Recently, SZSE issued the Notice on Strengthening the Management of Focus Monitoring Accounts (hereinafter referred to as the Notice) to its members. In the new situation, this is another important measure for SZSE to implement the requirements of comprehensive and stringent law-based supervision, promote the establishment of the “member-regulation-oriented” transaction behavior regulation model, and strengthen the front line supervision of transactions.
Focus monitoring accounts generally have advantages in capital or shareholding and feature frequent abnormal trading behaviors, exerting a serious impact on the order of market transactions. For a long time, SZSE has attached great importance to this issue and actively developed the management mechanisms of focus monitoring accounts. Since 2010, SZSE has gradually established a management system for such accounts. Each quarter, SZSE sends a list, which covers all securities accounts with abnormal trading behaviors, of focus monitoring accounts escrowed in members’ sales departments precisely to its members and requires them to take effective control measures. From the practice of supervision, the existing management system of such accounts has played an active and important role in accurately combating abnormal transactions, curbing speculation and maintaining market order. But there are still some problems such as low account transparency, regulatory arbitrage opportunities for account holders, insufficient basis of membership management, and low possibility of executing some regulation. The relevant systems are in desperate need of further improvement.
The Notice has strengthened the management system of Focus monitoring accounts mainly from four aspects. First, the way of identifying the accounts is defined. With reference to the experience of market supervision over the years, SZSE includes the investor securities account with severe or frequent abnormal trading behaviors in the account list and sets a 12-month highly monitoring period. Second, the focus monitoring accounts are announced to all members. The list is sent to the members on a monthly basis, covering all securities accounts in the name of the relevant account holders, to enhance the information sharing of such accounts among members and further eliminate the regulatory arbitrage space of the account holders. Third, members’ management responsibility for focus monitoring accounts is strengthened. Members are required to sign a supplementary agreement with their clients on the securities transaction commission and adopt a series of specific measures such as re-verification and focus monitoring to further strengthen the membership responsibilities. Fourth, members are asked to put forward more stringent management requirements when the holders of focus monitoring accounts apply for new accounts. The members must carry out a cautious assessment of such applications which must be signed on and confirmed by the person in charge of compliance before an approval is granted. After the account is opened, a monthly report must be submitted for six consecutive months. If the newly opened account is subject to self-regulatory measures by SZSE for abnormal trading behavior, SZSE will impose heavier penalties on the relevant members.
Currently, SZSE, in accordance with the unified deployment of the CSRC, is accelerating the establishment of the “member-regulation-oriented” transaction behavior regulation model that shifts from the main direct supervision of investor transactions to the concurrent supervision of both investors and members, urging members to take the responsibility for the management of clients’ transaction behavior. In particular, in respect of the account management, it is more than necessary to give full play to the important role of members in the management of customer transaction behavior, to adopt effective measures for strengthening control, and to effectively prevent transaction risks and maintain stable market operations. SZSE will incorporate the management of members’ focus monitoring accounts into the management evaluation of its clients’ transactions and on-site inspection, and strengthen the supervision and accountability of its members.
An SZSE official indicated that issuing the Notice to intensify the management of focus monitoring accounts is SZSE’s bout with abnormal trading behaviors to adapt to the new market situation and the regulatory concept changes. Next, SZSE will keep deepening the comprehensive and stringent law-based supervision, constantly improve the supporting systems and further enhance its technical supervision capacity so as to boost its frontline supervision deterrence, safeguard the market transaction order and protect investors’ legitimate rights and interests. Hence, the long-term sound and stable development of the capital market.
