Shanghai and Shenzhen stock exchanges issued new rules yesterday
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 securities
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 to these rules. In specific trading business, they must
sign agreements with their clients on the duties to reveal possible
investment risks.
These companies can also refuse commissions that are likely to
seriously disorder the market and are urged to report such
instances to the stock exchanges.
Meanwhile, senior managers of the securities companies can be
recognized as "unsuitable candidates" for management positions in
the business by the 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 allowable 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 almost to the point 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 February
12, the State Council approved the China Securities Regulatory
Commission to lead an inter-ministerial team aimed at cracking down
on illegal securities business.
(Xinhua News Agency February 26, 2007)