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Revised Securities Law expected
( 2003-07-24 11:44) (China Daily HK Edition)

A revised Securities Law - to boost the market and protect small investors - is likely to be promulgated next year, according to a senior legislator.

A special panel to take charge of the revision was established last week, headed by Zhou Zhengqing, former chairman of the China Securities Regulatory Commission (CSRC) and now member of the National People's Congress's (NPC) financial and economic committee.

Members of the panel, including top officials from the NPC, the CSRC, the Supreme People's Court, the State Development and Reform Commission, the State Council Legislative Affairs Office, and economists and experts, will soon check ground realities in Shanghai and Shenzhen, home to the mainland's two bourses.

A symposium, attended by both domestic and foreign experts, will be held next month to reach a broad consensus on the revision. The panel will later prepare a draft after soliciting opinions from various departments, which will be submitted to the NPC in December.

According to Zhou, the main aim of the revision is that it must help ward off risks when boosting development of the securities market; and give full play to the role of the securities market while safeguarding interests of small investors.

However, detailed changes have not yet been decided, he said; the panel is now busy inviting opinions from various departments in the legal, regulatory, brokerage and other fields.

However, Zhou denied earlier reports that major revisions would be made to the four-year-old law. Last month, some reports even claimed that of the 214 clauses in the law, more than 150 would be revised.

"There won't be heavy revisions," Zhou told Shenzhen-based Securities Times. "Overall, the current Securities Law suits China's real situation."

However, financial and legal experts have said the current law lacks many necessary provisions and contains many vague and impractical clauses.

The existing Securities Law was promulgated at a time when the Asian financial crisis made Chinese officials acutely aware of the devastating effects of financial risks. As a result, many clauses in the law stipulate stringent restrictions on certain aspects of companies' conduct. But many of these clauses are impractical, said a senior expert with the State Information Centre.

For example, the law says "speculation in stocks" by State-owned enterprises is forbidden. It also forbids banks' funds from entering the stock market in an "illegal way".

However, in practice, it is hard to define "speculation in stocks" and bank funds' "illegal" involvement in stock investment.

Moreover, legal experts said much of the law is now obsolete because myriad changes have occurred in the country's securities market and the corporate world in the past four years.

Zhou said he felt the current law contains detailed provisions on supervision of the market; what needs to be added or revised are clauses to boost development of the securities market.

"Clauses which don't suit the demand of China's economic development and development of securities market will be revised," he said.

He said provisions related to issuance and management of bonds, securities trading system, guarantee fund management, brokerage financing, opening of the securities market, rights of regulatory bodies, exchanges management system, and the law's relation with the Corporate Law, which is also under revision, will be under discussion.

Zhou also said that civil liabilities of listed firms, which has caused much concern among small investors, will be a focal point in the discussion.

The current Securities Law pays scant attention to the civil liabilities of listed companies that cheat investors; it contains only a brief reference to civil compensation payable to shareholders in cases of fraud in information disclosure.

The law has no stipulation regarding the consequences of other irregularities by listed firms, such as insider trading and price manipulation; it only says that such activities could lead to criminal charges.

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