China’s Capital Market Strengthens Preventative Measures Against Financial Fraud
ISSUING AUTHORITY:
The General Office of the State Council
DATE OF ISSUANCE:
July 5, 2024
EFFECTIVE DATE:
July 5, 2024
Chinese authorities have released a list of updated requirements to ensure that China’s capital market remains robust and securely defended against the growing threat of Financial Fraud.
On July 5, 2024, the list of requirements was issued by the State-owned Assets Supervision and Administration Commission of the State Council of the People’s Republic of China, in collaboration with the China Securities Regulatory Commission, the Ministry of Public Security, the Ministry of Finance, the People’s Bank of China, and the National Administration of Financial Regulation.
These requirements are split into six sections; together, they highlight that a zero-tolerance approach towards fraudulent activities, such as the illegal issuing of shares and the misappropriation of funds, is essential for maintaining market discipline and investor confidence. To effectively deter potential offenders from engaging in market abuse, penalties shall be issued according to the severity of the relevant offence.
General requirements include the adoption of a cooperative attitude towards stricter investigative procedures regarding suspected fraud, the collaboration of all relevant parties to increase the efficiency of such procedures from a holistic perspective, and the enhanced innovation of new long-term strategies in identifying and combating financial fraud.
Other requirements include the imposition of heightened criminal liability on majority shareholders, increasing director responsibility, conducting more practical due diligence exercises, greater management of post-investment affairs, and the mandatory delisting of companies found to be engaging in fraudulent activities.
These requirements aim to ensure that China’s capital market continues to thrive in a secure environment with strong regulatory oversight.
Reference:
國務院辦公廳轉發中國證監會等部門《關于進一步做好資本市場財務造假 綜合懲防工作的意見》的通知
