Securities regulator cracks the whip on insider trading

Hefty penalties imposed on 10 individuals, two barred for life in cases amounting to $15.8m

China's securities watchdog on Friday imposed heavy penalties on several individual investors involved in insider trading and rumor mongering as it sought to restore investor confidence by cracking down on illegal market activities.

The China Securities Regulatory Commission fined 10 individuals involved in five cases a combined 100 million yuan ($15.8 million). Two of the investors were banned from the securities market for life, according to Zhang Xiaojun, the CSRC spokesman.

"Insider trading, which takes advantage of private information, has seriously infringed the interests of smaller investors and disrupted the market principle of fair play," Zhang told a news conference on Friday.

"The regulator will continue its tough stance against illegal activities and will firmly maintain a transparent and fair market order," he said. The regulator has also initiated a fresh round of "thorough inspection" into the country's futures brokerages that targets illegal trading using third-party trading software to evade regulations, Zhang said.

The CSRC has launched an unprecedented crackdown on illegal activities including insider trading, market manipulation and financial fraud in an attempt to restore investor confidence since the Chinese stock market suffered a dramatic fall in the summer.

The regulator has imposed fines worth at least 2.37 billion yuan this year, five times more than the whole of 2014, according to media estimates.

On Friday, the benchmark Shanghai Composite Index jumped by 1.6 percent to an eight-week high to close at 3,391.35 points. It surged 6.5 percent this week for its steepest gain in four months.

The Shanghai index has rebounded by 16 percent from its August low after turbulence erased nearly $5 trillion in market value. Investor sentiment has, however, improved on hopes that more government stimulus measures and monetary easing would be announced to prop up the sagging economy.

"The central bank has loosened its tap on liquidity and the reform of State-owned enterprises is expected to continue through the year," said Wei Wei, an analyst at Huaxi Securities Co Ltd in Shanghai. "It's a good time window for stocks now and the rebound will probably carry on."

The Communist Party of China Central Committee will hold a key meeting from Oct 26 to 29 to deliberate on an economic and social development plan for China over the next five years.

It has sparked speculation that the government will accelerate reform of State-owned companies.

Douglas Morton, head of Asian research at Aviate Global LLP, said: "SOE reform is the catalyst that will ultimately drive this market and indications are that this is certainly ramping up." The measures will include commodity price reform, consolidation of excess capacity sectors, asset sales and asset injections, as well as mixed ownership, he said.

Bloomberg contributed to this story.

lixiang@chinadaily.com.cn