The mainland's state secrets law can be an occupational hazard for journalists, academics and activists because it is loosely defined and used to restrict information and stifle public debate. Now it looms as a risk for investors, too. Twice recently the Securities and Futures Commission has taken action to protect its interests after the secrecy law was invoked to prevent disclosure of information. Investors can pay dearly for heeding misleading prospectuses, reports and accounts, often involving non-disclosure. It is a worry that, as more smaller private mainland companies come to market, regulators have documented a litany of falsifications, exaggerations and omissions material to investment decisions. As a result the SFC has tabled a controversial proposal to criminalise failure by sponsoring bankers and brokers to ensure that information in prospectuses is accurate, exposing executives to jail terms and heavy fines. State secrets is a new excuse for not complying with requests by regulators and auditors. The SFC has asked a court to order Ernst & Young to provide information on a company that withdrew a listing application after the auditors resigned as the reporting accountant over inconsistencies in documents. E&Y has refused to comply because the information may be subject to claims of state secrecy. The SFC has also ordered China High Precision Automation Group to suspend trading in its shares after it said it could not furnish its former auditor with full information because its businesses were related to state secrets. All this highlights once again China's loose definition of state secrets. They are defined broadly as political, economic and defence matters that could involve national security and interests. One result, for example, is that there could be a fine line between the disclosure of information relevant to investors - such as a big government contract - and leaking state secrets. The SFC is right to use its powers to uphold rules aimed at ensuring a fair and open market. This is the first time it has asked a court to order compliance with such a request for information. But that is consistent with a more aggressive approach to regulation in recent years. Investor protection and market transparency go to the heart of Hong Kong's standing as an international financial centre and one of the IPO capitals of the world. A reputation for providing a level playing field for investors is crucial to maintaining it.