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Rule to boost capital market honesty

Updated: 2012-04-14 09:53

By Cai Xiao (China Daily)

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The first rules to encourage honest practices in China's capital market will be introduced this year to help the market develop steadily and guarantee investors' interests, the China Securities Regulatory Commission said on Friday.

The rules deal with setting up archives on the integrity records of financial institutions, employees, lawyers, accountants and advisers and putting the archives in a database.

The commission said it would pay attention to protecting the legal rights of the institutions and individuals by setting an effective disclosure period, with information on illegal activity withheld for up to 10 years

Based on the archives, the commission will take a series of measures including implementing an approval and checking system, as well as strictly controlling market access.

The commission also confirmed it would work with the State Council, local governments, judicial branches and industry organizations to regulate dishonest behavior.

"Setting up the database will increase the transparency of the capital market and decrease investment risks, which conforms with international practices," said Hong Hao, managing director and chief strategist at BOCOM international Holdings Co Ltd, the international investment banking and securities arm of Bank of Communications Co Ltd.

The commission also announced it would lower the calculation standards for the risk capital reserve of securities companies in their self-operated, asset management and brokerage businesses.

For instance, the calculation ratio for the risk capital reserve of self-operated equity securities was adjusted from 20 percent to 15 percent, and the ratio of fixed-equity securities was decreased from 10 percent to 8 percent.

Hong said lowering standards for the risk capital reserve will increase the amounts of funds used for investment.

"This measure, together with a series of new policies, including increasing the qualified foreign institutional investors' quota, will boost confidence in the Chinese stock market," said Hong.