1. Overview: Offering Fraud Offense (Article 160)
The crime of fraudulent offering (欺诈发行证券罪) under Article 160 of the Chinese Criminal Law applies to concealing material facts or fabricating materially false content in offering documents — prospectuses, share subscription forms, and bond-raising measures — when issuing shares or corporate bonds, where the amounts are huge, consequences serious, or other aggravating circumstances exist. In 2025 the CSRC investigated 22 offering-fraud cases with a 68% criminal-referral rate — the highest conversion-to-criminal rate of any securities offense in China.
Under the full registration-based reform, offering review authority shifted from the CSRC to the stock exchanges, but disclosure requirements increased significantly. Registration does not mean no scrutiny — it means disclosure-centered scrutiny. Offering fraud now faces stricter regulatory review and a continued crackdown posture.
📜 Article 160, Criminal Law of the PRC (excerpt)
"Whoever conceals material facts or fabricates materially false content in offering documents such as prospectuses, share subscription forms, or corporate and enterprise bond-raising measures, and issues shares or corporate or enterprise bonds, where the amounts are huge, the consequences are serious, or other serious circumstances exist, shall be sentenced to up to five years imprisonment or criminal detention and shall also or solely be fined; where the amounts are especially huge, the consequences especially serious, or other especially serious circumstances exist, shall be sentenced to more than five years imprisonment and fined."
2. Elements of the Offense
🔴 Parties
Issuers: joint-stock companies, LLCs, enterprises
Liable persons: directly responsible supervisors (directors, senior management) + other directly responsible persons (CFOs, sponsor representatives)
Controlling shareholders / de facto controllers who organize or direct the fraud are pursued as co-perpetrators.
🔵 Conduct
Concealing material facts or fabricating materially false content in offering documents
Documents include: prospectuses, bond-raising measures, listing announcements
Forms: false statements, misleading statements, material omissions.
🟡 Mens Rea
Intentional offense — knowingly issuing with false content in the offering documents
Negligence does not constitute the crime
"Knowledge" is inferred from objective conduct such as signing the offering documents or attending review meetings.
🟠 Aggravating Circumstances
Huge amounts: proceeds ≥ RMB 10M
Serious consequences: delisting / suspension / major investor losses
Other aggravations: repeated fraudulent offerings, refusal to rectify, etc.
3. Sentencing Standards
4. Core Defense Strategies
Disclosure Deficiency ≠ Fraud
Distinguish "quantitative" from "qualitative" disclosure failures — accounting-estimate changes and error corrections are not fraud; prove the false content in the offering documents fails the materiality test.
Professional-Reliance Defense
Reasonable reliance on audited accounts and legal opinions. Directors who signed based on unqualified opinions from accountants and lawyers typically lack the intent to defraud.
Actual Use of Proceeds
Demonstrate proceeds were actually deployed for the stated operations rather than diverted or dissipated; quantify the proportion of investor losses causally attributable to the alleged fraud.
Offering-Stage Compliance Record
Prove the issuer had robust internal controls that were effectively implemented; sponsors and auditors performed required verification; and the exchange raised no questions during review.
5. Comparison: China Article 160 vs. U.S. Securities Act
If the same offering fraud is investigated by the CSRC, the U.S. SEC, and/or the Hong Kong SFC at the same time, you face dual-enforcement risk: information you provide to one regulator may be shared with the others and used against you. Read more: Cross-Border Enforcement: SEC & CSRC →