Caixin
Jan 05, 2019 04:15 AM
FINANCE

Securities Regulator Handed Out Record Penalties in 2018

The China Securities Regulatory Commission steps up punishment of market violations with record penalties. Photo: VCG
The China Securities Regulatory Commission steps up punishment of market violations with record penalties. Photo: VCG

China’s securities regulator imposed record penalties in 2018 on dodgy market players, reflecting the country’s continued crackdown on market misconduct.

The China Securities Regulatory Commission (CSRC) issued 310 administrative penalty orders last year, 38.4% more than in the previous year. Fines levied on violators totaled 10.6 billion yuan ($1.54 billion), up 42.3% year-on-year, the commission said Friday in a statement. The commission banned 50 people from the market last year.

The top securities regulator has tightened its grip on financial market activities over the past couple of years as Beijing has stepped up efforts to contain financial risks.

The commission has “enhanced supervision and enforcement to strictly crack down on violations in the securities and futures market to rein in market irregularities and clean up the market environment,” the CSRC said.

The most-common violations caught by the regulator involve insider trading, information disclosure violations and market manipulation, the CSRC said. A total of 87 punitive decisions targeted insider trading, including 57 cases relating to asset acquisition and restructuring, the CSRC said.

Acquisition and restructuring are easily used by violators to seek illegal gains as such deals often take long periods and involve various parties, having a great impact on the market, the commission said.

In July, the regulator imposed a 400,000 yuan fine on Wang Chenglin, the owner of smart city service provider Hakim Unique Internet Co., for trading the company’s stock on insider information about the company’s reshuffling plan back in 2016.

In May, the CSRC accused six mutual funds, including industry leaders E Fund Management Co. Ltd., Harvest Fund Management Co. Ltd., and Sino-foreign joint venture Bank of Communications Schroder Fund Management Co. Ltd., of insider trading. It was the first time the securities watchdog targeted fund companies in such cases.

Fifty-six penalty orders were handed down for illegal information disclosure by listed firms. The highest-profile case involved scandal-ridden vaccine maker Changsheng Bio-Technology, which was accused of producing substandard vaccines and falsifying production data.

Last month, the CSRC fined Changsheng 600,000 yuan for violating information disclosure rules. Several company executives were also fined or barred from the market. Changsheng was also ordered to delist from the Shenzhen Stock Exchange.

In addition to investors and listed firms, the CSRC over the past year also paid closer scrutiny to business practices of financial intermediaries including brokerages, law firms and credit rating companies. The regulator punished intermediaries for violations in 13 cases.

One of China’s five main credit rating companies, Dagong Global Credit Rating Co. Ltd., was suspended from the debt rating business for one year in August over conflicts of interest and other violations. The order was the harshest punishment levied by regulators on a major intermediary agency.

The CSRC last year also launched inspections of private equity firms and found that 30% of the companies were in violation of laws and regulations, according to an announcement in October. Violations included illegal fundraising, misappropriation of fund assets, raising funds from unqualified investors and illegal commitments of guaranteed returns, among other failures to properly control risk and comply with regulations.

Ten punitive orders were issued to private equity firms over the past year, the CSRC said Friday.

The commission said it will continue its commitment to contain market violations and push forward capital market reform this year.

Contact reporter Han Wei (weihan@caixin.com)

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