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China is set to introduce a number of strict rules and regulations to strengthen its regulatory framework over listed companies and accounting firms.
New rules to be released in the coming one to two years, include those to strengthen the accounting responsibilities of chief executives and chief accounting officers of listed firms, boost information disclosure requirements relating to economic activities among managing teams and the major shareholders, said Zhang Weiguo, chief accountant of the China Securities Regulatory Commission (CSRC), the top watchdog overseeing China's securities sector.
He made the remarks on Saturday at the seventh China Capital Market Forum, an annual high-profile gathering of senior officials, academics and business insiders to discuss ways to boost China's ailing capital market.
These measures have mainly been taken to combat those rampant improper practices in the stock market, which often bring massive illegal returns for senior managing teams of the listed firms.
But investors on China's 11-year-old stock market, in which shares of over 1,200 companies are traded, have been much depressed by the frequently disclosed Enron-style scandals, which again triggered a year-long downturn of the market from its record high of 2,245 points in mid-2000 on the Shanghai stock market, to a new low of 1,311 points recently.
The new rules, designed to encourage transparency and development of good corporate governance, are deemed crucial for a turnaround in the market, said Zhou Daojiong, former chairman of CSRC.
Zhang said other planned rules to be launched in the next 24 months, include a number of regulations to streamline the sound performance of accounting firms, including an effective auditing system of accounts, restrictions on firms providing other non-accounting services, the keeping of back-up accounts and the prohibition of accountants holding posts in the listed firms they serve.
These measures mirror much contained within the Sarbanes-Oxley Act, a benchmark law introduced in the United States to strengthen information disclosure and corporate governance in listed firms in the wake of a series of major accounting scandals concerning multinationals, such as Enron and Worldcom.
In addition to short-term legal adjustments, Zhang also said others based on those already adopted in other countries may be introduced into China's market over the coming three to five years. Those under consideration include shortening information disclosure deadlines, strengthening auditing requirements for annual reports and improving the internal control systems of listed firms.
"The launch of a national independent accounting supervision committee will also be one of the most highlighted long-term objectives for us," said Zhang.
The official committee will be the decision-maker for a number of important issues, including development of accounting rules, supervision of the accounting sectors and punishment against illegal practices, he added.
(China Daily January 13, 2003)
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