Editorials

Sustain vigor

(China Daily)
Updated: 2010-06-10 09:30

Admittedly, China's markets regulator has stepped up efforts to check insider trading to protect ordinary investors, but that is insufficient to effectively crack down on illegal trades based on non-disclosed market information.

The China Securities Regulatory Commission (CSRC) must show more spine than simply shooting sitting ducks if the campaign has to show any teeth and resulted in higher conviction rates for offenders.

The CSRC has launched 51 probes into insider trading so far this year compared with 33 such cases last year.

The most high profile of these involved Huang Guangyu, once China's richest man who was sentenced to 14 years in prison for insider trading, bribery and illegal business dealings last month.

Huang's conviction is a clear pointer that the markets watchdog is no longer toothless in curbing illegal share deals.

The regulator has also got much needed help from the Supreme People's Procuratorate and the Ministry of Public Security, both of whom issued new rules last month clarifying prosecution standards for insider trading and leaking privileged information.

Such progress is welcome although it is disappointing to witness CSRC's repeated languor in taking on other stock market manipulators.

Related readings:  Zhongshan mayor in the dock for insider trading  Prosecution standards clarified for insider trading  Do draconian measures prevent insider trading?  China's one-time richest man jailed for 14 yrs

A case in point: Fund managers are not legally banned from trading in stock futures. This is a loophole some exploit, yet the securities watchdog was quick to conclude that these fund managers were not guilty of insider trading. Its reasoning: None of them had accounts for stock futures trading.

While that may have been true, the problem is that such a superficial conclusion is incapable of allaying market concerns that some fund managers may have used undisclosed trading accounts and capitalized on insider information to profit from, and hence deepen, the recent slump in the stock market.

No one doubts that the CSRC will put an end to any such practice if the evidence is forthcoming, but the lack of proof is no excuse for not digging deep enough.

Of course, the battle against insider trading is no cakewalk, but progress comes from first acknowledging the fight.