China tightens trading scrutiny on major shareholders and executives
New CSRC rules curb short-term trading by major shareholders to boost investor confidence and encourage long-term market participation
China has introduced new rules governing short-term trading, as the market regulator steps up oversight of the trading behaviour of major shareholders and listed company executives as part of a drive to bolster investor confidence.
The rules apply to shareholders with a stake of 5 per cent or more in a single listed company, including foreign investors, executives of publicly traded companies, their spouses and children, according to the China Securities Regulatory Commission (CSRC). The rules clearly define short-term trading activity as selling the same stock within six months of purchases or buying it back within six months of selling.
The rules came into effect on Tuesday after the CSRC unveiled them last month after seeking feedback from the public.
The rules would make it easier for long-term investors, such as social security funds and pension funds, to take part in the market as they laid out clear-cut guidance and reduced the odds of unintended misconduct, according to brokerage CSC Financial.
China’s yuan-traded shares have regained momentum over the past year after the CSRC implemented a raft of measures to revive investor confidence in the US$13.5 trillion market, such as cracking down on insider trading and fraudulent listings, as well as encouraging more institutional participation. The CSI 300 Index has risen more than 20 per cent in the last 12 months as overseas traders return and Chinese households shift part of their 170 trillion yuan (US$24.7 trillion) in bank savings into equities.