Enforcement improves capital market

The high incidence of illegal acts in the securities market has been effectively curtailed, and the combined effect of administrative law enforcement and judicial punishment has been strengthened, improving the capital market environment, officials said.

Solid progress has been made in building an integrated law enforcement and judicial system in the capital market, and the legitimate rights and interests of investors have been protected, Zhang Xiaojin, head of the forth procuratorial office of the Supreme People's Procuratorate, said at a news conference on Friday in Beijing.

In March 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council issued a document on strictly cracking down on illegal activities related to securities, which sent a clear signal of zero tolerance. It also promoted the formation of a capital market environment that respects the law and is trustworthy.

Yet financial fraud, illegal disclosure, insider trading, market manipulation and impairing the interests of listed companies in bad faith are still relatively prominent, which seriously damage market order and require authorities to tighten the crackdown, said Zhang.

From 2021 to June this year, 376 people nationwide were prosecuted for crimes related to securities. Among them, 147 were prosecuted in the first half of this year, up 93.4 percent year-on-year, according to SPP statistics.

"Procuratorial organs, securities regulatory agencies, public security organs, and people's courts have assumed their respective responsibilities and cooperated with each other, constantly improving the mechanism for handling securities criminal cases and strengthening professional capacity," Zhang said.

In one typical case, the former chairman of a listed pharmaceutical company in Guangdong province surnamed Ma and 11 colleagues were sentenced in January to six months to 12 years in prison along with fines for illegal disclosure and failure to disclose important information, manipulation of the securities market, and offering bribes.

From 2016 to the middle of 2018, Ma and other senior management personnel instructed financial personnel to carry out financial fraud. They inflated operating income, interest income and operating profit by forging invoices and bank receipts and other means, and inflated monetary funds by about 88.6 billion yuan ($12.6 billion) by forging and altering deposit and bank statements.

In addition, from 2016 to 2018, without the company's approval and accounting, they provided the major shareholder company and related parties with 11.6 billion yuan of nonoperating funds that were later used to purchase stock in Ma's company, which was not disclosed in the annual reports.

The inspection department has targeted prominent problems, such as fraudulent issuance, financial fraud and illegal occupation of guarantees, that seriously affect the quality of listed companies, and over 400 cases related to securities were handled in the first half of this year, said Liu Yongqiang, deputy head of the Enforcement Bureau of the China Securities Regulatory Commission.

In the first half of this year, the CSRC transferred more than 60 cases of securities and futures crimes and more than 200 suspects to the public security organs and sent them to the SPP simultaneously, according to the CSRC.