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Disciplinary sanctions and regulatory measures are the major methods of an exchange to make punishment towards illegal behaviors and an important guarantee for it to fulfill its front-line regulatory responsibilities. The Shanghai Stock Exchange (SSE) has explored to set up the disciplinary sanctions mechanism separating investigation and examination since 2008. And the SSE has gradually formed the disciplinary sanctions and regulatory measures system with numerous types and clear layers, improved the standards of implementing disciplinary sanctions and regulatory measures, and standardized the process of implementing disciplinary sanctions and regulatory measures in the regulation of several years. In general, the disciplinary sanctions and regulatory measures have been implemented in order and exerted important role in punishing and deterring illegal behaviors in stock market, and received good effects from the market.
With the in-depth promotion of strict and overall regulation by law in the stock market in recent years, the SSE’s front-line regulatory function has been further strengthened and its efforts on implementing disciplinary sanctions and regulatory measures against illegal behaviors have been remarkably intensified. In 2016 and 2017, the SSE made 68 and 93 disciplinary sanction cases respectively, up by 10% and 50% compared with the 62 in 2015; in particular, it made public censure and public assertion of 12 cases and 3 person-times in 2016 and of 25 cases and 11 person-times in 2017, showing sharp increase compared with 9 cases and 2 person-times in 2015. The China Securities Regulatory Commission (CSRC) revised and issued the “Management Method for Stock Exchanges” in November 2017, which further made clear and strengthened the self-regulation of stock exchanges, enriched their self-regulatory methods, and raised clear requirements on their disciplinary sanction procedures and hearing arrangements. To implement the requirements of “Management Method for Stock Exchanges”, improve the self-regulatory procedures and standards and protect the legitimate rights and interests of self-regulatory objects, the SSE has revised the “SSE Measures for Implementation of Disciplinary Sanctions and Regulatory Measures” (the “Measures” for short) and formulated the “SSE Detailed Rules on Self-regulatory Hearing” (the “Detailed Rules” for short), which are released and put into effect as of March 23, 2018.
The major revisions in the “Measures” are as follow. The first is to adjust and improve the varieties of disciplinary sanctions and regulatory measures according to the rules and regulatory requirements of the “Management Method for Stock Exchanges”, thus fitting on forceful “teeth” for the front-line regulation of the exchange. For example, disciplinary sanctions such as charging punitive default payment towards securities issuers and relevant market participants and members and requiring members to refuse investor’s Hong Kong Stock Connect trading order, and regulatory measures such as issuing regulatory recommendation letter to relevant departments have been added. The second is to optimize and restrict the procedures of implementing disciplinary sanctions and enhance the regulatory efficiency against severe abnormal trading behaviors. The third is to further improve the mechanism, standard and procedures of implementing disciplinary sanctions and regulatory measures, such as adding the situations for giving lesser, reduced or heavier disciplinary sanctions and regulatory measures; and the fourth is to expand the scope of disciplinary sanction hearing, including some disciplinary sanctions into hearing such as suspending or restricting trading authority, canceling the qualification of trading participant and member, charging punitive default payment and identifying as unqualified investor.
While strengthening the front-line regulation, the SSE has paid great attention to standardizing self-regulatory procedures and intensified the protection on regulatory object’s legitimate rights and interests through hearing and re-examination. In recent two years, the SSE has organized 10 disciplinary sanction hearings to listen to regulatory object’s defending at site and guarantee the fair and justice of disciplinary sanction. On summarizing the previous hearing procedures, the SSE has formulated the “Detailed Rules” to standardize the hearing process in its self-regulatory management. The “Detailed Rules” expands the scope of hearing -- including in the delisting and re-examination of regulatory object and adding the types of disciplinary sanctions suitable for applying hearing, thus intensifying the protection on regulatory objects. Besides, it optimizes the hearing process and made detailed stipulation on the hearing mode, procedures, rights and obligations of participants and special situations by referring to the administrative hearing process and combining the features of self-regulation and in accordance with the principle of standardization, fairness and efficiency.
Next, the SSE will earnestly strengthen the front-line regulation on illegal behaviors, make the most of disciplinary sanctions and regulatory measures by law, and keep promoting the sound and stable development of the capital market on the basis of the “Measures” and the “Detailed Rules”.
