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A spate of divorces among China's richest is forcing the securities regulator to crack down on large share sales following the breakups

Huileng Tan   

A spate of divorces among China's richest is forcing the securities regulator to crack down on large share sales following the breakups
  • China's securities regulator is cracking down on speedy share sales following divorces among the country's elite.
  • At least eight major shareholders of listed companies transferred stocks worth $3.9 billion to ex-spouses this year, per Bloomberg.

China's securities regulator is cracking down on speedy share disposals by wealthy couples after their divorces.

At the heart of the clampdown is a securities rule that restricts company executives and shareholders who own more than a 5% stake to sell only 2% of the float in the market within 90 days.

The action came after certain major shareholders of China's listed companies sold substantial shares in the firms shortly after their divorces, Bloomberg reported Thursday.

At least eight major shareholders of China's listed companies transferred stock worth $3.9 billion to their ex-spouses following their divorce announcements this year, per Bloomberg's analysis of company filings.

Half of the eight former couples announced plans to sell their shares in weeks or months after their breakup, per the outlet.

The largest stock transfer came from electronics company Suzhou Secote Precision Electronic, per Bloomberg. Tycoon Sun Feng, the company's chairman, transferred shares worth $192 million to his ex-wife in January.

The reasons behind the divorces are unclear.

The China Securities Regulatory Commission, or CSRC, has addressed market concerns on at least one occasion that large company shareholders may be breaking up to skirt securities regulations.

Before the crackdown — and despite the 2% limit on share sales — shareholders could sell at least 4% of their held stock after their divorce, per Bloomberg.

In July, the CSRC said they were paying attention to the trend and pledged to close the loophole a month later. The key Shanghai Stock Exchange and Shenzhen Stock Exchange then said they would still be applying the same 2% share sale limits to major shareholders even after the divorces.

The action by China's securities came as Beijing is trying to bolster confidence in its flagging economy and markets that have been struggling to recover after a post-COVID spurt.

Investors dumped a record $12 billion of Chinese stock last month, per JPMorgan data.

Last month, the Chinese government announced new initiatives — including reducing required collateral and a tax on stock transactions — to support its stock market.

The Shanghai Composite is up about 1% so far this year. The CSI 300 Index, a benchmark index of mainland stocks, is down about 3.5%.

The CSRC and Suzhou Secote Precision Electronic did not immediately respond to requests for comment from Insider.




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