Misrepresentation, Involuntary Delisting and Investor Protection - The Dilemma of Dislocated Regulation on Chinese Securities Market

On 21 March 2016 the Shanghai Stock Exchange issued its first ever decision to compulsorily delist a company on the ground of seriously breaching the disclosure norms. It is the first case applying the China Securities Regulatory Commission’s 2015 delisting regulation and has substantial implications for the future operation of the delisting system in China. The effectiveness of the delisting system, particularly in regard to the issue of misrepresentation, largely depends on the functioning of the Supreme People’s Court’s Judicial Interpretation issued in 2003. By virtue of examining the legislative purpose in the context of specific procedural devices adopted in the 2003 Interpretation, this article identifies the unfortunate status of investors and the causes thereof under China’s political and economic circumstances. It argues that the delisting system, which is built upon the unsatisfactory regime of investor protection, has put investors in a more disadvantageous position facing increased uncertainty and unpredictability. By going through crucial statutory provisions in the 2003 Interpretation and the delisting regulation, this article illustrates how the judiciary, the administrative authorities and the investors interact on this uneven playing field of stock market.