The 1st joint meeting, held recently by the Administrative Sanction Committee of the China Securities Regulatory Commission (CSRC) and the disciplinary committees of the Shanghai and Shenzheng Stock Exchanges, marked the official establishment of the mechanism of coordination and communication in terms of the CSRC’s administrative sanctions and the exchanges’ disciplinary punishments.

CSRC Vice-chairman Yao Gang pointed out at the meeting that it is quite necessary for the CSRC Administrative Sanction Committee and the exchanges’ disciplinary committees to establish the joint meeting system considering the new requirements to the securities supervision and law enforcement put forward by the new situation of the securities market’s reform and development. The two sides are asked to view the system as a platform for joint working meetings on a regular or temporary basis to compare notes on the new trends of the violations against laws and regulations on the securities market and probe into the major and complicated issues cropping out in the process of law enforcement. Parties concerned should give full play to their advantages and strengthen the mutual coordination and cooperation with a view to forming a multi-level ecosystem for crushing violations and fueling law enforcement capability and social effects.

In restructuring its system of securities law enforcement in October 2006, the CSRC optimized the system of “separating investigation from review” and established the Administrative Sanction Committee while integrating and expanding its inspection arm. All this contributed to improving the quality and efficiency of case trial. By June 30, 2009, the Committee had closed 154 out of a total of 194 accepted cases, issued 126 decisions on administrative sanction and 68 decisions on banning from market entry, warned 587 persons, fined 548 persons, revoked 30 persons’ qualifications for engaging in securities industry, banned 205 persons from market entry, including 55 permanently, and confiscated the illegal income with the total amount of RMB190,966,600, with the fines totaling RMB216,051,800.

For more than one year since 2008 when the Shanghai and Shenzhen Stock Exchanges set up their respective disciplinary committees, the self-disciplinary supervision and law enforcement has seen a growing momentum in both places. The disciplinary committee of the Shanghai Stock Exchange has reviewed 97 disciplinary cases and imposed 214 persons with the disciplinary punishments including public censure, circulated criticism and trading restriction, while the disciplinary committee of the Shenzhen Stock Exchange has held 23 meetings and imposed 67 disciplinary sanctions on companies and relevant personnel.

The 1st joint meeting also touched upon the short-term manipulation, one of the recent market attractions, and made proposals on how to supervise, recognize and penalize the new forms of market manipulations such as false orders and withdrawals, manipulation of opening or closing price and manipulation through notorious institutional spokesmen.

Sources say that although different from each other in terms of nature, implementation target, specific procedures and handling efficiency, the administrative sanction made by the securities regulatory authorities and the disciplinary punishment imposed by the exchanges, both important parts of securities supervision and law enforcement, are major means to crack down on violations against laws and regulations on the securities market, safeguard the order of securities market and protect investors’ interests. The coordination and communication mechanism established between the CSRC Administrative Sanction Committee and the disciplinary committees of the exchanges as well as the beneficial interaction formed between the administrative enforcement and the self-disciplinary supervision are of great importance in safeguarding investors’ lawful rights and interest and crushing securities violations.