CSRC tightens rules to crack down on fraud

The mainland securities regulator plans to restrict share issuers and major holders from selling their stocks at below the initial public offering price as part of new rules aimed at cracking down on fraud and protecting investors.

The restrictions will be in place for two years after lock-ups end, according to draft rules the China Securities Regulatory Commission posted on its website yesterday.

Issuers must also prepare and disclose plans to stabilise share prices that fall below net asset values within five years of their debuts.

The watchdog is seeking public feedback on the proposals by June 21.

New CSRC chairman Xiao Gang is extending predecessor Guo Shuqing's campaign to combat fraud. Since Xiao took over in March, the regulator has dished out penalties including a three-month suspension of Ping An Securities' underwriting licence for the firm's role in the share sale of a fraudulent company in 2011.

Under the draft rules, when a firm reports a net loss or a drop of more than 50 per cent in profit in the same year of its listing, the CSRC will stop reviewing any applications submitted by the investment bank that advised it.