The latest meeting of the Financial Stability and Development Committee of the State Council (referred to as the "Financial Committee") once again focused on the capital market.

The Financial Committee recently held its 36th meeting to study the full implementation of the work requirements of "zero tolerance" for illegal and criminal acts in the capital market, and named fraudulent issuance, financial fraud and other illegal and criminal acts. Liu he, member of the political Bureau of the CPC Central Committee, vice premier of the State Council, and director of the Financial Committee, presided over the meeting, and relevant responsible comrades of the member units of the Financial Committee and relevant units attended the meeting.

This is the fourth time in more than three months that the Financial Committee has focused on fraud in the capital markets, indicating the concern of senior officials about the capital markets. Xun Yugen, a strategist at Haitong, told reporters that strictly cracking down on capital market violations and strengthening delisting is a further improvement in the construction of the capital market system and sends a positive policy signal.Only by forming a capital market environment of "going in and out and survival of the fittest" can we ensure the stable and healthy development of the capital market.

The meeting had these key statements:

1. Fraudulent issuance, financial fraud and other illegal and criminal acts are the "cancer" of the capital market, harming the legitimate rights and interests of investors, endangering the market order, and restricting the effective exertion of the function of the capital market, which must be corrected resolutely, decisively and in a timely manner.

2. The CSRC and relevant departments should further strengthen securities law enforcement and judicial work, resolutely crack down on and curb illegal and criminal activities in the capital market, protect the rights and interests of investors, especially medium and small investors, and respond to the expectations of all sectors of society.

3. It is necessary to fully implement the requirements of "zero tolerance" for illegal and criminal acts in the capital market, take various measures to strengthen and improve securities law enforcement, and make every effort to maintain the health, stability and good ecology of the capital market.

4. Strictly investigate and deal with major illegal and criminal cases, speed up the investigation, punishment, and transfer work, and punish them severely, quickly and severely in accordance with the law.

5. To strengthen the intensity of civil compensation and criminal liability, it is necessary to speed up the landing of the newly revised detailed rules for the implementation of the Securities Law, and start "class action" in time in accordance with the law for typical cases of great significance and bad social impact.

6. Deepen the reform of the delisting system, further improve the delisting standards, simplify the delisting procedures, strengthen the delisting supervision, strictly implement the delisting system, and form a market-oriented and normalized withdrawal mechanism of "entry and exit, survival of the fittest".

7. Cooperate with the legislature to speed up the revision of the criminal law, further improve the legal system for punishing illegal and criminal acts, and increase the intensity of penalties.
8. Improve the securities law enforcement system and mechanism with Chinese characteristics that meet the needs of the development of the capital market, strengthen the construction of the basic system of administrative law enforcement, unify law enforcement standards, standardize law enforcement behavior, improve law enforcement efficiency, and strengthen specialized law enforcement forces.

9. The CSRC shall, in conjunction with relevant departments, establish a "Coordination working Group on cracking down on illegal activities in the Capital Market" to form a joint force to crack down on illegal activities in the capital market and jointly safeguard the health and stability of the capital market.

10. Strengthen the guidance of public opinion, strengthen law enforcement publicity on key cases through multiple channels and platforms, send a clear signal of "zero tolerance" to the market, give full play to the warning and educational functions of investigating and handling typical cases, and promote the formation of a good market ecology and culture of law worship and trustworthiness.

Point one: the Financial Committee has repeatedly focused on the capital market over the past three months.

The 36th meeting of the Financial Committee was presided over by Liu he, member of the political Bureau of the CPC Central Committee, vice premier of the State Council, and chairman of the Financial Committee, and attended by relevant responsible comrades of member units of the Financial Committee and relevant units. this meeting studies the full implementation of the work requirements of "zero tolerance" for illegal and criminal acts in the capital market.

The meeting pointed out that the integrity construction of market subjects is related to the long-term and healthy development of the capital market. Fraudulent issuance, financial fraud and other illegal and criminal acts are the "cancer" of the capital market, harming the legitimate rights and interests of investors, endangering the market order, and restricting the effective exertion of the function of the capital market, which must be corrected resolutely, decisively and in a timely manner.

"for a period of time, due to the shortcomings of system construction and the low cost of crimes in the capital market, there have been a number of cases of vicious financial fraud. The Financial Committee said that the newly revised Securities Law has greatly increased the cost of crimes in the capital market, regulatory rules and regulations are constantly improving, and a strong framework for three-dimensional punishment has been built. the CSRC and relevant departments should further strengthen securities law enforcement and judicial work, resolutely crack down on and curb illegal and criminal activities in the capital market, protect the rights and interests of investors, especially medium and small investors, and respond to the expectations of all sectors of society.

This is the fourth time in three months that the Financial Committee has focused on capital markets. Prior to this, the Financial Stability and Development Committee of the State Council met three times on April 7, April 15 and May 4, all of which mentioned cracking down on capital market fraud.

Xun Yungen said that since the political Bureau of the CPC Central Committee proposed "promoting financial supply-side reform" in February last year, the capital market has played a more important role in the development of the national economy. If China's financial system wants to increase the proportion of direct financing, it is necessary to give full play to the role of the capital market. Further improving the market system and strictly cracking down on violations of laws and regulations is a protection for investors, and it also shows that regulators are serious. The determination to protect investors is very strong.

Since 2019, the CSRC has severely cracked down on financial fraud of listed companies, has filed and investigated 22 listed companies' financial fraud, imposed administrative penalties on 18 typical cases, and transferred 6 suspected criminal cases of financial fraud to public security organs.

At the same time, recently, Kangmei Pharmaceutical, Swertia Island and other counterfeiting companies have been severely punished, which has won the attention of all parties in the market. In May this year, the CSRC punished Kangmei for financial fraud. Kangmei Pharmaceutical Co., Ltd. has been severely punished for falsely increasing income and tens of billions of dollars in monetary funds. GF Securities Co., LTD. has also paid the price for the Camme fraud case, and the relevant documents relating to the sponsor agency business and bond underwriting business may be suspended.

Point 2: seven major measures constitute a combination of "anti-counterfeiting" in the capital market.

The meeting demanded that it is necessary to fully implement the requirement of "zero tolerance" for illegal and criminal acts in the capital market, take various measures to strengthen and improve securities law enforcement, and spare no effort to maintain the health, stability and good ecology of the capital market.

First, we should strictly investigate and deal with major illegal and criminal cases, speed up investigation, punishment, and transfer work, and punish them severely, quickly and severely in accordance with the law.

Second, it is necessary to strengthen civil compensation and criminal liability, speed up the landing of the newly revised detailed rules for the implementation of the Securities Law, and launch "class action" in a timely manner in accordance with the law for typical cases of great significance and bad social impact.

The third is to deepen the reform of the delisting system, further improve the delisting standards, simplify the delisting procedures, strengthen the delisting supervision, strictly implement the delisting system, and form a market-oriented and normalized withdrawal mechanism of "entry and exit, survival of the fittest".

The fourth is to cooperate with the legislature to speed up the revision of the criminal law, further improve the legal system for punishing illegal and criminal acts, and increase the intensity of penalties.

Fifth, improve the securities law enforcement system and mechanism with Chinese characteristics that meet the needs of the development of the capital market, strengthen the construction of the basic system of administrative law enforcement, unify law enforcement standards, standardize law enforcement behavior, improve law enforcement efficiency, and strengthen specialized law enforcement forces.

Sixth, the CSRC, together with relevant departments, will set up a "Coordination working Group on cracking down on illegal activities in the Capital Market" to form a joint force to crack down on illegal activities in the capital market and jointly maintain the health and stability of the capital market.

Seventh, strengthen the guidance of public opinion, strengthen law enforcement publicity on key cases through multiple channels and platforms, send a clear signal of "zero tolerance" to the market, and give full play to the warning and educational functions of investigating and handling typical cases. we will promote the formation of a good market ecology and culture of law worship and trustworthiness.

Point 3: deepen the delisting reform and form a regular withdrawal mechanism

In the combined fight against counterfeiting, the meeting proposed to deepen the reform of the delisting system, further improve the delisting standards, simplify the delisting procedures, strengthen the supervision of delisting, strictly implement the delisting system, and form a market-oriented and normalized exit mechanism of "going in and out, survival of the fittest".

Xun Yugen said that with the implementation of the registration system, A-share delisting also began to accelerate, which is necessary. Since Science and Technology Innovation Board's pilot registration system last year, the number of listed companies has increased, and the smooth flow of imports requires that the caliber of delisting should be widened correspondingly. In the US securities market, the number of listed companies is equal to that of delisted companies, and the number of stock enterprises has not changed much. Chinese enterprises have delisted too little. in view of this problem, regulators have improved the rules and system and adopted market-oriented delisting indicators. Look forward to the implementation and implementation of delisting more stringent, so that enterprises that meet the delisting criteria to quickly leave the A-share market, in order to protect the rights and interests of investors.

Compared with the previous, the delisting rate of A shares has rebounded in recent years. In 2019, for example, a total of 18 listed companies delisted, a record high. Since 2019, there has been an important change in the way of delisting, that is, it is more diversified, including compulsory withdrawal of finance, transactions, major violations of the law, active withdrawal, and restructuring such as absorption and merger. The diversification of delisting methods also means the accelerated formation of the market survival of the fittest mechanism. Judging from the situation of 18 delisted companies, 9 companies were forced to delist, accounting for 50%, accounting for 50%. One company took the initiative to delist through a resolution of the general meeting of shareholders, accounting for 6%. Eight companies, including Little Swan, delisted through absorption and merger, restructuring listing, asset exchange and other restructuring methods, accounting for 44%.

Point 4: set up a working group to form a joint force to crack down on illegal activities in the capital market

One of the highlights of this meeting is that the Securities Regulatory Commission and relevant departments will set up a "Coordination working Group on cracking down on illegal activities in the Capital Market" to form a joint effort to crack down on illegal activities in the capital market and jointly safeguard the health and stability of the capital market.

Xun Yugen believes that this will be more advantageous to crack down on illegal activities in the capital market, and only by making heavy moves and heavy hands can the violators who trample on the red line of the law pay a heavy price, find out the black sheep and get to the root of the problem.

In the past, what has often been criticized by all parties in the market is that the penalties for counterfeiting companies are too light, and the maximum penalty of 600000 is a drop in the bucket compared to the scale of financial fraud. Since March 1, the new securities law has been formally implemented, which has greatly increased the illegal cost of disclosing false financial information.

The amount of penalty imposed by the new securities law on illegal acts of information disclosure of listed companies shall be increased from a maximum of 600000 yuan to 10 million yuan; for the controlling shareholder or actual controller of the issuer to organize or instruct to engage in false statements, or to conceal relevant matters resulting in false statements, a maximum fine of 10 million yuan shall be imposed.

In addition, by promoting the construction of an authoritative and efficient three-dimensional accountability system in the capital market with the organic connection of self-discipline management, daily supervision, inspection and punishment, criminal liability, class action and civil compensation, the scope of attack on violators in the capital market will be greater.