CSRC tightens firms' disclosure rules

BEIJING - The China Securities Regulatory Commission (CSRC) on Friday modified the rules on the information disclosure process for listed companies, in a bid to improve their corporate behavior and provide more valuable reference points for investors.

In a revised standard for companies' annual reports, the regulator called for comprehensive and precise summaries in addition to greater disclosure of non-financial information for the convenience of regular investors.

Non-financial information normally accounts for only 20 percent of an annual report, said Lu Zefeng, deputy director of the CSRC department of public offering supervision.

This information includes production and sales volumes, stocks, market share and data on major suppliers and clients. The CSRC also asked listed companies to make public the pay levels of their top management teams.

Companies should report their involvement in non-core businesses, such as investment in financial derivatives made with "idle" funds, which may pose major risks to the companies' financial health, the regulator said.

Companies were also requested to register the names of employees with access to sensitive internal information in a bid to prevent insider trading.

Meanwhile, the period for prior notice before a company's initial public offering has been extended from five days to one month, to allow more time for social supervision, the CSRC said.

The rules will only apply to companies listed on the main board of an exchange and the board for small- and medium-sized enterprises.The adjustments are the latest in a series of measures issued by the CSRC to regulate the country's stock market.

Apart from tougher regulations on listed companies, the regulator also removed restrictions on large stakeholders increasing their holdings.

Lu said the move was to encourage increases in shareholdings by major investors, but denied that the changes are related to the current downturn in the stock market.

Stocks on the Chinese mainland advanced on Friday, trimming the benchmark index's biggest annual loss since 2008, as increasing US home sales bolstered confidence in the world's largest economy.

"We have high inflation, an economic slowdown and very tight money supply this year and that's a picture of stagflation that is pretty negative for equities," said Wei Wei, an analyst at West China Securities Co in Shanghai.

"The stock market may find a bottom next year, given cheap valuations. But in terms of economic fundamentals, we haven't seen an end to the slowdown," Wei said.

The Shanghai Composite Index (SCI) climbed 25.86 points, or 1.2 percent, to 2199.42 at the close, its biggest gain in two weeks.

The SCI has tumbled 22 percent this year, the most since 2008 and extending last year's 14 percent plunge, on concern that increases in borrowing costs and Europe's debt crisis will derail economic growth.

Bloomberg News contributed to this story.