Wu Qing: Evergrande Receives Record-Breaking Penalty

Deep News
09/22

On the afternoon of September 22, the State Council Information Office held a press conference in the "High-Quality Completion of the 14th Five-Year Plan" series, introducing the achievements of financial industry development during the 14th Five-Year Plan period. Wu Qing, Chairman of the China Securities Regulatory Commission (CSRC), made relevant announcements at the conference.

Wu Qing stated that over the past five years, the capital market has faced complex and profound environmental changes, with external imported risks creating turbulent challenges, while domestic risks in certain sectors have been fully exposed. As a convergence point and sensitive zone for various risks, the capital market has borne the brunt of these challenges. The Central Financial Work Conference emphasized the need to accelerate the construction of a capital market that is "safe, standardized, transparent, open, vibrant, and resilient," with "safety" taking precedence, highlighting the importance of risk prevention and strengthened supervision.

The CSRC has consistently adhered to the principle of seeking progress while maintaining stability, balancing development and security, strengthening regulatory defenses, and firmly maintaining risk bottom lines.

First, the commission has resolutely maintained stable market operations. Implementing the "four early" requirements, it has strengthened comprehensive monitoring and early warning systems, improved cross-market, cross-sector, and cross-border risk prevention mechanisms, enhanced counter-cyclical adjustments, and coordinated the development of primary and secondary markets. The commission has also strengthened coordination with relevant parties, supporting Central Huijin Investment, social security funds, insurance companies, securities funds, and listed companies in playing their inherent stabilizing roles, collectively implementing a "combination punch" strategy and building protective barriers to effectively respond to external shocks, significantly improving investor confidence and market expectations.

Second, the commission has steadily promoted continued convergence of risks in key areas. Adhering to strict control of incremental risks, stable reduction of existing risks, and strict prevention of "thunderstorms," the bond default rate in exchange markets has remained at a relatively low level of around 1%. Private fund risk remediation has progressed solidly, with approximately 7,000 zombie institutions completing clearance, and incremental risks from "pseudo private funds" being basically contained. The closure of financial asset exchanges and "pseudo financial asset exchanges" has achieved significant results, with all 27 financial asset exchanges scheduled for closure having their qualifications revoked, and over 100 identified "pseudo financial asset exchanges" completely cleared.

Third, the commission has significantly enhanced the effectiveness and deterrence of regulatory enforcement. On one hand, focusing on financial fraud and other violations deeply detested by investors, it has pursued both "primary culprits" and "accomplices," systematically constructing a comprehensive, three-dimensional integrated punishment and prevention system to resolutely break up fraud "ecosystems." For example, regarding bond market financial fraud, Evergrande and its auditing firm were issued record-breaking penalties of 41.75 billion yuan and 3.25 billion yuan respectively, while third parties involved in the Yuebo Power case were simultaneously held accountable for cooperation in fraud. On the other hand, the commission has fully utilized legal tools, implementing strict law enforcement and ensuring penalties are both accurate and impactful. Joint guidance opinions with the Supreme People's Court have been issued for strict and fair law enforcement and judicial work to serve and guarantee high-quality capital market development, continuously improving administrative, civil, and criminal accountability systems. Over the past five years, more than 700 cases and leads have been transferred to public security organs, with a number of responsible parties being severely held criminally liable.

Fourth, the commission has tightened and strengthened the investor protection "safety net." Actively responding to investor concerns, it has successively improved regulatory rules for share reduction, quantitative trading, securities lending, and other related areas. It has promoted the introduction of advance compensation, party commitments, fraudulent issuance mandatory repurchase systems, and clarified mandatory regulatory requirements such as declaration accountability and intermediary institution service quality evaluation, continuously improving the investor protection system with orderly connections between prevention, intervention, and post-incident measures. In recent years, the first special representative litigation case, Kangmei Pharmaceutical, compensated investors approximately 24.6 billion yuan, while Zijing Storage and Zeda Yisheng cases compensated investors 10.9 billion yuan and 2.8 billion yuan respectively. A series of landmark cases have been implemented through joint efforts, improving the quality and effectiveness of investor rights protection work.

Wu Qing also introduced that over the past five years, a fairer and more just market environment has further formed in the capital market. The CSRC has insisted on supervision with "teeth and thorns," being principled and uncompromising, continuously improving the full-chain regulatory system and resolutely cracking down on illegal and irregular behaviors. During the 14th Five-Year Plan period, 2,214 administrative penalties were issued for financial fraud, market manipulation, insider trading and other cases, with fines and confiscations totaling 41.4 billion yuan, representing increases of 58% and 30% respectively compared to the 13th Five-Year Plan period. Enforcement deterrence has been further strengthened, transparency has been further improved, and the market ecosystem has been further purified.

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