New securities chief reveals tough intentions

No one should have any doubts about how tough the country's new securities regulator Xiao Gang wants to be.

On Friday, just four days after the former Bank of China chairman was appointed boss of the China Securities Regulatory Commission, three listed firms received investigation notices for being suspected of having released false and misleading information.

The move sent a clear message to the market, that the law is the law, and must be followed.

It was a quick response to the call made by Premier Li Keqiang, who holds degrees in both law and economics, that government officials must be loyal to the Constitution.

There will always be some old hands in the Chinese securities sector who say China is an exception, and too much rule of law is not good for business.

They made the complaint about the former commission chairman Guo Shuqing, who is now a key leader in Shandong province.

Sticking strictly to the law was his focus. He made or revised 68 securities rules during his 17-month tenure, more than any previous commission boss.

Most of the rules were aimed at eliminating financial fraud and increasing competition.

Those old hands may be making the same complaint about Xiao, now that he's made it clear he is going to continue with the policy initiatives of his predecessor.

Releasing the investigation notices to the three companies, a commission official reportedly said: "We will severely punish those who violate the law".

Analysts said that if the three companies had violated information disclosure rules, they would not only receive public censure from the watchdog, but perhaps more seriously, their executives may face economic punishment. "The new chairman of the CSRC may continue to tighten regulation of the securities market," said Xu Hongcai, an economist from the China Center for International Economic Exchanges.

Curbing insider trading and improving information disclosure by public companies were among the main aims of former chairman Guo.

Last year, according to the national securities regulatory body, it handled 380 cases of rule-breaching, a 31 percent increase on the previous year.

As a result, 316 investigations were made, a 21 percent rise, and a record number for the commission. "The CSRC will continue to improve securities law as the basis of its investor protection work," an official from the CSRC Investor Protection Bureau said, shortly before the change in chairman.

Under Guo's initiative, all companies applying for IPOs, and other financial service intermediary businesses, were required to re-examine their application documents in an effort to improve the quality of information release.

The first stage of the re-examination campaign is planned to end on March 31.

By March 21, 48 companies had completed their IPO applications. Whether the CRSC restart any IPO approval processes is still to be seen.