The U.S. Securities and Exchange Commission (SEC) on
Wednesday (September 21) charged the CEO and former president of Chinese
technology company Cheetah Mobile with insider trading.
The U.S. securities regulator said in a statement that the
company's chief executive, Sheng Fu, and former president and chief technology
officer Xu Ming, worked together to formulate an trading plan.
The SEC alleges that the pair sold Cheetah Mobile's
securities under the so-called "10b5-1 trading plan" while in
possession of material non-public information.
The SEC said Fu Sheng and Xu Ming avoided losses of about
$203,290 and $100,127, respectively, in the 2016 sale of 96,000 American
depositary shares of Cheetah Mobile under the deal plan. Headquartered in
China, Cheetah Mobile provides a variety of technology products to the market,
including mobile games and other applications.
"This case is an example of the SEC's determination to
hold corporate executives accountable. They are trying to Bypassing federal
securities laws and illegally trading non-public information. Although in some
cases trading under so-called 10b5-1 trading plans can protect employees from
insider trading liability; these executives' trading plans are not
securities-compliant law because they have material, non-public information at
the time of entering the transaction.”
The SEC also found that Fu Sheng made materially misleading
public statements about the company's revenue trends during Cheetah Mobile's
March 2016 earnings call and caused the company to fail to report on its 2016
earnings call. Significant negative earnings trends were disclosed in the April
annual report.
According to the order of the SEC, Fu Sheng and Xu Ming
violated the anti-fraud provisions of the Securities Exchange Act of 1934; Fu
Sheng violated the anti-fraud provisions of the Securities Act of 1933, which
caused Cheetah Mobile to violate the Exchange Act 》 on the reasons for the
reporting requirements of stock issuers. Fu Sheng and Xu Ming, without
admitting or denying the SEC findings, agreed to cease and desist orders
related to their future securities transactions; and paid civil settlements of
$556,580 and $200,254, respectively fine.
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