People’s governments of provinces, autonomous regions and municipalities directly under the central government, ministries and commissions of the state council and agencies directly under the state council:
Small and medium-sized investors are the main participants in China’s capital market at the present stage, but they are in a weak information position with weak anti-risk ability and self-protection ability, which is vulnerable to infringement of legitimate rights and interests. Safeguarding the legitimate rights and interests of small and medium-sized investors are the top priority in the supervision of securities and futures, concerning the vital interests of the people and is the basis for the sustained and sound development of the capital market. In recent years, the protection to the small and medium-sized investors in China has achieved positive results, but there is still a big gap between the protection of the market “open, fair and just” and the protection of the legitimate rights and interests of the majority of investors. In order to implement the spirit of the 18th CPC national congress, the third plenary session of the 18th CPC Central Committee and the relevant requirements of the State Council with further strengthening the protection of the legitimate rights and interests of small and medium-sized investors in the capital market, under the consent of the state council, the following opinions are hereby put forward.
I. Completing Investors Appropriateness System
We will formulate and improve the classification standards for small and medium-sized investors. According to the actual situation of China’s capital market, the classification criteria and basis for small and medium-sized investors are formulated and made public, and dynamic evaluation and adjustment are carried out. We will further standardize institutional arrangements for investor suitability in markets at different levels and types of transactions, and clarify the scope and manner of investor participation.
Grading risks scientifically. Securities and futures trading institutions and intermediary institutions shall evaluate and grade the risks of products or services with recommending products or services that are suitable for investors’ risk tolerance and recognition ability, fully explaining information that may affect their rights to investors, and do not mislead or cheat customers.
We will further improve rules and regulations and market service rules. Securities and futures trading institutions and intermediary institutions shall establish professional standards and internal accountability mechanisms, and sales personnel shall not accept clients’ entrustment to conduct transactions in their own names; Investors shall be clearly reminded to truthfully provide data and information, keeping the personal information collected strictly confidential and ensuring security, and shall not sell or illegally provide it to others. We will strictly implement the investor suitability system and enhance oversight. Those who violate the regulations on suitability and cause losses to small and medium-sized investors will be held accountable in accordance with the law.
II. Optimizing Investment Returning Mechanism
Guiding and supporting listed companies to enhance their ability of continuous returns. Listed companies should improve their corporate governance with improving their profitability and actively reward investors. When a company initially publics offering of stocks, the refinancing of the listed company, or the merger and acquisition and reorganization of the listed company dilute the immediate return, it shall promise and fulfill the specific measures to fill the return.
Completing profit distribution system. Listed company shall reveal the profit distribution system especially the detailed arrangement for the cash dividend policy with commitment. The listed company that does not fulfill the cash dividend policy shall be recorded into the credit archive, who cannot refinancing again in case of rectification requirement not fulfilling. The independent directors and the relevant intermediary institutions shall give clear opinions on whether the profit distribution policy harms the legitimate rights and interests of small and medium-sized investors.
Establishing a diversified return on investment system. Completing the stock rights re-purchasing system, guides the listed company to make commitment for buying back the stock rights once the share price is lower than each stock of net assets. To study the establishment of a “share for interest” system enriches the dividend distribution. The listed company with continuously stable cash dividends shall be supported from policies of supervision and management. Different participation in profit guiding policies shall be formulated and completing the Ex-dividend system arrangement.
We will develop specialized intermediaries that serve small and medium-sized investors. The product suitable for small and medium-sized investors are encouraged to develop. Small and medium investors are encouraged to participate in the market through institutional investors. The fund manager shall earnestly fulfill the promise of dividends and strive to create a good return on investment. The fund management fee structure and level diversification is encouraged to form the fee mode of consistent fund manager and fund share-holders interests.
III. Protecting the right to know of small and medium-sized investors
We will enhance the pertinence of information disclosure. The related subject organizations shall disclose the information that has a significant impact on the investment decision in a true, accurate, complete and timely manner. The disclosure content shall be concise and easy to understand, fully revealing the risks, and facilitating the access of small and medium-sized investors. The internal information disclosure system and process shall be completed with strengthening the Board Secretary and other relevant personnel responsibilities and formulating the voluntary and concise information disclosure rules.
The market transparency is improved. To the information that significantly affects the trading price of securities and futures, the trading site and relevant subjects shall timely fulfill their obligations of reporting, information disclosure and risk disclosure. Uniform information disclosure platform shall set up to complete cross-market trading products and emergency information disclosure mechanism. We will improve the accountability mechanism for information disclosure anomalies and step up dynamic supervision of information disclosure in the event of sensitive events involving listed companies.
The responsibility of information disclosure is fulfilled. The listed company shall not illegally provide relevant information to others before disclosing such information publicly according to law. The commitments made by the controlling shareholders and actual controllers of the listed company in the information disclosure documents shall be concrete and operable, in particular, they shall make clear commitments on the liability for compensation or compensation that can be earnestly performed. The listed company shall specify the time and manner of receiving the investor's inquiry and improve the public opinion response mechanism.
IV. Completing voting mechanism of small and medium-sized investors
Completing voting mechanism of small and medium-sized investors. We will guide the general meetings of shareholders of listed companies to adopt on-line voting in an all-round way with actively implementing the cumulative voting system for electing directors and supervisors. The listed company shall not impose any minimum shareholding limit on the solicitation of voting rights. We will improve the third-party witness system for voting at shareholder meetings of listed companies. We will study and improve the system whereby small and medium-sized investors put forward proposals to remove company directors and the self-regulatory organization shall improve the filing and performance evaluation system for independent directors.
Separate counting mechanism for small and medium-sized investors shall be set up. When the shareholders’ meeting of a listed company considers major matters affecting the interests of small and medium-sized investors, the votes of the small and medium-sized investors shall be counted separately. The separate counting results shall be disclosed to the public timely and submitted to the securities regulatory department.
We will ensure that small and medium-sized investors exercise their rights in accordance with the law and improve the system for avoiding conflicts of interest with putting an end to intra-industry competition and fair handling related party transactions. The controlling shareholders or actual controllers of the listed company shall not restrict or obstruct the small and medium-sized investors from exercising their lawful rights, nor shall they impair the rights and interests of the company and the small and medium-sized investors. We will improve the meeting system for bondholders of publicly traded companies and the trustee management system. The fund manager shall facilitate the exercise of voting rights by fund share-holders and encourage small and medium investors to participate in holder meetings.
V. Setting up the multiplex mechanism of dispute solutions
The dispute solution mechanism shall be completed and the listed company and the securities and futures trading institutions shall bear the primary responsibility for handling the investor’s complaint, improving the complaint handling mechanism and publicizing the handling process and handling situation. Securities regulatory departments should improve the registration and filing system, and take the handling of complaints as the basis to measure the compliance management level of relevant subjects. We will support investors in settling disputes through consultation with market participants or in reaching a settlement agreement.
Third party organizations role will be played with supporting self-regulatory organizations and market institutions shall independently or jointly conduct professional mediation on securities and futures in accordance with the law to provide free services for small and medium-sized investors. To develop securities and futures arbitration services and cultivate professional arbitration force, we will establish the docking mechanism of mediation, arbitration and litigation.
Coordination and cooperation will be enhanced and related department shall complete the system of civil procedures related infringement act coordinating with the judiciary authorities. We will improve procedures for protecting the rights of small and medium-sized investors in accordance with the law and reduce the cost of safeguarding their rights. We will improve the mechanism for protecting the rights of small and medium-sized investors in accordance with the characteristics of civil tort compensation in the capital market. Measures to protect investors in bankruptcy and liquidation will be improved.
VI. Completing compensation mechanism for small and medium-sized investors
The violators or the parties involved are urged to compensate the investors voluntarily. The controlling shareholder and the actual controller who are responsible for the listed company’s illegal ACTS shall, on their own initiative and in accordance with the law, use the company’s equity and other assets held by them to compensate small and medium-sized investors. Where false records, misleading statements or major omissions in the prospectus causes investors to suffer losses, the subject of liability shall compensate the investors according to law, and the intermediary institutions shall also bear corresponding liabilities. Where the fund manager or custodian fails to perform its duties diligently and causes property losses to the fund share-holders, it shall make compensation according to law.
Establishing a delisting risk response mechanism for listed companies. A listed company that is at risk of delisting due to violation of laws and regulations shall make a special assessment of the delisting risk and propose a response plan in its periodic report. The debt repayment fund system for publicly issued corporate bonds shall be studied and set up. The insurance mechanism is introduced in delisting of listed company with adding additional clauses of delisting insurance in relevant liability insurance.
We will improve the risk relief mechanism. And securities and futures trading institutions and fund managers shall, within the existing policy framework, make use of the risk reserve fund to improve the independent relief mechanism and compensate investors for losses according to law. The quality guarantee deposit of recommend and guarantee for issuing securities and the loan loss provision for listed company violation operation mechanism shall studied to fulfill. Administrative amicable settlement system in securities and futures shall be explored to set up with developing administrative amicable experimental unit. We will study ways to expand the scope and sources of securities investor protection funds and futures investor protection funds.
VII. Enhancing supervision and fighting strengthen
Supervision policies shall be completed. The securities regulatory authorities should safeguard the legitimate rights and interests of small and medium-sized investors throughout the supervision work and implement it in all links. For securities and futures activities that are subject to the administration of administrative licensing, registration or filing, the securities regulatory authorities shall establish corresponding arrangements for protecting the legitimate rights and interests of investors. A pre-disclosure system shall be established for the reduction plan of restricted share-holders, which the relevant shareholders shall not transfer the shares before the disclosure. Shareholders of restricted shares are encouraged to proactively extend the lock-up period. The integrity record database covering whole market shall be set up to share in different departments. We will improve the mechanism for small and medium-sized investors to inquire about the integrity of market operators with establishing the incentive mechanism of keeping promise and punishment mechanism of breaking promise.
We will resolutely investigate and deal with illegal acts harming the legitimate rights and interests of small and medium-sized investors. We will seriously investigate and punish listed companies for improper correction of earnings forecast reports, failure to disclose matters that cause stock price fluctuations, release of information before designated media, substitution of press release for public announcement, fabricating or disseminating false information to mislead investors, insider trading and market manipulation. The controlling shareholder or actual controller of a listed company shall be firmly discouraged from transferring or occupying the assets of the listed company directly or indirectly. We will establish a reward system for reporting illegal securities and futures cases.
Law enforcement cooperation will be improved and all regions and departments should have a unified understanding to work closely with each other and crack down on all kinds of illegal and criminal activities related to securities and futures, and promptly correct all kinds of acts harming the legitimate rights and interests of small and medium-sized investors. We will establish a rapid response and handling mechanism for incidents of infringing upon the legitimate rights and interests of small and medium-sized investors, and formulating and improving contingency plans for emergent mass incidents, and handle related incidents well and maintain stability. Securities regulatory departments and public security organs should continuously strengthen law enforcement cooperation, improve the working mechanism, and increase the involvement in advance. The relevant departments should cooperate with the public security and judicial organs to improve the standards for the prosecution of securities and futures crimes and the relevant judicial interpretation.
VIII. Enhancing education to small and medium-sized investors.
We will increase the popularization to the knowledge about securities and futures with gradually bringing investor education into the national education system, and experimental unit programs can be carried out in areas where conditions permit. Giving full play to the media’s function of public opinion guidance, publicity and education. Securities and futures trading institutions shall undertake the obligation to educate investors in various products and services, ensure expenses and personnel allocation, and bring investor education into all business links. The risk prevention awareness of investors shall be improved and rhythmic tissue shall enhance the investor education function and complete member investor education service self-discipline rules.
This investor risk prevention awareness shall be enhanced. The Small and medium-sized investors should establish a sense of rational investment, exercise rights and fulfill obligations in accordance with the law, develop good investment habits, and do not listen to rumors, but do not blindly follow the wind, improve risk prevention awareness and self-protection ability.
IX. Completing investors protection organization system
Building comprehensive protection system. We will accelerate formation of a comprehensive protection system featuring legal protection, regulatory protection, self-regulatory protection, market protection and self-protection, and normalize, standardize and institutionalize the protection of small and medium-sized investors. Securities regulatory authorities, self-regulatory organizations and market operators shall improve their organizational structures and work systems, increase resources input, improve infrastructure and smooth communication channels for the small and medium-sized investors. The securities regulatory authorities shall establish the inspection system and evaluation system for the protection of the legitimate rights and interests of small and medium-sized investors, and take them as the important basis for daily supervision and administrative license application review.
The organizational system will be improved. We will explore the establishment of self-regulatory organizations for small and medium-sized investors and public welfare rights protection organizations, providing relief assistance to small and medium-sized investors, and enriching the content and methods for rights protection such as reconciliation, mediation, arbitration and litigation. The role of professional lawyers of securities and futures will be fully played to encourage and support the lawyers providing commonweal legal aid to the small and medium-sized investors.
Optimizing policies environments. The securities regulatory authorities should further improve policies and measures to improve the level of protecting the legitimate rights and interests of small and medium-sized investors. Major state-owned shareholders or actual controllers of listed companies shall exercise their rights in accordance with the law and support market operators in fulfilling their statutory obligations. The financial, tax and securities regulatory departments shall improve the tax system related to trading and dividends and optimize the investment environment. Where relevant departments of the state council and local people’s governments require listed companies to provide non-public information, relevant provisions of laws and regulations shall be observed. Relevant departments should improve the working mechanism for data collection and release, strengthen information sharing, and form a coordination and communication mechanism for the protection of investors’ legitimate rights and interests. The international supervision cooperation and communication shall be enhanced to realize the cross-border supervision and protection to the legal rights and interests of investors.
