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Top securities regulator touches on difficulty in governing market
Last Updated:2013-08-14 14:14 | CE.cn
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By Li Hongmei


Xiao Gang, chairman of the China Securities Regulatory Commission, recently wrote an article in the Qiushi magazine of the Communist Party of China (CPC), detailing the commission's difficulties in following regulations governing insider trading, fraud, and market manipulation.

Xiao said in the article that there were over 1,200 laws governing the stock market, but over two thirds of them had never been cited, signaling the commission's lack of control over the market.

As Chinese society is governed by the traditional concept of building and maintaining "guanxi", or connections, people with influential connections are often able to circumvent these regulations.

The commission conducts investigations into 110 cases a year, which involve violations amounting to market manipulations, insider trading or fraud. However, no more than 60 cases a year are charged with administrative penalties, according to commission figures. Each year, around 30 cases result in charges of criminal offenses, but even these do not culminate in sentencing.

Many of these issues have existed in the Chinese capital market for a long period of time, he said. Xiao is the first commission chairman to confess to the problems facing the institution.

Some executives at publicly-listed companies funded state projects and contributed a lot to the local economy. However, after they were charged by the commission, many were able to conduct meetings and retain their positions within the companies, owing to their connections in the government.

Xiao said that the commission lacks sufficient authority to govern the often all-powerful securities sector due to the sector's monetary influence and power over society.

The commission chairman added that the latest amendment in the Securities Act will reform the stock market at various levels. The commission's earlier reform of relevant IPO regulations was considered inadequate by the public.

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