China tightens regulation of securities dealers with new rules
26/2/2007 15:30
China's Shanghai and Shenzhen stock exchanges issued yesterday the new
rules of regulating their member securities companies in a bid to ward off risks
in stock trading.
The rules, which will come into effect on May 1, set limits
to the varieties, methods and scales of stock trading that dealers are allowed
to conduct, preventing them from engaging in high-risk business beyond their
capacity.
The securities companies are required to remind their clients of
possible risks when being entrusted with abnormal dealings, according the
rules.
They can refuse commissions that are likely to seriously disorder the
market and report them to the stock exchanges, the rules said.
In specific
trading business, the securities companies must sign agreements with their
clients on the duties to reveal possible investment risks, according to the
rules.
Meanwhile, senior managers of the securities companies can be
recognized as "unsuitable candidates" for management positions in the business
by national securities watchdog, once they receive disciplinary punishment for
three times in their companies' irregular operations.
The new rules will
replace previous provisional rules that have been in operation since 1998 and
only apply to domestic securities companies with membership in the stock
exchanges.
Under the new rules, the Shanghai Stock Exchange will no longer
expand its membership, which now stands at 151, while the Shenzhen bourse, which
has 175 member securities companies, will limit the total number of
members.
The new rules came at a time when talk of a bubble has been rife in
the Chinese stock market, raising government and public concern.
The
benchmark Shanghai Composite Index gained 130 percent last year and had jumped
nearly 10 percent in January alone before a recent correction took it back to
about where it started the year.
Despite a bullish stock market, the
government has warned investors of illegal securities companies, which usually
involve swindling clients of funds with claims of high returns.
On Feb. 12,
the State Council approved the China Securities Regulatory Commission would lead
a inter-ministerial team to crack down on illegal securities
business.
Xinhua
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