Money

CSRC steps up effort to tackle insider trading

By Li Xiang (China Daily)
Updated: 2011-06-16 09:49

Individuals with access to critical information may have to register on regulatory list

BEIJING - The China Securities Regulatory Commission (CSRC) on Wednesday issued draft rules of a nationwide registration system for people with access to privileged information of listed companies.

The move is aimed at tackling reports of rampant stock market insider trading and market manipulation.

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The proposed rules would require all domestic listed companies to register the names of people with access to information that could influence stock prices and other derivative securities. Companies are also asked to record the time, place and means of how the information was provided, the regulator said.

People who are subject to the new rules include shareholders owning more than 5 percent of a public company, those involved in major mergers and acquisitions, and intermediary financial institutions, including securities brokers and individuals who have access to market-moving information, according to the regulator.

"The rules are aimed at preventing potential insider trading. By recording their detailed information, it will be easier to hold accountable individuals involved in illegal trading," Ouyang Zehua, vice-director of the market supervision department of the CSRC, said at a news briefing.

The securities watchdog launched pilot programs in Shanghai, Shenzhen, and Fujian province in 2008. The registration system will eventually be expanded to the entire nation and include all listed companies, Ouyang said.

He admitted that the CSRC encountered "many difficulties" when asking listed companies to comply with the registration system, especially State-owned enterprises.

Insider trading scandals, such as the one last year involving retailer Gome Electrical Holdings Go Ltd, have long plagued China's stock market, contributing to market volatility.

The regulator has stepped up efforts to rein in illegal trading by ensuring the confidentiality of listed companies and regulating government officials who have access to such information.

The CSRC also appointed two senior judges as members of its administrative judicial committee to ensure case hearings are professional and independent.

In November, the State Council, China's cabinet, ordered tough measures to crack down on insider trading and called for the collaboration of multiple government agencies. Investors interpreted the move as a signal of the government's determination in addressing the issue.

Analysts have suggested the regulator should expand the list to include government officials who have the power to influence business decisions.

They also warned that the CSRC's effort to tackle insider trading could fall short if the policies are not implemented effectively and properly enforced.