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Upgrade of cross-border supervision and law enforcement cooperation in capital markets

Fang submitted 2021-07-12 09:49:55

Upgrade of cross-border supervision and law enforcement cooperation in capital markets

The "Opinions on Strictly Cracking Down on Illegal Securities Activities According to Law" (hereinafter referred to as the "Opinions") issued by the Central Office and the State Council a few days ago proposes to strengthen cross-border supervision cooperation, strengthen the supervision of Chinese concept stocks, establish and improve the extraterritorial application of capital market laws, etc. . Industry insiders pointed out that this move pointed out the direction for further strengthening the judicial coordination of cross-border supervision and law enforcement in the capital market.

In recent years, as companies "go global" and the interconnection of domestic and foreign capital markets has deepened, securities issuers’ cross-border financing and investors’ cross-border investments have become increasingly complex, and the number and forms of cross-border securities illegal activities have gradually increased. Regulatory coordination is facing new situations and new problems. Industry insiders pointed out that the primary issue is that the legal basis for cross-border securities supervision and enforcement cooperation has yet to be consolidated. For example, the legal system for overseas issuance and listing needs to be further improved; the cross-border data flow management and personal information protection issues involved in the opening of the securities, fund and futures industry also need to be established and improved as soon as possible; another example, although the securities law clarifies the principle of extraterritorial application. However, the specific application conditions, extraterritorial law enforcement procedures, and the effectiveness of evidence lack specific and clear regulations. It is necessary to deepen legal research and speed up the formulation of supporting rules.

In order to strengthen judicial cooperation in cross-border supervision and law enforcement, the "Opinions" put forward three aspects. The first is to consolidate the legal basis for cross-border supervision cooperation. Improve relevant laws and regulations on data security, cross-border data flow, and confidential information management. Establish and improve the extraterritorial application system of capital market laws. Efforts should be made to formulate judicial interpretations and supporting rules for the extraterritorial application of the Securities Law, refine the specific conditions for the extraterritorial application of the law, and clarify matters such as law enforcement procedures and the effectiveness of evidence. Efforts will be made to revise the regulations on strengthening the confidentiality and file management related to the issuance and listing of securities overseas, and to compact the main responsibility of information security of overseas listed companies. Strengthen the standardized management of cross-border information provision mechanisms and processes.

The second is to improve and optimize the supervision and system rules for overseas listing of domestic enterprises. Strengthen the supervision of Chinese concept stocks. Effective measures will be taken to deal with risks and emergencies of Chinese concept stock companies, and promote the construction of relevant regulatory systems. Amend the special regulations of the State Council on the overseas stock raising and listing of joint stock limited companies, clarify the responsibilities of domestic industry supervisors and supervisory departments, and strengthen cross-departmental supervisory coordination.

The third is to further strengthen supervision and law enforcement cooperation with overseas securities regulatory agencies. Adhere to the principle of law and reciprocity, and further deepen cross-border audit supervision cooperation. Explore effective ways and methods to strengthen international securities law enforcement cooperation, actively participate in international financial governance, and promote the establishment of law enforcement alliances to combat cross-border securities violations and crimes. Strengthen foreign-related trials in the capital market, and promote the mutual recognition and enforcement of judicial judgments between foreign countries and China.

Guo Li, a professor at the Law School of Peking University, told a reporter from the Economic Information Daily that most of the Chinese concept stock companies are leading high-tech companies in various industries in China, and they have massive data on national travel, shopping, payment and other fields. In the era of big data, data is an extremely important strategic resource, and cross-border data flow is related to the individual rights of citizens, and it will also have a direct impact on national security. The "Opinions" started from various aspects such as improving data security related legislation, compacting the main responsibility of information security of Chinese concept stock companies, and strengthening the coordination of domestic regulatory authorities to create a set of policy systems that strengthen the maintenance of data security by Chinese concept stock companies, and targeted solving the current outstanding problems in cross-border supervision is also of great significance to maintaining national data security.

Chen Li, chief economist and director of the Institute of Chuancai Securities, said that as China’s capital market opening continues to increase, the two-way capital flow will bring some new problems, but there is a red line that cannot be touched, that is, strict adherence to state secrets. and act within the limits of the law. At the same time, with the continuous advancement of science and technology, some new contradictions and problems have emerged in the capital market, which cannot be fully covered by legal provisions, and gray areas are likely to breed in implementation. Therefore, it is very necessary to establish and improve the system of extraterritorial application of capital market laws. In addition, the current Chinese capital market is still in the growth stage, and perfecting the rule of law is the only way for it to mature.

Strengthening judicial cooperation in cross-border supervision and law enforcement is an inevitable requirement to ensure the high-level two-way opening of the capital market under the new situation, and it has always been the focus of regulatory authorities. On June 22 last year, the chairman of the China Securities Regulatory Commission, Yi Huiman, stated that under the current circumstances, on the one hand, the pace of China’s capital market opening to the outside world will not slow down, but will continue to accelerate; on the other hand, strengthening international regulatory cooperation is the inevitable choice to adapt to the global of financial market opening and risk prevention. He pointed out that the most important thing in combating illegal and criminal activities in the international capital market is to establish a high degree of mutual trust between regulators through adequate communication and cooperation, and on this basis to jointly establish a law enforcement alliance against cross-border securities illegal and criminal activities.

On October 21 last year, Yi Huiman stated at the 2020 Financial Street Forum annual meeting that it is necessary to strengthen cross-border auditing and international supervision and law enforcement cooperation, and actively participate in international financial governance. In June of this year, Yi Huiman once again emphasized at the 13th Lujiazui Forum that global regulatory agencies need to further strengthen mutual law enforcement cooperation, jointly provide the market with a good regulatory expectation and environment, and jointly combat violations of laws and regulations. At the same time, it is necessary to effectively handle the relationship between openness and security. The prerequisite for companies to go overseas for listing is to comply with relevant domestic laws, regulations and regulatory requirements.

It is understood that in recent years, the China Securities Regulatory Commission has adhered to the principles of open cooperation, mutual respect, and respect for international practices in accordance with the "Securities Law" and other legal authorizations, established a multilateral and bilateral regulatory cooperation mechanism with overseas securities regulatory agencies, and actively carried out securities regulatory and law enforcement cooperation to jointly crackdown on illegal and criminal activities in cross-border securities. At present, the China Securities Regulatory Commission has signed a number of bilateral regulatory cooperation memorandums of understanding with securities regulatory agencies in 66 countries or regions, and in 2007 became a signatory of the International Securities Regulatory Commission’s "Multilateral Memorandum of Understanding on Consultation, Cooperation and Information Exchange". Under the aforementioned multilateral and bilateral cooperation mechanisms, the China Securities Regulatory Commission earnestly fulfills its obligations of cross-border law enforcement cooperation. In 2020, the China Securities Regulatory Commission received 71 requests for cross-border law enforcement assistance and completed 68; received 29 requests for cross-border regulatory information exchange and completed 24; and sent 23 requests for law enforcement assistance to overseas securities regulatory agencies.












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