Market law review underlines delisting

An investor checks stock information on his mobile phone in front of an electronic board showing stock information at a brokerage house in Beijing, Feb 16, 2016.[Photo/Agencies]

Perfecting the system of delisting stocks and strengthening of efforts to crack down on illegal activities in the capital markets will be highlights in the second review of the revision of the Securities Law, said a member of the Standing Committee of the National People's Congress, China's top legislature.

Wu Xiaoling, deputy director of the Financial and Economic Affairs Committee of the NPC, told media in Beijing on Thursday the review highlighted four points.

"First, we need to perfect the basic trading systems, including securities trading, settlement and delisting.

"Second, we need to create space for developing a multilevel capital market so as to facilitate enterprises' financing.

"Third, we should pay more attention to investor protection by strengthening efforts to crack down on illegal activities and increasing channels for investors to compensate for loss, legal advocacy and administrative remedy.

"Last but not least, market rules should be further tightened," said Wu.

"Information authenticity and complete information disclosure are central to the capital market, so we need to intensify inspections and severely crack down on illegal information disclosure and market manipulation."

Li Shuguang, a law professor at the China University of Political Science and Law, said the second review pays attention to key areas, which makes it different from the first review of the proposed amendments to the law.

"The latest review shows that China will adopt a 'tolerant entry and strict exit' regulation idea," said Li, explaining that the IPO approval pace is faster, and the implementation of delisting is more determined.

"For 'zombie companies' (consistently loss-making, staff-heavy State-owned enterprises that continue to operate without much rationale) and fraudulent companies, the delisting process will be quicker."

Li also said creating space for a multilevel capital market is a wise move because China has developed the New Third Board. It has also developed, or is developing, stock connects for mainland bourses with those in Hong Kong and London, besides reforming the ChiNext board.

According to Li, the Supreme People's Court has confirmed civil compensation to victims of fraudulent statements made by players in the securities market.