The Straits Times
Published on Dec 10, 2012

China securities regulator mulls new investor protection agency: Report


SHANGHAI (REUTERS) - China may create an agency that could file corporate governance lawsuits on behalf of individual investors as regulators attempt to restore confidence in the country's struggling domestic equities markets, the official Shanghai Securities News reported on Monday.

China Securities Regulatory Commission (CSRC) head Guo Shuqing said he is considering establishing one or more agencies that would buy shares in listed Chinese companies, which would allow the agency to participate in shareholder meetings and file complaints or lawsuits to protect the interests of retail investors.

"A public company must have strong corporate citizenship and not allow controlling shareholders to arbitrarily intervene in excess of their legal rights at the expense of the interests of small and medium-sized shareholders. This is the only way to win the trust of the market," Mr Guo said in the report.

The agency would be focused on helping small shareholders fight decisions by company management that are legal yet contrary to shareholder interests. Examples of such behaviour include the widespread practice by Chinese listed firms of sitting on cash instead of paying out dividends, repeatedly fundraising through new share issuances that dilute the value of existing shares, and acquiring other companies from related parties at inflated prices.