SHANGHAI (Reuters) - China’s securities regulator will strengthen oversight of insider trading related to mergers and acquisitions, the latest step in a campaign to clean up China’s unruly capital markets.
The draft rules released on Friday aim to integrate the M&A approval process with efforts to detect and punish insider trading.
Under the rules, the regulator will automatically look for patterns of suspicious trading for all stocks that suspend trading pending the outcome of the approval process for mergers, acquisitions, and other restructurings.
If the examination uncovers evidence of possible insider trading, the approval process will be suspended, threatening the company’s ability to complete the deal.
Depending on the circumstances of the case - including the role of the individuals suspected of insider trading in the proposed deal - the approval process may be either restarted or terminated.
The draft of the rules was released for public comment. Both the Shanghai and Shenzhen stock exchanges also released accompanying documents for public comment that outline specific implementation details.
The new rules are the latest in a campaign over the last year by the China Securities Regulatory Commission (CSRC) to crack down on fraud, which analysts say is rampant in China’s stock market. CSRC has become noticeably more aggressive since its new chairman, Guo Shuqing, took office last October.
In addition to stepping up insider trading prosecutions, CSRC has established a new agency to protect investors and set new rules requiring listed companies to keep records of anyone who has access to price-sensitive information.
Reporting by Gabriel Wildau; Editing by Robert Birsel