• Wed
  • Sep 24, 2014
  • Updated: 1:03am

Millions of small investors get protection

PUBLISHED : Thursday, 12 January, 2012, 12:00am
UPDATED : Thursday, 12 January, 2012, 12:00am

A new department to protect the interests of 72 million individual investors has been set up by the mainland's securities regulator, which is likely to roll out more policies to allow small players to seek compensation for losses resulting from market irregularities.

The new Investor Protection Bureau is responsible for policymaking and receiving complaints from individual investors, according to Xinhua.

The creation of the department came after the newly appointed chairman of the China Securities Regulatory Commission, Guo Shuqing, said that the regulator would intensify efforts to clean up the market.

China's retail investors have often been short-changed by dealers who take advantage of insider information to make a profit from equity investments.

Several listed firms were also found to have falsified earnings in the past two decades, a time that saw multi-billion-yuan losses by retail investors. .

The small investors could not be fully compensated for the losses because of the lack of an efficient legal system.

'Retail investors were easily hurt because they have little knowledge about the market and have no awareness of risks,' Xinhua said. 'Their access to information is limited and their investment skills are insufficient.'

Guo told a government conference earlier this week that the regulator had investigated 209 cases of insider dealing in 2010, and promised to safeguard investors' interests.

On the mainland, tens of millions of individual investors opened a combined total of 164 million trading accounts at the Shanghai and Shenzhen stock exchanges.

Institutional and corporate investors had only 700,000 accounts. However, they held 70 per cent of the total market capitalisation.

The securities regulator has long had to be politically minded, because a sharp downturn on the stock market could result in social disorder if millions of investors lose years of savings.

The newly established bureau is also required to educate investors by warning of the risks of over-speculation on volatile stocks.

Xiong Wei, a former chief representative to the CSRC's Shanghai office, will head the new bureau, according to Xinhua. It is expected that the new department will draw up new policies that could help victims of insider trading to be fully compensated.

An analyst at Haitong Securities, Zhang Qi, said: 'The regulator has showed its willingness to help small investors, but it will be a huge and difficult task because existing policies, laws and regulations are all biased against them.'

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