Wang Xiaoshi, a China Securities Regulatory Commission (CSRC) official working closely with its approval committee, was reported to have been arrested earlier this month, for allegedly taking bribes for disclosing information about members of the approval committee to soon-to-be listed companies.

The arrest occurred less than one year after the CSRC published a regulation to introduce more transparency in governing its approval committee last December.

As the country's securities watchdog, the CSRC plays an essential role in supervising the development of the country's decade-old stock markets.

Since the domestic stock markets turned bearish in 2001, many people pointed their fingers at the CSRC for giving the greenlight to underqualified companies to be listed in the market.

The poor performance of some newly listed companies, though not the only cause of a weak market, seriously dampened investor confidence in the market.

In response, the securities authorities took some overdue measures to get its own operations in order.

Besides allowing greater public scrutiny of its powerful approval committee, the CSRC raised criterion for applicants' initial public offering and highlighted securities brokerage firms' accountability in underwriting new shares.

All were needed efforts. But a remaining question asks, who will supervise the supervisor itself.

Self-supervision is important, but not important enough.

Few could believe the latest arrest of a CSRC official was only an isolated case that had nothing to do with the lack of effective supervision over the market watchdog itself.

Under such circumstances, shareholders are justified to ask hard questions of the securities authority, particularly about how it will fulfill its commitment to protecting investor interests.

To root out all sorts of wrongdoings that have crippled the domestic stock market, the CSRC should, first of all, prevent its own staff from abusing its power.

The arrest not only reveals how serious the problem is, but also offers a chance to address it.

Suspicion will only thicken to further undermine the development of the stock market if the CSRC can not face the problem squarely.

(China Daily November 18, 2004)