Huang Guangyu's stiff punishment is a clear warning to all those indulging in insider trading - that taking undue advantage of regulatory loopholes will cost them dear.

Huang, once China's richest man, was sentenced to 14 years behind bars by a Beijing court on May 18. The self-made billionaire who built Gome into one of the largest electronics retailers in China was fined 600 million yuan ($88 million). The court also ordered the confiscation of his property worth 200 million yuan.

The punishment will hopefully deter others seeking to profit from unlawful deals in China's capital markets, which have been expanding rapidly over the years.

Regulators charged with the duty to ensure fairness, justice and transparency of the market should, however, not count on this unique case to check speculators and manipulators from capitalizing on insider information.

The worst global recession in decades has highlighted the peril of unregulated financial derivatives and the severe consequences of ineffective market regulation in developed countries.

Under such circumstances, Chinese policymakers have been wise enough not to throw the baby out along with the bathwater.

The launch of the long awaited stock index futures last month is the latest evidence of the country's unremitting efforts to deepen capital markets reform.

That is not enough. Domestic market watchdogs must implement rules and mechanisms in tune with the fast-paced development of financial markets, and enforce them aggressively.

Policymakers must also perform a thorough regulatory overhaul to crack down on unlawful speculation and manipulation of the capital markets.

In fact, Huang's harsh sentence should be taken as the first serious warning.