Information disclosure and protection of investors in China’s securities market


University of British Columbia

Date Issued


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Master of Laws - LLM




China is undergoing a tremendous change which has begun ever since late 1978 when it opened its door to the outside world and gradually implemented the market-oriented economic reform. With the establishment of the Shanghai Stock Exchange in December 1990, China began a wellpublicized effort to build a legal regime for regulating the securities market. At present, China's stock exchange trading system reaches all large and medium-sized cities with 2,412 retail branches all over China with the total market capitalization of more than RJV1B 1,950.5 billion, equivalent to 24.46% of GDP. Securities regulation was originated from England and had significant developments in the U.S during late 19t h century. One of the major objectives of securities regulations is the protection of investors. Requiring issuers to provide investors with the knowledge necessary to facilitate informed investment decisions is one means through which securities regulation attempts to protect the investors. The securities regulations of China have relatively comprehensive requirements on information disclosure, however, misrepresentation made by listed companies has been rampant in the market. Investors who suffer losses incurred by such misrepresentation have not been compensated for the lack of adequate civil remedy under Chinese securities regulations, which have been considered as an instrument of the leadership to meet political and/or economic ends, and meanwhile reflect unique Chinese legal culture originating from traditional Confucianism. Having realized the necessity and urgency of civil remedy, Chinese lawmakers have made new legislation to overrule previous "inefficient" judicial decisions, which prohibited the People's Court to accept misrepresentation related civil suits brought by the investors against listed companies. In addition, securities regulations also need to address lessons learnt by the Western regulatory authorities after the failures of Bre-Xs and Enrons, which are the pursuit of true information disclosure and the advances on corporate governance. Undergoing the huge economy reform, obviously China has dedicated to the protection of private rights. For example, the first Civil Code of the People's Republic of China has been drafted. It is reasonable to believe that Chinese are progressing to an era when people enjoy all sorts of civil rights; what's more, their entitlements are well protected by laws.

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