The rule of law is the foundation of good governance in the capital market

Mondo Finance Updated on 2024-02-20

The new year and new atmosphere also bring together new hopes for market investors.

From February 18 to 19, the China Securities Regulatory Commission held more than 10 symposiums, listening to the voices of the market, hoping to build consensus and form a joint force between the regulator and the market to promote joint construction.

At present, there is a lack of confidence in the domestic capital market, and even a crisis of confidence, financial fraud, insider trading, whitewashing and listing and other problems are prominent, and some institutional and mechanism problems that hinder fair market transactions need to be eliminated urgently, and the market order such as protecting the "money bags" of hundreds of millions of investors and protecting the legitimate rights and interests of major market entities is needed, and more rule of law and market-oriented systems are needed to build bridges and pave the way, and continue to deepen reform and expand institutional opening-up to expand the freedom of action of market entities.

Recently, the China Securities Regulatory Commission (CSRC) has seriously investigated and dealt with a number of cases of financial fraud and insider trading, and has taken concrete actions to issue a voice in the capital market that "the law will not yield to the lawlessness and bow its head." It can be said that it has the effect of awakening the "sleeping Article 20" in the capital market. Financial fraud, insider trading, etc., are not only difficult to obtain evidence, but also often involve a variety of complex and intertwined interests, resulting in high costs for investors and relatively low costs for being punished for illegal acts.

If this practical action is aimed at deterring illegal acts in the market from point to point, then open-door legislation and transparent supervision, through forums and other forms, to broaden opinions, brainstorming, and build consensus, etc., are more conducive to improving the ability of supervision to adapt sensitively to changes in the capital market; We will start a new journey of law-based governance of China's capital market with an increasingly open and confident pace, and create an open, fair and just market order for major market players, so as to kick off the prelude to good governance of the capital market.

The most essential feature of the capital market is the rule of law, only the rule of law can breed market trust and credit, so that the market entities can act in accordance with the law in the legal framework that cannot be done without the authorization of the law and can be done without the prohibition of the law. As the saying goes, mountains change due to the situation, water changes due to time, and people change due to thinking, and open-door legislation allows the legal order of the capital market to adapt well to the changes of the market and keep the law moving with the times; Transparent supervision more fully expresses the deterrent power of the rule of law, which is neither superior nor inferior, but only rational.

At present, a general consensus has been formed in the market, that is, it is hoped that the relevant departments will strictly control the IPO access, fundamentally improve the quality of listed companies, and increase investment returns; It is also required to strictly regulate the behavior of major shareholders, strictly prevent all kinds of disguised and detour behaviors such as financing sales and refinancing, as well as pseudo-market value management and improve the delisting system.

Many of these suggestions may be overkill. For regulators, to adhere to the principle of the rule of law, they must not only listen to the voice of the market, but also use the rule of law to clarify their action boundaries in response to market demands.

For the regulatory authorities, strictly controlling IPO access and improving the quality of listed companies is not based on the perspective of market investment value, but on public decision-making and market-oriented reform. What the regulatory authorities strictly guard against is whether there are problems such as fraudulent issuance, systematic fraud, cooperation fraud, financial bathing, etc., as well as illegal acts such as false information disclosure, insider trading and market manipulation in the name of market value management, which are guarded by an open, fair and just market order.

As for the specific type of listed company with investment value, it can only be left to the major market players to choose based on their own preferences and risk carrying capacity.

Therefore, at present, all parties, including the regulatory authorities, need to face up to the demands of the market such as "strictly controlling IPO access and improving the quality of listed companies", not to let IPOs temporarily return to the regulatory authorities for access control, nor to transfer the right to judge the investment value of listed companies to the regulatory authorities, but for the regulatory authorities to clarify what can and cannot be done based on the belief of marketization and rule of law. Because it is the responsibility of supervision to protect market order and create a well-governed trading scene, judging the value of specific investment targets does not fall within the scope of regulatory regulation, legal constraints and power in and out.

Only by making the self-discipline and self-regulation of the market clear and self-sufficient, and each with its own beauty, can we truly bring good governance to the capital market. This also means that the whole process of supervision of listed companies is necessary and boundary. Supervision guards the formal justice of how to do things correctly, and the substantive justice of doing the right things such as value judgments is the private territory that cannot be entered and exited by supervision.

It can be seen that the whole-process supervision of good governance requires a strict authorization mechanism, and on the other hand, it needs to be carried out from the perspective of procedural justice, so as to remove any institutional and institutional obstacles that hinder the freedom of action of the legitimate rights and interests of the market, and always defend an open, fair and just market order, especially not to restrict their freedom of action in the market on the grounds of protecting the interests of investors.

Good rain knows the season, when spring happens. Standing at the moment of the hope of spring, the China Securities Regulatory Commission (CSRC) has opened up a new open information structure and communication structure of China's capital market with open and inclusive actions that open up and pool wisdom, so that the individual preferences and demands of all stakeholders can be integrated into the journey of good governance in the capital market in accordance with the law. Only by starting from the beginning can we truly open a new chapter in the high-quality development of China's capital market, and it will be difficult for regulators to take a step forward and stand up well if they are bound by any preferences.

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