Date
26 July 2017
Xian Yan, who controls Guangxi Future Technology, has been fined 3.4 billion yuan and barred from the securities market for life for suspected malpractices. Photo: Caixin
Xian Yan, who controls Guangxi Future Technology, has been fined 3.4 billion yuan and barred from the securities market for life for suspected malpractices. Photo: Caixin

CSRC again shows its heavy-handed approach

The heavy penalty imposed on Xian Yan, a senior executive of Shenzhen-listed Guangxi Future Technology (600556.CN), serves as further proof of the extremely tough stance of Liu Shiyu, the head of China’s securities watchdog, toward those suspected of market malpractices.

Xian was fined 3.47 billion yuan for stock price manipulation and lapses in information disclosure, the China Securities Regulatory Commission (CSRC), led by Liu, said in a statement last week.

Liu, a former banker who is currently serving as the chairman of the CSRC, warned that it’s much easier now for authorities to chase down irregularities thanks to new technologies such as big data and cloud computing.

Guangxi Future Technology had on January 3 submitted to the CSRC up to 1,001 extraordinary shareholders’ meeting proposals. Most of the agenda items were nonsense, such as a proposal for setting up an approval system for dating activities between employees.

The proposals kept some CSRC employees working overnight and aroused much concern among market participants.

Guangxi Future Technology was formerly known as Guangxi Beisheng Pharmaceutical. After Xian Yan took over control of the firm in August 2016, he has been seeking permission for restructuring the assets but got rebuffed repeatedly by CSRC due to inadequate disclosures.

It is said that Xian has been holding a grudge against the CSRC, and decided to face off with the securities regulator with the nonsense proposals.

However, Xian might have underestimated Liu, who is known for zero tolerance toward malpractices.

“These proposals represent a challenge to the government and the party, and is an outright contempt of law,” the market watchdog said.

On top of the fine, Xin has been barred from the securities market for life.

Rulings of such nature may help the cause of minority investor protection, but authorities need to ensure that the punishments are handed out after due process and in the right proportion. 

Overall, the lack of a proper trial and a transparent mechanism to deal with malpractices means policy risk remains a problem with China’s domestic equity market as of now.

This article appeared in the Hong Kong Economic Journal on Feb. 28

Translation by Julie Zhu

[Chinese version 中文版]

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RC

Hong Kong Economic Journal columnist

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