China issues 23 measures to bolster protection for small and medium investors

The China Securities Regulatory Commission (CSRC) on Oct. 27 set out 23 concrete measures across eight areas to enhance investor proteciton and market confidence.

The CSRC places clear responsibilities on market intermediaries, requiring securities firms and other operating institutions to strengthen investor education, implement investor-suitability management, and embed investor education into routine business processes. Before selling financial products or providing services, institutions must explain business rules, clarify key contract terms and clearly warn of related risks to improve the targeting and effectiveness of investor education.

The CSRC also requires firms to take primary responsibility for handling investor complaints. Institutions must better align complaint and dispute-resolution mechanisms with internal control and compliance systems, address complaint sources, and raise overall service quality.

Investor protection agencies are given an expanded role in dispute resolution. As specialized bodies for protecting capital market investors, these organizations are encouraged to support litigation, bring shareholder representative suits and other representative legal actions to protect investor rights. The measures call for broadening practical scenarios, in which investor protection bodies assist small investors — including accepting mandates to file civil claims and participate in creditor voting during bankruptcy liquidation or reorganization of listed companies.

The CSRC asks investor protection agencies to promote exemplary cases of supportive litigation and shareholder-derivative actions, provide public explanations of typical rulings, and actively inform small investors about ongoing enforcement or litigation activities. When such agencies send inquiry letters to listed companies or initiate civil suits, they should publicly disclose appropriate information so that small investors are kept informed and can more readily exercise shareholder rights or pursue remedies.

For companies facing delisting risk, regulators will step up ongoing oversight, require clear disclosure of delisting risks to protect investors’ right to know, and enhance monitoring of abnormal trading to curb speculative manipulation. In cases of forced delisting arising from major legal violations, the CSRC urges controlling shareholders and actual controllers to take proactive compensation or other measures to offset investor losses caused by illegal acts, and calls for coordinated handling across civil, administrative and criminal proceedings to safeguard investor interests.

For voluntary delistings, the CSRC requires listed companies to provide protective measures such as cash-out options.