In view of the low information transparency and the imperfect system of China's securities market as well as the enforcement difficulty in anti-manipulation judicial procedures, the insider dealing has become a hot issue on the market in all-floating environment. Research Center Director Hu Ruyin of the Shanghai Stock Exchange (SSE) said that more activities of the market mean more possibilities for the insider dealing. To deter the flooding of insider dealing, it is imperative to enforce investigation and punishment, improve the legislation and adjust the function orientation of supervision departments. Meanwhile, the SSE should also reinforce the morality and responsibility of main participants of the market to cultivate a regulation-observing market.
Hu said that insider dealing is a worldwide issue. According to preliminary statistics in UK, 29% companies' stocks are purchased before information disclosure of merger and acquisition, since some investors has already learnt the information. In China, insider dealing, always connected with market manipulation, damages the efficiency, impartiality and transparency of the securities market as well as the interests of most investors. Besides, it deters the realization of systematic risk control on the securities market by supervision departments. At the development beginning of China's emerging and transitional market, investors have weak regulation-observing awareness. So, the market often seems out of order. Once social agreement cannot be reached or punishment on misconduct is insufficient, the competitiveness of China's securities market will be damaged in the international arena.
According to Hu, insider dealing and market manipulation based on insider dealing are a kind of "cancer" on the current securities market. Their means fall into three categories. The first is the stock price manipulation based on trading. The second, information manipulation, influences stock prices through spreading untrue information and rumors. The third is behavior manipulation, namely, insider dealing is conducted by controlling time and completeness of information disclosure. All these manipulations directly damage the market efficiency and fairness. However, the investigation on insider manipulation behaviors faces three major difficulties in terms of misconducts detection, investigation and quote.
According to Hu, the law enforcement right of the China Securities Regulatory Commission (CSRC) is insufficient, while its function orientation is too much. All this has become a major obstacle for insider dealing investigation. Firstly, compared with the mature market of the USA, China's legislation mechanism is still immature. The investigation power and means of the CSRC are insufficient. Moreover, punishment on insider dealing stipulated in laws and regulations are hardly enough. Secondly, the CSRC is endowed with other responsibilities and functions besides investigation, which causes the misplacement of functions and resource allocation, low supervision efficiency and insufficient validity. Thirdly, both investigation and disposal of violations of regulations and punishment are insufficient. The low private cost of violations and lack of powerful law enforcement and supervision punishment have objectively indulged the insider dealing.
Hu also pointed out that, "it is unilateral to confine the reinforcement of supervision over insider dealing only to the securities market." The naissance of insider dealing doesn't exist merely in listed companies or senior management on the securities market. Governmental systems are also likely to leak the information. Therefore, the current laws can hardly reach the scope of insiders and sensitive information. Thus, it is necessary to improve the credit system of the whole society. Besides, on a mature market, since the real-name system of personal properties and the personal credit system are perfected, there will be much more obstacles for violations of laws and regulations. Thus, the misconducts can be easily found and investigated. In China, the issue of the real-name system of personal properties has not been solved yet, which increases the difficulty in investigation and quote of insider dealing. Efforts should be made to improve both the personal credit system and the personal property management system. Meanwhile, efforts should be made to reinforce joint supervision, establish the informer system and improve the public credibility system.
According to Hu, the difference between our market and a mature market is not in the market hardware, but in the game rules and behavior modes of market operation. The crux of transformation of the securities market hinges on transformation of the system, the culture and the behavior modes. Moreover, reinforced supervision over insider dealing is the most important in the market credibility system. Great efforts should be made to further improve the laws and regulations, enhance the punishment determination and elevate the law and credibility awareness of the whole securities market. By doing so, the legal and regulation-observing behaviors will become the internal spirit, the value orientation and the best choice of all market participants.
