Self-regulatory measures and disciplinary sanctions are important tools SZSE uses to regulate the market. In order to implement the guidelines of the Central Financial Work Conference, on January 12, SZSE issued the revised Implementing Measures for Self-Regulatory Measures and Disciplinary Sanctions and Guidelines for Self-Regulation of Listed Companies No. 12 - Implementing Standards for Disciplinary Sanctions. The revision aims to further consolidate the institutional cornerstone for comprehensively strengthening regulation, actively instruct and urge all parties to operate in compliance and jointly create a good ecology of the capital market.

The revision mainly includes the following aspects:

Focusing on prominent problems to enhance the effectiveness of regulation. Firstly, increasing the severity of sanction. The revision makes it clear that if huge amount of funds are occupied and not repaid, which seriously damages the interests of listed companies and investors, the listing application documents submitted by the controlling shareholders, the de facto controllers or the other issuers under their control who organize and direct the occupation will not be accepted within a certain period, depending on the circumstances. Secondly, filling the regulatory gap. The revision clearly includes the responsible persons in the scope of sanction if they are identified by competent authorities as directly related to such violations of laws and regulations as financial frauds of listed companies. Thirdly, adhering to full accountability. The revision specifies that after securities delisting, the provisions on disciplinary sanctions will still apply to the violations during the listing period, to avoid “no accountability after delisting”. Fourthly, strengthening the regulation of intermediaries. The revision details the violations by intermediaries, focusing on whether intermediaries are diligent and responsible and whether documents and reports issued are true and accurate. The revision also intensifies financial accounting regulation and sets out the sanction standards for accounting firms and their employees. Fifthly, reinforcing joint sanctions. SZSE shall take the corresponding measures against the persons who are subject to sanctions imposed by other securities trading venues such as temporarily not accepting documents and identifying as inappropriate persons.

Standardizing sanction procedures to increase the prescription of sanctions. Firstly, standardizing the prior notice. The revision makes it clear that if, after issuing a prior notice of disciplinary sanction, SZSE adjusts the main violation facts, reasons, basis or proposed sanction decision, then a notice shall be issued again to fully protect market entities’ right to know. Secondly, optimizing the delivery method. The revision specifies that the sanction instruments can be served by such electronic means as business columns and e-mail, or mails, and that if the sanction instruments cannot be served by the above methods, they can be announced and deemed to be served after ten days upon announcement. Thirdly, timely and efficiently imposing sanctions. The revision clarifies that in the case of multiple violations, some of the identified violations can be given sanctions first to avoid “long delay in disciplinary decision making”. If the violation fact has been determined by the documents of competent administrative regulatory authorities or judicial authorities and the situation is urgent, the relevant decision can be made by means of voting by communication.

In addition, the revision optimizes the disciplinary sanction mechanism synchronously. In particular, the violations of laws and regulations that attract wide market attention and have serious circumstances are elevated to the deliberation level to strengthen the check on sanctions. After-hours restricted transactions are included in the scope of deliberation by the disciplinary committee to improve the prudence of decision making. A special meeting convener of the disciplinary committee is set up to enhance the level of professional check on disciplinary sanctions.

Since 2023, SZSE has strictly cracked down on the securities-related violations of laws and regulations, insisted on the main line of comprehensively strengthening regulation and effectively taken combined regulatory measures of ex-ante clue follow-up, interim warning and rectification and ex-post severe punishment. In 2023, SZSE made 179 disciplinary sanction decisions and imposed sanctions on listed companies for 93 times, on issuers for 8 times and on other responsible persons for 575 times, including public censure for 223 times and public determination of ineligibility for directors, supervisors and senior officers of listed companies for 28 person-times. Under the continuous situation of high regulatory pressure, the total number of violation cases decreased compared with previous years, the “strict” regulatory atmosphere further formed and the market ecology further purified.

The Central Financial Work Conference stressed the need to comprehensively strengthen institutional regulation, behavioral regulation, functional regulation, look-through regulation, and continuous regulation. Next, SZSE will thoroughly implement the guiding principles of the Central Financial Work Conference, and, under the guidance of CSRC, adhere to the goal of building a safe, standardized, transparent, open, dynamic and resilient capital market and uphold the concept of compliance with laws and regulations and strict regulation. Hence, continuously strengthening the institutional guarantee for the capital market, constantly optimizing self-regulation and effectively improving the effectiveness of front-line regulation. SZSE will highlight fairness and justice through the “strict regulation” against violations of laws and regulations, boost investors’ confidence, and strive to build a clean and upright ecology, so as to safeguard the high-quality development of the capital market.