It’s all about protecting investors’ interests. From now on, controlling shareholders and executives of companies listed on the mainland must toe a tighter official line on disclosure of company business and insider information.
The updated rules are spelled out in guidelines issued by the China Securities Regulatory Commission, the nation’s securities watchdog, for A-share listed companies. They are part of the central government’s push to improve stock market operations, making them more transparent and minimizing the ways firms can defraud investors.
Under the new guidelines, the regulator will punish companies if they do not meet obligations to investors, including releases of detailed information about performance indicators, timelines and risks. Companies also have to publish non-financial information about areas such as production and sales volumes, stocks, market share and data on major suppliers and clients.
On top of that, listed companies must say how much they pay their top managers and detail risks from any non-core company businesses, such as investments in financial derivatives made with “idle” funds, the regulator said. The names of employees with access to sensitive internal information will be registered to prevent insider trading.
The punishments for not meeting these obligations vary but they might affect whether the firms can secure regulatory approvals for activities in the capital market, according to the commission. The commission already requires listed firms to make comprehensive disclosures but, in reality, it hasn’t strictly enforced penalties for breaches.
Institutional investors are believed to benefit most from the move because they focus more on company commitments over the longer term while retail investors are concerned about profiting from share price movements.
The updates spring from a commission review last year of listed companies’ commitments to investors. Of the 2,493 listed companies on the Shanghai and Shenzhen stock exchanges, more than two-thirds — 1,631 – did not meet disclosure obligations by specified deadlines, while 80 companies did not fulfill them even after the deadlines.
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