Today, General Office of the State Council released the Opinions on Further Intensifying Protection of the Rights and Interests of Medium and Small Investors in the Capital Market (hereinafter referred to as the “Opinions”).

The “Opinions” has established the institutional system for protection of the rights and interests of the medium and small investors in the capital market by starting from the actual situations of the capital market of China, being oriented for safeguarding the needs, and lawful rights and interests of the investors, and aiming at the outstanding problems about protection of the investors which have existed for a long time, and is a programmatic document guiding protection of the rights and interests of the medium and small investors in the capital market of China and promoting sustainable healthy development of the capital market.

Deng Ge – the press spokesman of China Securities Regulatory Commission expressed, release of the “Opinions” is an essential milestone in the development history of the capital market of China, has a vital practical significance and will definitely have far-reaching impacts. Firstly, it helps safeguard the immediate interests of the hundreds of millions of people, and social equality and justice. Secondly, it helps invigorate the market confidence, motivate the market vitality and accelerate development of the multi-level capital market. Thirdly, it helps improve the market function by changing from the previous focusing on finance into focusing on both investment and finance, enrich the market products, and intensify risk classification management, so as to better adapt to the diversified needs of the investors. Fourthly, it helps further transforms the government functions, and promote regulatory transformation by changing from excessive proactive approvals into intensifying in-process and post regulations, so as to practically strengthen law enforcement and intensify the responsibilities of the market players.

Deng Ge – the press spokesman of China Securities Regulatory Commission said, the “Opinions” closely focuses on the basic rights for which the medium and small investors care most, such as the right of return, right to know, right to participate in regulation and right of claim, etc, and provides targeted institutional arrangements.

The first is to improve the investor eligibility system. Eligibility management is the first layer of protection for the investors to access to the capital market. It is to establish the specialized market service system adapted to the investors’ needs and protection of their rights and interests, and comprehensively improve the service level of the market players by developing an uniform investor eligibility system and market service rules, scientifically determining the risk ratings of the various kinds of products and services as well as providing access and protection arrangements for the investors.

The second is to optimize the return-on-investment mechanism. It is a lawful right for the medium and small investors participating in investment to get returns on their investment. By aiming at the issues such as low return on investment, few ways for return and unsound return mechanism, the “Opinions” requires to guide and support the listed companies to improve their sustainable return ability, improve their profit distribution system, establish a diversified return-on-investment system, develop the professional intermediaries serving the medium and small investors, and encourage to develop the low-risk products having stable return adapted to the medium and small investors.

The third is to guarantee the right to participate and right to know of the investors. Facilitating the investors to exercise their rights is the basic guarantee for waking up the consciousness of right of the investors and embodying equality and justice. The “Opinions” provides a series of “combination blow” arrangements to facilitate the investors to exercise their rights, and will strongly support implementation of the right to know, right to participate and right to supervise of the investors, and improvement of corporate governance. The “Opinions” requires to guide the listed companies to take the online voting system comprehensively, actively implement the cumulative voting system, and improve the mechanism of director dismissal by the medium and small investors, and not to pose any restraint on the minimum shareholding ratio for collection of the voting right. A separate votes counting mechanism shall be developed for the medium and small investors, and the counting results disclosed. The right to know and equal information acquisition of / for the investors shall be guaranteed by centering on information disclosure. The pertinence of information disclosure shall be improved, and voluntary and precise disclosure rules be developed. The matters leading to abnormal price fluctuation shall be disclosed or clarified through supervision and urging. A sound accountability mechanism for abnormal information disclosure shall be developed.

The fourth is to intensify dispute settlement and compensation relief for the medium and small investors. The “Opinions” proposes to establish a mechanism for settlement of various disputes of rights and interests, supports the investors and management entities in the market to settle disputes or reach settlement agreements through negotiation. It supports to conduct professional mediation and arbitration services, and establish the link mechanism among mediation, arbitration and litigation. The relevant civil action system for tort shall be improved, and the procedure for the medium and small investors to safeguard their rights by law shall be optimized. By focusing on the prominent problem of infringement of the rights and interests of the investors, the “Opinions” details the liabilities of compensation in all the procedures from securities issuance, corporate supervision, institutional supervision to delisting. The recommendation and guarantee deposit system, risk reserves system against illegal behaviors of the listed companies, risk reserves system for various kinds of institutions, corporate sinking fund, occupational insurance for securities intermediaries and delisting liability insurance shall be established. Meanwhile, the fight against the behaviors harming the rights and interests of the medium and small investors shall be strengthened, a credit record database covering the entire market be established, and the mechanism for stimulating good faith and punishing bad faith be improved.

The fifth is to intensify education on the medium and small investors, and improve the protection organization system for the investors. The “Opinions” requires to include the education on investors into the national education system. It is to help the medium and small investors to build the rational investment consciousness, exercise rights and fulfill obligations by law, develop good investment habits, not to listen to rumor, not to follow suit blindly and improve the risk prevention consciousness and self-protection ability through intensifying education services on the medium and small investors. It is to supervise and urge the securities and futures institutions to incorporate the education on investors into all the procedures including account opening, trading, marketing and customer service. Protection of the rights and interests of the medium and small investors is a systems engineering, so the resultant protective force shall be generated through comprehensive arrangement. The “Opinions” requires to accelerate formation of the comprehensive system integrating legal protection, supervision protection, self-disciplined protection, market protection and self-protection.

Deng Ge – the press spokesman of China Securities Regulatory Commission stressed and pointed out, the “Opinions” proposes to establish more than 80 policy measures covering 9 areas by focusing on protection of the rights and interests of the medium and small investors, and gives a number of institutional innovations and reform highlights. Full implementation of the institutional arrangements given in the “Opinions” will certainly further consolidate the foundation for development of the capital market, improve the inherent quality and operating efficiency of the capital market, enhance the market investment value, and optimize the market resource allocation, which is the fundamental guarantee for the market to develop healthily and soundly in the long run.