Establish systems, enforce strict laws, and emphasize protection; rule of law construction reshapes the capital market ecosystem.

Securities Times reporter Cheng Dan

When the rule of law flourishes, the market flourishes; when the rule of law is strong, regulation is strong. The China Securities Regulatory Commission (CSRC) recently released its 2025 report card on rule-of-law development, showing that the capital market has been pushed forward in depth along the rule-of-law track, advancing all reforms of the capital market. The pace of legislation in key areas has accelerated. The costs of illegal and noncompliant conduct continue to rise. A comprehensive, three-dimensional accountability system is gradually taking shape… Years of sustained rule-of-law development have laid a solid foundation for the capital market to move toward high-quality development.

Zheng Yu, a professor at the School of International Finance and Law, East China University of Political Science and Law, said that as the construction of the “four pillars and eight beams” of the legal system for the capital market has been completed, the punishment and enforcement mechanism for illegal conduct has basically taken form. There is still room to explore the system’s inclusiveness and adaptability. While enforcing regulation strictly and pursuing accountability, regulators should increasingly focus on improving regulatory efficiency and governance effectiveness, thereby achieving strict regulation across the entire chain.

Build Systems to Optimize Market Ecology

High-level rule of law strengthens the basic systems of the capital market, clarifying the rights and obligations relationship among market participants, which helps foster a market ecology that honors the law and keeps promises. Since the promulgation of the new “Nine Articles” (the “new National Nine Measures”), the CSRC has already formulated and revised more than 50 regulatory documents, covering areas such as listed company restructuring, information disclosure, and delisting systems. Guided by a series of rules that promote the entry of medium- and long-term funds into the market, in 2025, about 1 trillion yuan worth of medium- and long-term funds entered the market.

“Improving and strengthening the rule of law in the capital market is conducive to preventing and resolving financial risks, and it is especially critical for maintaining market order, strengthening rule awareness, and stabilizing market expectations.” Tian Lihui, a professor of finance at Nankai University, said that in recent years, advancing capital market development along the rule-of-law track has effectively addressed emerging issues and public concerns, thereby serving the real economy more effectively.

At present, in vigorously advancing capital market rule-of-law development, the focus is to answer, from the perspective of the rule of law, how to better serve the development of scientific and technological innovation and new productive forces; to effectively protect investors’ lawful rights and interests; to improve the institutional system for risk prevention, early warning, response, and accountability in the capital market; and to ensure that financial innovation in the capital market always moves in the direction of better serving the real economy needs. According to the 2026 arrangements, the CSRC will study and formulate a rule-of-law development plan for the capital market, accelerate the drafting and revision of legislation in key areas, and enhance the inclusiveness, adaptability, competitiveness, and attractiveness of the system.

Taking the institutional building to promote rational investing, value investing, and long-term investing as an example, Cheng Hehong, the CSRC’s chief lawyer, recently introduced that the CSRC will organize an evaluation of the implementation effectiveness of the Securities Law, research and summarize policy and rule experiences and practices that are favorable for promoting rational investing, value investing, and long-term investing, and extract them to be elevated into state legal provisions for the securities market. It will continue to advance the revision of the Securities Investment Fund Law, and convert relevant achievements from public fund reforms into law. It will promote the formulation of the Regulations on the Supervision and Administration of Listed Companies, revise and improve the Regulations on the Supervision and Administration of Securities Companies, and strengthen the legal foundation for rational investing, value investing, and long-term investing.

How can more medium- and long-term funds “be willing to come and stay”? Wu Xiaoqiu, president of the National Financial Research Institute at Renmin University of China, believes that efforts should focus on reform across the asset side, the demand side, and the institutional side, among which the core of reforms on the institutional side is to improve rule-of-law provisions to ensure market transparency and fairness, greatly increase the costs of illegal and noncompliant conduct, and form a new pattern in which administrative penalties transition primarily into criminal penalties and civil compensation as the main enforcement tools.

Strict Enforcement to Enhance Regulatory Quality and Effectiveness

The life of law lies in implementation. The effectiveness and authority of capital market supervision come from strict, standardized, fair, and civilized law enforcement. At present, strict regulation has become the norm. The CSRC has comprehensively strengthened whole-process supervision, to a certain extent reversing the situation in which, for a long time, the costs of illegal conduct in the capital market were too low.

In all of 2025, the CSRC handled and investigated 701 cases of illegal conduct in the securities and futures markets, with fines and confiscations totaling 15.474 billion yuan. It transferred 172 leads of suspected crimes to public security authorities. Among them, the financial fraud comprehensive punishment-prevention system that has been accelerated to build severely punished malignant financial fraud cases such as those involving Fujun Pharmaceutical, and Pulei Pharmaceutical (300630). The high-pressure crackdown on trading-related illegal conduct led to fines and confiscations exceeding 100 million yuan in cases such as the Jin Sui Chun market manipulation case and the Tian Han illegal reduction of holdings case. Intermediary institutions such as ShineWing Certified Public Accountants, Asia-Pacific (Asia Pacific Law Firm), and Donghai Securities were punished according to law.

Zheng Yu said that while law enforcement is strictly pursuing accountability, it increasingly focuses on improving regulatory efficiency and governance effectiveness. On the basis of pursuing responsibility of financial fraud companies and adhering to the principle that the “chief culprit must be investigated,” regulators further strengthen the principle that “accomplices must be struck,” targeting situations in which intermediaries, through intentional conduct or serious negligence in their performance of duties, provided assistance to fabricate fraud or failed to properly review, as well as the upstream and downstream companies’ fictitious business and fund-circulation-type assistance in fabricating fraud. Stronger supervision and crackdowns are carried out, achieving strict regulation across the entire chain.

From the fines orders, it can be seen that securities regulatory law enforcement is not “three cups of penalty.” Instead, it comprehensively applies measures including administrative regulatory actions, administrative penalties, civil compensation, criminal pursuit of liability, integrity-related sanctions, delisting supervision, and self-regulatory management, to build a full-dimensional, three-dimensional accountability system with “teeth and thorns,” so as to form a market atmosphere of “those who dare not violate, do not want to violate, and cannot violate.”

In the next step, the CSRC’s enforcement focus will still be on punishing securities and futures illegal activities that infringe investors’ rights and interests and disrupt market order, such as fraudulent issuance, financial fraud, market manipulation, insider trading, and fraud against clients. Guo Feng, chairman of the Securities Law Research Committee of the Chinese Law Society, believes that it is necessary to regulate conduct by major shareholders such as reductions of holdings and the occupation of funds, strengthen compliance governance of listed companies from the source, and further consolidate the foundation for market stability. It should also further enhance the effectiveness and deterrence of regulatory law enforcement, accelerate the advancement of digital and intelligent regulatory construction, use technologies such as big data and artificial intelligence to improve the ability to identify illegal and noncompliant conduct, and achieve “early detection, early intervention, and early resolution.”

Strengthen Protection to Enhance Investors’ Sense of Gain

China’s capital market has the world’s largest base of investors. Tightly weaving and strengthening an “investor protection safety net” is a concrete reflection of enhancing investors’ sense of gain.

Since last year, the CSRC has formulated and issued the “Several Opinions on Strengthening the Protection of Minority Investors in the Capital Market.” It has comprehensively and systematically clarified the overall approach and policy measures for the protection of minority investors in the current and next period, and promoted the launch of special representative litigation in a number of cases, including the Dalian Port (600190) case for special representative litigation procedures, and the Jin Tong Ling (300091) case for a first-instance pilot ruling; Minmetals Securities also established a special fund for advance compensation regarding the Guangdao Digital false disclosure matter; and the special representative litigation case involving Meishang Ecology (300495) was opened for trial. A series of measures is intended to enhance investors’ confidence and safeguard market openness, fairness, and justice through coordinated linkage between regulatory law enforcement and criminal justice and civil compensation.

Cheng Hehong said that in the next step, it will further advance special representative litigation in securities disputes, increase the application of the advance compensation制度, improve the quality and effectiveness of investors’宣传教育 work, and better embed investors’宣传教育 into the business processes of securities and futures operating institutions when developing customers and providing services.

“Special representative litigation in securities disputes is of great significance for increasing the costs of illegal conduct in the capital market, protecting investors’ lawful rights and interests, and ensuring the stable, sound development of the capital market.” Tian Lihui suggested that regulators and relevant parties should strengthen communication and coordination, promote the construction of a normalized working mechanism for special representative litigation, and ensure that special representative litigation in securities disputes is carried out in accordance with law, with prudence, and with efficiency. For cases of special representative litigation that meet the conditions stipulated by laws and judicial interpretations, the people’s courts should accept and try them promptly in accordance with law.

(责任编辑：董萍萍 ）

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