China's Securities Regulator Brings in New Rules to Retain Market Integrity; Will Deny Violators Trading Access
Du Qingqing
/SOURCE : Yicai
China's Securities Regulator Brings in New Rules to Retain Market Integrity; Will Deny Violators Trading Access

(Yicai Global) Dec. 4 -- The China Securities Regulatory Commission (CSRC), the country's top securities regulator, is trying to strengthen the integrity of regulation in China by combating violators who don't take warnings seriously. The commission plans to unveil a blacklist of major deceivers and implement an integrity-based credit management system for major market players.

The regulator began publicly soliciting opinions for its revisions to regulations covering the integrity of the securities and futures markets on Dec. 1. It will extend the scope of its integrity supervision to include the New Third Board, private equity, regional equities, asset-backed securities, bonds and futures, securities margin trading, bond-pledged repurchases and contractual repurchases.

"Current penalties are not enough for certain illegal acts," a CSRC official told Yicai Global. "Other measures, such as public exposure and restrictions on opening accounts or trading, are necessary. Under the current framework of laws and regulations, the maximum administrative penalties imposed by the CSRC are fines of CNY300,000 (USD45,306) or CNY600,000, which many people believe aren't stringent enough."

In the past, authorities have always regulated institutions and practitioners, but supervision over individual investors was fairly weak. However, abnormal fluctuations in the stock market in 2015 showed that market disruption caused by individual investors cannot be ignored, as they have harmed the interests of investors by manipulating markets and insider trading.

The CSRC made its first steps towards improving market integrity in 2012, when it brought in interim measures. The main new measures include expanding the scope of supervision and introducing the blacklist of fraudsters.

The blacklist will expose such information as administrative penalties, market access restrictions, securities and futures crimes, refusals to cooperate with regulators, serious violations of the rights and interests of investors and other information about illegal or dishonest behavior.

The commission will also tackle "immature traders" and "imperfect trading systems" through its new integrity measures, which will restrict those who seriously undermine market order to open securities and futures accounts. Securities and futures media agencies, personnel and information such as defaults on bonds will all be covered in 'integrity files.'

Securities registration and clearing institutions and securities and futures companies will need to check these integrity files when opening new accounts for investors. If they find red flags, they should refuse to open the account.

Market access bans will be categorized into four groups: those who have received criminal charges for securities and futures crimes and received administrative penalties for fraud, market manipulation, insider trading or dissemination of false information; those investigated by public security and judicial organs for illegal securities and futures activities; those who have received local government penalties for illegally opening securities and futures trading exchanges or illegally organizing trading; and those who failed to pay administrative penalties or cough up illegal gains confiscated by the CSRC or its agencies on time.

The commission has published the full regulations on its official website. The deadline for leaving feedback is Dec. 31, 2017.

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Keywords: China Securities Regulatory Commission , Credibility And Integrity