To strengthen the supervision over insider dealing, the Shanghai Stock Exchange (SSE) has recently held a special meeting on supervision work to study the arrangements of the China Securities Regulatory Commission (CSRC) for cracking down on insider dealing and pledge to give its first priority in frontline market supervision to deterring insider dealing and take several measures to strengthen the supervision over insider dealing.
The SSE put forward seven regulatory measures. Firstly, the internal supervision resources will be integrated to increase the efforts to crack down on insider dealing. The stock exchange, the frontline market regulator, is crucial to the comprehensive prevention and control system of insider dealing. The SSE will improve the regulation response speed and efficiency and tighten the supervision over insider dealing by enhancing the integration of its regulatory resources and holding special meeting on supervision work on a regular basis to coordinate, deploy and promote the work of preventing and curbing insider dealing.
Secondly, the capability to discover clues to insider dealing will be strengthened. The SSE will consolidate the coordination mechanism between abnormal stock price fluctuation monitoring and information disclosure supervision as well as the examination and verification of insider dealing in merger and acquisition. Once the abnormal stock trading is discovered, the SSE will thoroughly investigate relevant trading behaviors and report in time the clues to violations. The SSE will also make further analysis on the features of insider dealing and optimize the monitoring indicators to improve the monitoring system functions and enhance the capability to spot insider dealing.
Thirdly, the supervision over information disclosure will be intensified to stop the insider dealing root and branch. Last year, the SSE introduced the registration system of insiders of inside information in significant assets reorganization of listed companies. This move not only increased the inside information management awareness of listed companies and drove the perfection of their inside information management measures but also laid a solid foundation for cracking down on insider dealing thanks to the timely and complete data of insiders of inside information. In August 2010, the SSE published the "Guidelines of Conducts of Controlling Shareholder and Actual Controller of Listed Company" to promote the perfection of corporate governance from the aspect of standardizing the behaviors of controlling shareholder and actual controller of listed companies. The SSE will in the days to come continue to intensify the continuous supervision over listed companies' information disclosure including the registration of insiders of inside information in a bid to curb the insider dealing root and branch.
Fourthly, the supervision role of media will be given full play. Public supervision is one of the major channels to discover and deter insider dealing. The SSE has always attached importance to the supervision of media over suspicious insider dealing and market manipulation, and will in future take the initiative in collecting the clues found by the media to make swift supervision response. Meanwhile, the SSE encourages investors and insiders to report clues to insider dealing in a view to forming the cohesive forces in the society to stop insider dealing.
Fifthly, the training for listed companies and the education towards investors will be enhanced. The SSE will highlight the prevention of insider dealing in training for listed companies to increase their awareness of preventing insider dealing. Furthermore, the SSE has publicize the insider dealing in investor education through newspaper, network, lectures, brochures and other channels and ways to create a favorable atmosphere among investors for constraining insider dealing.
Sixthly, the supervision cooperation will be enhanced to promote the construction of comprehensive prevention and control system for insider dealing. Under the guidance of the CSRC, the SSE will enhance its cooperation and exchange with public security and justice departments and the Ministry of Supervision to provide full support to investigation of insider dealing cases and other securities violations so as to promote the construction of comprehensive prevention and control system for insider dealing.
Seventhly, the client management responsibility of brokers will be strengthened. Impelling brokers to earnestly fulfill the client trading management responsibility is an important part of the SSE's client management work. In future, the SSE will increase brokers' responsibility and awareness to find and report illegal trading behaviors including insider dealing through such work as broker business training, broker classification appraisal and promotion of brokers' innovative businesses including margin trading and securities lending to keep down insider dealing.
