CSRC’s Struggle Against Insider Trading: A Look into China’s Enforcement Record

Hongming Cheng, a sociology professor at the University of Saskatchewan, provides valuable insights into the Chinese Securities Regulatory Commission’s (CSRC) efforts in combating insider trading in China in his study published in the Journal of Financial Crime.

CSRC’s Enforcement Strategies and Challenges

According to Cheng’s research, addressing insider trading in China remains a significant concern due to the following reasons:

Scarce number of insider trading cases
Lack of successful convictions

Despite China’s intensified campaign against securities offenses, the enforcement of insider trading laws has not become more stringent.

Challenges Faced by the CSRC

The CSRC encounters essential challenges in regulating insider trading in China:

Power limitation: Hereditary high-ranking government and party officials’ involvement in insider trading imposes a power limitation on the CSRC when directly administering discipline and penalties.

Recommendations for CSRC

To improve its insider trading enforcement:

Resources: CSRC should receive more resources to tackle insider trading cases more efficiently.
Power: The CSRC needs more power to enforce penalties on offenders, regardless of their status in the government and party hierarchy.
Training: Better-trained regulators are necessary to understand the complexities and nuances of insider trading cases.

Enhancing Surveillance Capabilities

The CSRC can strengthen its insider trading enforcement by:

Advanced computer surveillance software: Utilizing advanced computer surveillance software to monitor trading activities.
Inter-agency information-sharing: Enhancing inter-agency and inter-market information sharing to facilitate collaboration and coordinated responses.
Collaboration with international regulators: Working alongside international regulators to share knowledge and develop effective, mutually agreed-upon regulatory approaches.

Implications

This study offers valuable insights for:

Researchers in financial crime and securities regulation
Regulatory bodies
The private sector
Government departments seeking an analysis of China’s insider trading enforcement landscape and potential solutions.

References

Cheng, H. (2008). Insider trading in China: the case for the Chinese Securities Regulatory Commission. Journal of Financial Crime, 15(2), 165-178. https://doi.org/10.1108/13590790810866881