A study by Shenzhen Stock Exchange has found that punishment of market fraud is insufficient to deter offenders, South China Morning Post said. The study found that between 1993 and October 2001, the China Securities Regulatory Commission handed down 218 disciplinary actions for disclosure violations involving 171 firms and one-fifth of all cases were repeat offences. Between 1997 and September 2001, the number of companies punished for disclosure irregularities rose from 1.34 per cent of all listed firms to 9.04 per cent. Nearly one third of these firms were found to have re-offended within two years of their initial disciplining, while three firms had been punished four times.
The study showed that regulators tended to choose the lightest of a range of punish- ments available to them, with 62 per cent of cases involving an internal reprimand and only 5.5 per cent involving fines. Individuals rarely suffered any consequences and no firm had been de-listed.
The author of the report concluded that these lenient punishments had led to repeated offences by violators and to a general culture of dishonesty. He appealed for tougher action against violators, including restrictions on their fund-raising activities.