A DRAFT amendment to China’s securities law was adopted Saturday by the country’s top legislature and will come into effect from March 2020.

It was approved at the end of a six-day bimonthly session of the National People’s Congress Standing Committee.

The latest revisions to the law include rules on information disclosure, the registration-based initial public offering (IPO) system, more severe punishment for market violations and insider trading. Additionally, a new chapter was added to the law with provisions on information disclosure and investor protection.

Under the current IPO system, new shares are subject to approval from the China Securities Regulatory Commission (CSRC) before being listed.

Policymakers initiated a plan to have market participants play a greater role in IPOs as early as six years ago in order to move away from the securities regulator acting as the gatekeeper for all offerings and their pricing.

The amended legislation, due to take effect from March 1, removes complex and time-consuming watchdog scrutiny before listings and is designed to streamline listing procedures for companies eager to go public.

But in a move to discourage market manipulation, it also contains provision for heavier punishment on stocks violations and pledges better protection for investors in general.

The revision sets a general framework to encourage small and individual investors to take the initiative in class action lawsuits and introduces compensation in civil litigations.

The new law also increases the penalties for illegal activities in the securities sector. It not only stipulates the confiscation of illegal proceeds but also pledges stricter administrative punishments.

For instance, if a firm indulges in fraudulent public offerings, and does not issue the securities, it would face fines of between 2 million yuan (US$280,000) and 20 million yuan. This contrasts with the previous standard between 300,000 yuan and 600,000 yuan.

Individuals responsible for fraudulent offerings will face much higher punishments of between 1 million yuan and 10 million yuan, according to the latest revision.

China’s top securities regulator said last month that the registration-based mechanism for IPOs that underpinned the successful launch of Shanghai’s Nasdaq-style STAR Market will be rolled out on Shenzhen’s startup board ChiNext.

(SD-Agencies)