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Market Cleared of Poor Companies

In the latest move to rectify domestic futures and securities companies, China's securities regulator has demonstrated its determination to rebuild market order with new standards.

Fifteen futures brokerages were closed down yesterday as they failed to meet designated standards for reopening business after rectification.

The China Securities Regulatory Commission (CSRC) posted the names of the 15 companies yesterday on its website, requiring local securities administrations to take back licences for futures brokering from these companies.

The CSRC started to review the qualification of all futures brokerages on an annual basis in 1997. Only the licences of those passing the review are renewed.

Companies that break laws and regulations are ordered to rectify or they are closed down.

In the latest move, most of the outcasts were from Shanghai and south China's Guangdong Province.

They failed to meet the criteria for resumption of business after completing reforms, a CSRC circular explained, giving no further details.

It has been part of the regulator's efforts to clear up the futures and securities sector and bring order to the market.

In a separate circular yesterday, the CSRC also asked securities companies to immediately withdraw from risk investment, which contravenes current legislation.

Currently, China has only a temporary regulation that allows qualified securities companies to conduct asset management for securities investment funds.

While risk investment by securities houses has still not been put on a proper legal basis.

However, many securities companies have used legal loopholes to take part in venture capital business, lured by potential high returns.

Without a sound legal framework and an investor protection mechanism, the business has led to a number of disputes and irregularities, experts said.

Therefore, from now on, securities houses will not be allowed to take part in risk investment through either direct or indirect investment in the venture capital companies, the CSRC said.

Those who have conducted risk investment in the past should immediately stop within six months.

They must report back to the CSRC. Those who continue to conduct risk investment will be punished.

(China Daily 04/18/2001)

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