Bourses to curb listing violations

Trading in firms that have provided false information to be terminated

Bourses in Shanghai and Shenzhen released drafts on Friday of the delisting procedures of public companies that have committed major legal violations, showing the regulator's resolution to strengthen the administrative responsibility of stock exchanges.

It is only one week after the China Securities Regulatory Commission announced it would revise the delisting policies of public companies.

According to the draft released by the Shanghai Stock Exchange on its website, companies that have committed one of the six types of major legal violations shall see trading of their stocks terminated. These include providing false and misleading information for initial public offering or company restructuring, providing false and misleading information in companies' annual reports and documents that have been submitted or disclosed, receiving at least three administrative penalties according to the country's Securities Law over the past 60 months, and other violations identified by the stock exchange.

The new regulations have been introduced to "purify the market environment and urge public companies to disclose information according to laws and regulations so that deterrence can be formed, market order secured and interests of individual investors protected", the draft said.

In addition, the bourse is considering the possibility of delisting companies that have received frequent upper-limit punishment within a short time period.

Jiang Yang, vice-chairman of the CSRC, said at a news conference during the ongoing two sessions in Beijing that under the Securities Law, bourses are responsible for the suspension and termination of companies' listings.

"It cannot be predicted at present whether there will be more companies delisted this year since the revised conditions of the regulations have not been finalized yet," he said. "But if a company should be delisted according to the laws and regulations, everything should be done as the law prescribes," he said.

Shenzhen Stock Exchange said in an announcement that it will start to explore the compensation mechanism for fraudulent stock issuance - a mechanism under which the liable sponsor agencies should pay compensation in the first place and pursue recovery from other liability subjects.

According to Zhao Min, director of the Investor Protection Bureau under the CSRC, they have started related work during the stock issuing and delisting process, which includes compensation in the issuing process, dispute mediation and compensation claims during delisting.