At a recent investor protection forum, Liu Jipeng, a professor at the China University of Political Science and Law and a well-known capital markets expert, delivered a keynote speech emphasizing the need to strengthen delisting mechanisms. He stated that while delisting efforts must be intensified, establishing a robust compensation system is a prerequisite. This system should ensure that wrongdoers bear appropriate responsibility and effectively protect the interests of retail investors.
The compensation system urgently requires improvement, with funding sources being a critical issue. Liu pointed out that the core problem with the current delisting system is the lack of a sound compensation mechanism. He stressed the importance of creating a dedicated compensation fund to safeguard the legitimate rights and interests of retail investors. In his view, retail investors, being an information-disadvantaged group, often suffer the most during a company's delisting process. Establishing a specialized compensation fund could help mitigate their losses and uphold market fairness.
Identifying wrongdoers and imposing strict penalties on controlling shareholders and intermediaries is essential. Liu clearly identified two main parties that should be held accountable. First, major shareholders and actual controllers of listed companies bear primary responsibility for corporate operations and information disclosure; they should be liable for compensation if violations lead to delisting. Second, intermediaries such as accountants, lawyers, and appraisers play a crucial role. Liu emphasized that without their assistance, fraudulent activities would be difficult to execute. As gatekeepers of the capital markets, intermediaries must face consequences if they compromise independence and professionalism to aid misconduct.
Learning from international experience and enhancing penalties is necessary. Liu cited cases from the United States, such as the collapse of major accounting firms, which demonstrate zero tolerance for intermediary violations in mature markets. He acknowledged some progress domestically, including penalties imposed on securities firms, but argued that current punishments are insufficient and must be strengthened to create an effective deterrent.
Delisting should not be an easy exit; value reassessment is indispensable. Liu proposed that companies should not be allowed to delist lightly. He suggested that before delisting, a comprehensive review and value reassessment should be conducted, similar to practices in India. He noted that the strong performance of the Indian stock market in recent years is closely linked to its strict delisting regime. This process not only better protects investor rights but also prevents companies from evading responsibilities through delisting.
In conclusion, Liu emphasized that improving the delisting system is a systematic project requiring coordinated efforts from regulators, judicial authorities, and market participants. A well-functioning delisting channel that enhances market efficiency must be paired with a comprehensive investor protection mechanism to ensure that violators are duly punished, fostering healthy development and survival of the fittest in capital markets.
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