China is building a new capital market to better serve its people through new measures that will boost market-oriented reforms and intensify a clampdown on illegal market activities, economists said.
The changes in the country's Securities Law will lay out the foundations in a registration-based share of stocks across its A-Share Market, and will come into effect on March 1, according to the National People's Congress Committee, the highest legislature in the country.
On Saturday, after the fourth review of the draft amendment during a six-day session, the committee voted to adopt the revised legislation.
The revised law states that the registration-based program would "completely replace the approval-based system, not just in one or two pilot submarkets," said Dong Dengxin, chief of the Finance and Securities Institute at the University of Science and Technology in Wuhan.
The revised law is a most significant breakthrough in China's reforms of its broad capital market, Dong pointed out.
The amendment, he added, will abolish the practice of allowing a public offering review committee - in which the securities regulator reviews applications for public bidding.
It will also authorize stock exchanges in the country to review applications instead. Alternatively, the securities regulator is responsible for securities registration. It also made more rigorous and simplified standards for issuing securities to disclose information.
The revision authorized the State Council, will decide o the scope and steps of registration-based reforms, allowing for smoother transition and phase-in processes.
The China Securities Regulatory Commission must fully "consider the actual market situation and, in particular, manage the issuance of securities, shares registration and market ability to absorb the reforms," said Cheng Hehong, director of the CSRC Department of Legal Affairs, China's top securities regulator.
The commission is now ramping up efforts to promote registration-based reform on the ChiNext, the creative business-heavy board of Shen-zhen, Cheng said on Saturday.
It followed the STAR board's debut in Shanghai it July, around nine months after Chinese leader Xi Jinping announced the country would introduce the board as a registration-based monitoring system.
Hong Rong, founder of Hongda Education, Shanghai-based investor network, said ensuring a phase-in of the registration reform is crucial to avoid any bumps in raising funds that could put heavy pressure on market liquidity.
A listed company that discloses inaccurate, misleading or incomplete information will face fines of between 1 million and 10 million yuan, while based on the revised legislation, a person will be fined up to 10 times the illegal profits for insider trading or market manipulation.
