Fund launched to protect investors (09 Sept 2005)

The State Council, the Cabinet, has provided funds to establish a company to manage an investor protection fund, major domestic securities newspapers reported Thursday, citing sources.

The company, registered Aug. 30, has registered capital of 6.3 billion yuan (US$776.82 million). Its board of directors includes officials from the China Securities Regulatory Commission (CSRC), the Ministry of Finance and the Shanghai Stock Exchange, the Shanghai Securities News reported.

The operations of the company will include compensating creditors when securities firms are shut down, go bankrupt, have their licenses canceled, or are taken over by the securities regulator, the newspaper reported.

A CSRC spokesman confirmed Thursday that an investor protection fund has been set up.

"Yes. There is a 6.3 billion yuan 'Protection Fund for Securities Investors,'" said Dai Biao, a spokesman for the securities regulator. "It has already been registered in State Administration for Industry and Commerce. CSRC hasn't announced this piece of news to the public yet," he said.

According to the Shanghai Securities News, the investor protection fund may receive a 10 billion yuan loan from the central bank. It also can raise funds by issuing debt with permission from the State Council, the newspaper said, citing unnamed sources.

In July, an official at the central bank confirmed that 10 billion yuan had been earmarked for a government fund to protect investors.

The launch of an investor protection fund comes as China reforms its share market by allowing listed companies to float nontradable shares.

The prospect that nontradable shares, mostly owned by government entities, would be released onto the market has weighed on stock prices the past few years. The benchmark Shanghai Composite Index has fallen about 47 percent from its peak in the middle of 2001.

(Shenzhen Daily/Agencies)