Lens on 'fleeing' scallops secures investors

The China Securities Regulatory Commission announced on Friday that it has decided to let the public security organ probe the suspected securities crimes committed by the Zhangzidao Group and its executives.

Since 2014, when Zhangzidao announced that the "fleeing" scallops it was breeding caused it a loss of 763 million yuan ($112 million) in the third quarter that year, the company has come up with several more similar excuses for its financial losses, triggering investor concern. This led the CSRC to verify Zhangzidao's information disclosure frauds and mete out administrative punishments according to law.

The latest action to try Zhangzidao and related personnel for criminal responsibilities is a manifestation of the all-around and three-dimensional accountability network being woven by the regulator for crimes in the capital market and intensified crackdowns on illegal acts.

The Zhangzidao Group has become a laughing stock in the Chinese stock market ever since it came up with innovative excuses such as "the scallops fled" or "the scallops died" to explain its "financial losses". Such absurd claims hurt investor confidence while the regulator had no way to prove the company had committed irregularities.

Zhangzidao's repeated violation of investors' rights and interests without fear reflected the mindset of some listed companies, which felt information disclosure frauds can at most earn them fines. However, that was a loophole of the past, when because of difficulties in finding evidence, a company committing information disclosure frauds could not be held criminally accountable.

The noose is tightening on Zhangzidao now because of technological progress, such as the accurate positioning technology used by the CSRC through the Beidu Navigation Satellite System to locate the company's fishing boats and verify its true operating conditions, thus gaining evidence of the company's fraudulent behavior.

This shows that listed companies can now be investigated for frauds or other illegal acts under the country's existing legal framework. It will certainly deter enterprises intending to break the law, leading to creation of a clean ecological environment in the stock market to protect the rights and interests of investors.

China faces increasing domestic and international uncertainties, which makes it particularly necessary and important to maintain the healthy development of its capital market. Further strengthening of legal supervision and escalated crackdown on the frauds and other illegal acts in the capital market, along with stock market reforms, such as the establishment of the scientific innovation board and the launch of the registration system, mark the authorities' greater efforts to protect the interests of investors and maintain the rule of law in the capital market.