Revised Securities Law to take effect March 1, disclosure requirements stricter
China's revised Securities Law will take effect on March 1, setting the legal basis for a phase-in registration-based reform across the whole capital market, according to the top legislature on Saturday.
The Standing Committee of the National People's Congress voted to adopt the revision of the Securities Law — the fundamental law governing the capital market — on Saturday, after the fourth review of the draft revision during a six-day session.
Based on the experience of the sci-tech innovation board, the revised law made new arrangements of initial pubic offerings to gradually implement the registration-based system across the whole market, said Cheng Hehong, director of the Department of Legal Affairs of the China Securities Regulatory Commission, the top securities regulator.
Specifically, the revision abolished the system of public offering review committee, whereby the CSRC reviews public offering applications, and authorized stock exchanges to review the applications. The CSRC will instead be responsible for securities registration, Cheng said.
The revision also authorized the State Council, China's Cabinet, to decide the scope and steps of registration-based reform, Cheng said, adding that the country will phase-in implementing the registration-based system and ensure a smooth transition.
"The CSRC will fully consider the actual situation of the market, and especially coordinate securities issuances, securities registrations and the market capacity to digest (the reforms)," Cheng said at a briefing on Saturday.
The CSRC is ramping up efforts to push ahead the registration-based reform on the ChiNext, Shenzhen's innovative enterprise-heavy board, he added.
The revised law made information disclosure requirements stricter and streamlined requirements of issuing securities, in compliance with the registration-based reform.
The revision also focused on improving the mechanism of investor protection, and set a separate section of investor protection, according to Gong Fanrong, an official with the NPC's Financial and Economic Affairs Committee.
It distinguished ordinary investors with professional investors and made different investor protection arrangements accordingly, and established a system of securities civil action that fits characteristics of the domestic market, Gong said.
Moreover, illegal behaviors in capital markets will face much higher punishments under the revised law.
For instance, if a firm indulges in fraudulent public offerings and has yet to issue the securities, it will face fines of between 2 million yuan ($285,000) and 20 million yuan, according to the revision.This contrasts with the current effective standard between 300,000 yuan and 600,000 yuan.
Under the new law, the CSRC could also forbid securities trading by individuals engaging in serious securities legal breaches for a period and even lifetime, on top of the current ban on being hired as senior officials in listed firms and carrying out securities business.
