President Zhang Yujun Of The Shanghai Stock Exchange: Boosting Sustained Sound Growth Of SSE Market By Building Legal, Integrity Systems

At the 2nd "SSE Legal Forum" held on November 26, President Zhang Yujun of the Shanghai Stock Exchange (SSE) said that the construction of legal and integrity systems is a fundamental, long-term and systematic task in the development of the SSE market as legal system construction has been an important guarantee for the capital market, a base for regulation and integrity in the capital market and a precondition for safeguarding the 3 principles of "openness, fairness and justice" in the market.

"Objectively speaking, the current integrity level in the SSE market could not match with the rapid growth of the market's targets such as its size and structure as well as meet the expectations of investors. It is a long-term arduous task to build the integrity system as the social integrity basis, the market mechanism and the basic legal system which the construction of legal and integrity systems in the market depends on are still weak, incomplete and imperfect", said Zhang.

In recent years, the SSE has made some achievements in the construction of legal and integrity systems in the market by giving full play to its basic function of organizing and administrating securities trading and boosting the integrity construction in the market regulation, service, innovation and development. According to Zhang, the SSE has made great efforts on the following aspects:

Firstly, the business rule system has been continuously optimized and the systematical base for the integrity construction consolidated. So far, the SSE has had 250-plus effective business rules and regulatory documents concerning securities listing and trading as well as member management, etc., mostly involving the guidance of honesty of market participants and the penalty on dishonesty.

Secondly, the front-line supervision has been intensified to prevent and punish the dishonesty and rule-breaking. Since 2007, the SSE has successively made public criticism on 31 companies whose capital was maliciously occupied by their major shareholders and the relevant 203 directors, supervisors or senior managers, as well as 31 companies who provided rule-breaking guarantees and the relevant 248 directors, supervisors or senior managers, with the malicious occupation of listed companies' funds by their major shareholders eliminated on the whole. Besides, the market surveillance has been strengthened to promptly find and stop abnormal transactions such as insider dealing, market manipulation and short-swing trading. The SSE has actively assisted relevant authorities of the China Securities Regulatory Commission (CSRC) in implementing the express regulation mechanism of "check, suspension and termination in case of abnormality, suspicion and rule-breaking" in the merger and reorganization of listed companies as well as publicly criticized the accounts suspected of rule-breaking and limited their trading. According to deployment of the CSRC, an independent integrity information platform has been established to collect all the penalty information of market participants since 2000 and file 1,000-plus pieces of integrity information involving more than 2,000 punished people-times to the CSRC's integrity database. The integrity records have played a more important role in the market regulation.

Thirdly, the SSE has positively explored the classified regulation system and perfected the incentive system of market integrity. In the regulation on listed companies, the SSE has conducted differentiated regulation by carrying out the level 1-5 risk management on listed companies in light of their integrity conditions. In addition, the SSE has classified the regulatory operation of listed companies and guided them to requite their shareholders, fulfill their social responsibilities and consummate their corporate governance by ushering in the dividend index, social responsibility index and governance index.

Fourthly, the SSE has adhered to the integrity education and fostered the legal-system and integrity cultures. The SSE set up the investor education department in 2008 to functionalize and professionalize the investor education, in which the integrity education became a crucial point.

Fifthly, pains have been taken to propel relevant legal system work and optimize the legal environment for the integrity construction.

Zhang stressed in his speech that from the perspective of legal system construction coordinated with the integrity culture, all parties should cooperate with each other by the overall planning of legislation, law enforcement, justice, law abiding and publicity. Thus, he put forward several suggestions as follows: concerning legislation, it is needed to improve integrity-oriented laws and regulations, administrative regulations and market business rules and perfect the fundamental system compatible with the integrity construction; as for laws enforcement, with the aim of raising the law-enforcement efficiency, it is needed to strengthen the comprehensive coping mechanism of the preliminary prevention, in-the-action curb and after-action punishment for dishonest and illegal actions and give full play to the basic role of credit records in the regulatory enforcement; as to justice, it is needed to enhance the proactive law enforcement and give full play to the guidance of good faith principle for the securities market cases, which aims at further combining the legal effect and market effect of case ruling; with respect to law abiding, it is needed to sharpen the construction of market operation mechanism and the market discipline, in a bid to give full play to independent selection, self-government, mutual restriction of market participants; in terms of law publicity, it is needed to innovate methods and strengthen the market-oriented guidance and media publicity, which aims to further raise the integrity awareness of all market participants and develop the integrity culture.