China issues new securities rule

A new rule based on the 2006 Securities Law was issued in China yesterday to define the nature of illegal securities business and propose steps to control the illegal securities business.

The new rule was co-established by the Supreme People's Court, the Supreme People's Procuratorate, the Ministry of Public Security and the China Securities Regulatory Commission (CSRC). The rule is to clarify definitions of illegal securities business and to fight against dealers who conduct illegal business.

Authorities are aware of the situation that there are rising amount of companies, most of which are from western China, selling "original" shares to public investors in eastern China, by telling investors that the company will be listed overseas or has got approval from the securities regulator, said CSRC.

The rule issued yesterday enables investors under such situations the right to claim for compensation through civil action and suggests that illegal dealers may be put under judicial prosecution in the future. About 90% of illegal securities deals broke criminal law, according to CSRC.

The illegal securities business surges amid the bullish stock market in China. Insiders attribute the situation to soaring hot money that seeks short-term returns in China's capital market.