1. Forms of “illegally recommending stocks, funds, and futures” and the policy boundaries

“Illegal fund recommendation” refers to business activities in which unqualified institutions and individuals provide investment advice on public funds and other investment products approved by the China Securities Regulatory Commission to investors, clients, or other service recipients, and obtain economic benefits directly or indirectly. “Illegal stock and futures recommendation” refers to activities in which unqualified institutions and individuals provide investors or clients with paid consulting services—directly or indirectly—such as securities and futures investment analysis, forecasts, or recommendations. The main patterns of conduct constituting “illegal recommendation of stocks, funds, and futures” include:

(1) Online live streaming and short videos promoting stocks, funds, and futures. This primarily refers to creating or using internet platforms to set up live-streaming rooms or publish short videos, where individuals—under titles such as “streamer,” “broadcaster,” “blogger,” or “community leader”—directly or indirectly recommend stocks, funds, or futures.

(2) Recommending stocks, funds, and futures on Weibo and WeChat. This primarily refers to directly or indirectly recommending stocks, funds, and futures through online social platforms such as Weibo and WeChat, under aliases like “stock guru,” “key opinion leader,” or “teacher.”

(3) Software recommending stocks, funds, and futures. This primarily refers to selling or providing software that recommends stocks, funds, and futures, along with investment analysis, selection advice, trading timing recommendations, and price trend forecasts.

(4) Training that recommends stocks, funds, and futures. This primarily refers to directly or indirectly promoting stocks, funds, and futures by marketing courses such as “wealth management,” “investor education,” “financial literacy education,” “stock trading,” and “fund investing,” as well as by organizing investment seminars, briefings, and analysis sessions.

In accordance with the relevant provisions of the Fund Law, the act of “illegally recommending funds (public offerings)” is suspected of engaging in fund service business without authorization. In accordance with the relevant provisions of the Securities Law, the act of “illegally recommending stocks” is suspected of illegally conducting securities business. In accordance with the relevant provisions of the Regulations on the Administration of Futures Trading, the act of “illegally recommending futures” is suspected of illegally conducting futures business.

2. Forms of “black mouth” activity in the stock market and policy boundaries

“Stock market ‘black mouths’” refers to institutions and individuals who fabricate and disseminate false or misleading information to influence stock prices or trading volumes, and even manipulate the market, in order to obtain illegal profits. Their main modus operandi includes:

(1) Fabricating and disseminating false information about securities. This primarily refers to disrupting the securities market by fabricating or spreading false or misleading information.

(2) Manipulative trading. This primarily refers to disseminating false or uncertain material information to induce investors to make investment decisions, thereby affecting securities trading prices or volumes, and engaging in related transactions or seeking related benefits.

(3) Pump-and-dump trading. This primarily refers to publicly issuing evaluations, forecasts, or investment recommendations regarding a security and its issuer or listed company, thereby misleading investors into making investment decisions, influencing the security’s trading price or volume, and engaging in securities transactions that are contrary to the direction of such evaluations, forecasts, or investment recommendations.

(4) Manipulation through informational advantage. Controlling the generation of information by issuers or listed companies, or controlling the content, timing, and pace of information disclosure, thereby misleading investors into making investment decisions, affecting securities trading prices or volumes, and engaging in related transactions or seeking related benefits.

In accordance with the relevant provisions of the Securities Law, the aforementioned conduct is suspected, respectively, of fabricating and disseminating false or misleading information (behavioral pattern 1) and of manipulating the securities market (behavioral patterns 2–4).

3. Forms of “off-exchange margin financing” and policy boundaries

“Off-exchange margin financing” refers to the practice of lending funds to investors at a multiple of the margin they provide, enabling them to use the borrowed funds together with their own margin to trade stocks and futures in designated securities or futures accounts, while charging interest, fees, or a share of the profits. The main patterns of such activity include:

(1) System-based sub-account model. This primarily refers to margin financing intermediaries using account-subdivision systems to split securities and futures accounts into multiple virtual trading sub-accounts, which they then provide to investors for stock and futures margin trading.

(2) Account-lending model. This primarily refers to financing intermediaries providing securities or futures accounts they own or control to investors for leveraged stock and futures trading.

(3) Virtual margin financing model. This primarily refers to margin financing intermediaries using virtual stock and futures trading systems to organize investors to engage in stock and futures margin trading, whereby investors’ trade orders and funds do not actually enter the securities or futures markets.

(4) Margin financing through point‑buy arrangements. Under this model, the “point buyer” (the party seeking funds) provides stock or futures trading strategies, while the investor (the party supplying capital) furnishes margin financing and securities or futures accounts. After being matched by a margin‑financing intermediary, the two parties execute leveraged stock or futures trades and share investment returns as agreed.

In accordance with the relevant provisions of the Securities Law and the Regulations on the Administration of Futures Trading, engaging in “off-exchange margin financing” is suspected of constituting the illegal operation of securities or futures business (behavior patterns 1, 2, and 4). Engaging in virtual‑account margin financing is suspected of involving fraud and other unlawful and criminal activities (behavior pattern 3).