CSRC to make new effort to protect small investors

Xiao Gang, chairman of the China Securities Regulatory Commission (CSRC). said at a forum Saturday that greater effort should be made to protect the rights of small and medium-sized investors in the capital markets.

The regulator will set up a system allowing small and medium-sized investors to vote on key company issues like dividend distribution, so as to "ensure their right to express themselves and allow them to monitor actions by the controlling shareholders," Xiao said at the forum, which was held by the China Association for Public Companies in Beijing.

To ensure that small and medium-sized investors get access to key information about listed companies, Xiao also stressed the obligations of controlling shareholders to disclose information properly.

"There is an urgent need for the regulator to take measures to protect the interests of smaller investors, who are an important source of capital, especially at a time when the public is less confident in the capital markets," Li Daxiao, director of research with Shenzhen-based Yingda Securities Co, told the Global Times Sunday.

Media reports last month said that about 1 million investors have sold all their shares in recent months due to a lack of confidence in the country's capital markets.

A spokesman for the CSRC responded on October 25, saying that investors have been active in the secondary market, with both the number of investors and the total amount of transaction volumes increasing this year.

But some small-sized investors have become less enthusiastic about involvement in the stock market.

The Chinese capital market is better suited to "big-sized players, and small investors usually suffer losses," Yin Haicun, a 32-year-old IT worker who started investing in the stock market in 2010, told the Global Times Sunday.

Yin said he sold all his shares in September, partly because he suffered a total loss of around 100,000 yuan ($16,390) over the past three years, and also because he was angry about illegal activities in the market, such as insider dealing.

The regulator will set up a compensation system for investors who suffer losses if the controlling shareholders don't fulfill commitments made during share issuance and merger and acquisition processes, according to Xiao.

Xiao also stressed the need to normalize the delisting process so as to optimize the allocation of resources for the capital market.

"Improving the delisting process could restrict circulation of shares in underperforming companies and curb speculative trading, which will protect investors' interests," Li noted.

To complete its delisting rules for Shanghai-listed companies, the Shanghai Stock Exchange released four sets of supplementary rules in December 2012, involving setting up a risk warning board, and establishing the delisting period, a transfer system for delisted shares, and relisting regulations.