New securities law aims to offer stronger investor protections

Information disclosure obligations boosted along with bigger penalties for violations

by Chris Gill
New Securities law enacted
An investor watches share prices rise and fall during trading on the stock market in Shanghai. Photo: iStock

(ATF)  – China's new securities law aims to improve protections for investors, to strengthen information disclosure obligations and to significantly increase the cost of trading violations. 

The General Office of the State Council officially announced that the new securities law  – which is part of China’s ongoing fiscal reforms – would take effect from March 1.

The "institutional" reforms aim to outline intermediary agency responsibilities and provide strong legal guarantees for a “standardized, transparent, open, dynamic, and resilient capital market”, the State Council said.

The Securities Regulatory Commission (CSRC), the Ministry of Justice and other departments will be able to conduct special "clean-up" operations under the new law.

The notice clearly stated that illegal and criminal acts will be punished according to the new law, which aims to eliminate confusion that existed under the country's earlier system.

The CSRC will step up efforts to investigate and deal with acts that it says “seriously disrupt market order, such as fraudulent issuance, illegal disclosure of information, intermediary agencies' diligence and due diligence, market manipulation, insider trading, and use of undisclosed information for securities transactions.

The Regulatory Commission and Justice Ministry want to strengthen the link between administrative law enforcement and criminal justice, as well as strengthen information sharing, and improve the efficiency of of case transfers and investigations.

Police forces have been told they must crack down on illegal and criminal acts in regard to securities and form an effective deterrent.

"We must strengthen the protection of investors' legitimate rights and interests," the commission said in a widely published release.

"We will take effective measures to protect the legal rights and interests of investors, especially small and medium investors, and steadily promote the system of civil lawsuits for securities compensation by investor protection agencies on behalf of investors,” it said.

It is hoped the law will bring China’s markets closer to international norms, but with China specific characteristics.