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Crackdown uncovers more market malpractice cases (2)

By Song Shengxia  (Global Times)

08:27, September 25, 2012

"As a result, an increasing number of accounting and market manipulation scandals have been unearthed," Li said.

In a recent case involving market misconduct disclosed by the CSRC, a man surnamed Zhang in Central China's Henan Province spread a rumor online in August that CITIC Securities, the country's biggest listed brokerage, recorded a 2.9 billion yuan ($459 million) loss.

On the same day, another man in East China's Zhejiang Province surnamed Chen spread a similar rumor claiming that the CITIC Securities' chairman had been taken away by authorities.

The rumors sent shares of CITIC Securities into a tailspin, but the company later denied the news and said the plunge in share prices was caused by short-selling by equity funds.

The CSRC said early this month that people who spread rumors will be punished according to law and the commission was still investigating the case to see if any illegal practices had been conducted, such as manipulating the market by spreading false information.

However, the most commonly seen form of market misconduct was insider trading.

Among the 90 newly filed cases since the beginning of this year, 57 involved insider trading, accounting for 63 percent, the CSRC data showed.

One analyst said that he thinks insider trading penalties are "too light," because the maximum fine is only 3 million yuan, which is not enough to deter people from engaging in illegal practices.

"Apart from reinforcing penalties as deterrence, regulators should also try to bring its system in line with international practice and make it more open, transparent and market-oriented," said Li Xunlei, chief economist with the Shanghai-based Haitong Securities.

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