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Tighten securities market supervision needed
(China Daily)
Updated: 2005-02-07 11:29
In the face of the current "anti-corruption storm," tighter regulation of the
securities market is urgently called for, says an article in the Beijing Youth
Daily. An excerpt follows:
So far this year, 12 senior executives of listed companies have been detained
by the authorities. Together with those still in custody from the end of last
year, the number of executives awaiting their day in court is quite large.
A common thread throughout the cases is that, though irregularities and
illegalities have long existed in these companies and been known about by
supervisory authorities, they have, until recently, gone unpunished.
The current "anti-corruption storm" is actually an administrative act guided
by the central government and not a move by securities authorities. And what can
be gleaned from this new series of anti-corruption measures is that the central
authorities are getting serious about the problem-riddled securities market.
But more important is how this "administrative storm" can be transformed into
a routine supervisory mechanism, and how this mechanism will improve market
order.
Most companies involved in this "anti-corruption storm" have complicated
relationships with State assets and local government departments. It is for
these reasons, among others, that these companies did not operate according to
market rules, and were not strictly supervised.
For some State-holding companies, "State assets" and "public interests" were
used as excuses for illegal behaviour. Some management buyouts in State-owned
enterprises (SOE) that were not entirely legal went ahead smoothly under the
banner of "SOE reform." Supervisory work was somewhat lax in front of local
administrative willpower and the interests of various government departments.
Thus the current "anti-corruption storm" mainly reflects the central
government's determination to tighten up the securities market but is not the
supervisory department's new awakening.
But better institutional construction, leading to a rigid supervisory
mechanism, is needed in the long run.
To regulate the securities market through better administration is workable.
But if this power intervenes in enterprises' operations, independent supervision
will not be thoroughly implemented and the supervisory mechanism will not work
effectively. Therefore, government departments should pull away from
over-meddling. Administrative power should also be watched closely by
supervisory departments.
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