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Irregularities on the rise: CSRC

Updated: 2013-11-23 11:08
By Yang Ziman ( China Daily)

Violations in securities, futures markets hit 486 cases through Oct

The quantity of violation cases handled by the China Securities Regulatory Commission in the first 10 months of the year has exceeded the amount for the whole of last year, the spokesman for the commission said at a news conference on Friday.

The commission dealt with 486 violation cases in the securities and futures markets from January to October, up 44 percent year-on-year. It launched 286 investigations, 25 percent more than in the same period last year.

Fines collected amounted to 148.8 million yuan ($24.4 million) as of the end of October, twice the amount seen during the same period last year. Thirty-four cases were sent to public security organs, an increase of 70 percent year-on-year.

The CSRC spokesman also said that there will be increased scrutiny for initial public offerings.

"The intensification of the supervision will be key to the implementation of the registration mechanism for initial public offerings," said Deng Ge, the spokesman.

"The CSRC is going to verify the information disclosure of IPO applicants and their intermediary agencies without making judgments over the companies' profitability. It will be up to the investors to decide for themselves the rate of return and risks."

The IPO registration system was announced in the communique released after the recently concluded Third Plenum of the 18th Central Committee of the Communist Party of China.

The system requires the CSRC to boost supervision over listed companies, while loosening the approval process before IPOs.

The commission has outlined three approaches to implement the registration system.

First, information disclosure lies at the heart of the reform. The CSRC is going to step up supervision on the truthfulness, accuracy, comprehensiveness and timeliness of IPO applicants and their intermediary agencies. Any acts indicating window dressing or fraud will be severely punished.

Moreover, the market will play a decisive role in the allocation of resources, including financing, the timing of the IPOs and prices among other factors.

The commission is also going to enrich the means of supervision, Ge added.

It is going to clearly define the responsibilities of the stakeholders before IPOs and closely watch their actions after they have gone public. Any violator will face serious consequences, the spokesman added.

The CSRC has dealt with 46 cases concerning incomplete or deceitful information disclosure from January to October, three times the amount registered in the same period the previous year.

The cases included Wanfu Biotechnology (Hunan) Agricultural Development Co Ltd, which tampered with its profit figures to deceive investors, and Guangdong Xindadi Biotechnology Co, which fabricated performance data to get listed on the ChiNext, a NASDAQ-like stock exchange operated by the Shenzhen bourse for high-tech startups.

Underwriters, including Ping An Securities Ltd, Nanjing Securities Co Ltd and Minsheng Securities Co Ltd, and the accounting and legal consulting firms of the offenders have also been punished, the CSRC said.

The commission added it has also stepped up a crackdown on insider-trading cases. It handled 158 such cases in the first 10 months of the year, 67 of which were put on file for further investigation and prosecution.

These under-the-table deals mainly concerned information on major asset reorganizations.

Violations have taken on new features, said Ge, as the complexity of the market and innovative products increase.

The recent incident with Everbright Securities Co Ltd, for instance, is a new type of case that took place both in the securities and futures markets.

In August, the company sold a significant amount of exchange-traded funds and stock-index future contracts within hours, due to a trading mistake, resulting in great market turbulence.