Mandated to implement the State Council's latest directives, Xiao Gang, head of the China Securities Regulatory Commission has a full year ahead of him. Xiao described his overwhelming mission in detail at a recent conference on the protection of personal investors' interests.
During the conference, Xiao covered several topics and enumerated the many challenges his agency faces. Truly, the abuse of small shareholders' rights and the disrespect for the interest of personal investors are commonly observed to have become an inseparable part of the stock market's culture.
Last year's Everbright Securities debacle had triggered many pessimists to come to the judgment that corruption in the stock market and its institutions is deeply ingrained and that a change of heart is hopeless. There were calls asking the government for laws that were tough enough to get rid of the guilty and to stop potential offenders.
Legal deterrence does not seem to be a course of action available to the China Securities Regulatory Commission. Xiao spoke in detail about the principles and technicalities involved in protecting investors, based on the experiences of other markets where fairness and transparency are emphasized. Most investors know that these fair and transparent safeguards are lacking in the Chinese stock market.
As a result, manipulation of prices and profiting on insider information are common because the disclosure of information does not necessarily follow requirements under the securities ordinance. Cases wherein wrong information is deliberately released by the management of listed companies to deceive investors are not rare.
Many stock market commentators have long contended that penalties for violations are too light to be deterrents. For example, the 523 million yuan ($ 86 million) penalty on Everbright for insider trading may appear very huge to the average personal investor, but the fine actually affected the company's image more than its treasury.