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Brokerages urged to enforce rules

Shanghai Daily, July 13, 2015

• China's securities regulator yesterday instructed brokerages to review trades and enforce rules that require the use of real names and national identification numbers, the latest move by the government aimed at stabilizing stock prices following a devastating market rout over the past month.

  Chinese authorities have tightened controls on trading while partly blaming illegal behavior for a 30 percent drop that has wiped out trillions of dollars worth of market value in just three weeks.

  The latest warning by the China Securities Regulatory Commission is meant to clamp down on a trick whereby a single investor controls multiple accounts — often registered under other people’s ID numbers — to bid the price of a stock up or down.

  “Some institutional or individual investors hold ‘virtual’ securities accounts or trade with borrowed accounts. As real-name registration is required by the law, this illicit conduct may damage other investors’ legitimate interests,” the CSRC said. It asked local authorities to verify the authenticity of securities accounts and be more strict when supervising them, Xinhua news agency reported.

  Institutional and individual investors will be prohibited from lending their accounts to each other, it said.

  The CSRC said it will clamp down on any illicit conduct in accordance with the law, and will transfer violators to the police.

  Regulators recently unfurled a series of other measures, such as banning listed companies’ big shareholders from selling shares or limiting shorting activities in stocks and futures, while vowing to crack down on illegal trading activity with the help of China’s public security apparatus.

  Xinhua news agency reported yesterday that an investigation personally led by Meng Qingfeng, China’s vice minister of public security, found certain brokerages suspected of manipulating futures prices and other “malicious” trading.

  Xinhua said the investigation team visited the head office of the CSRC in Beijing last Thursday to investigate what it called “malicious short-selling of stocks and stock indexes,” an example of the dodgy practices many believe were part of the recent stock falls over the past few weeks.

  The team arrived in Shanghai on Friday to search for further clues to such illegal practices, Xinhua added.

  Among the government’s other measures has been the arrangement of a curb on new share issues and the orchestration of brokerages and fund managers to promise to buy at least 120 billion yuan (US$19 billion) of stocks with backing from the central bank.

  The moves appeared to work by the end of last week, with the CSI300 index of the largest listed companies in Shanghai and Shenzhen racing higher to close up 6.4 percent on Friday, while the Shanghai Composite Index rose 5.8 percent.

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