Courts lend support to China's new tech board

Courts across the country have been required to offer better legal services to ensure the smooth operation of the country's newly-launched Nasdaq-style tech board and safeguard a healthy capital market.

The requirement was highlighted in a guideline issued on June 21 by the Supreme People's Court, which is expected to serve as a key legal basis for the nation's STAR Market, informally dubbed the science and technology innovation board.

The STAR Market, launched at the Shanghai Stock Exchange on June 13, has been viewed as a milestone in the country's capital market development, as it is the first submarket of China's capital market to adopt the registration-based initial public offerings mechanism-a core part of the market-oriented reforms.

The guideline requires courts nationwide to increase intellectual property protection for listed companies on the board and allows heavier punishments for those who infringe intellectual property.

It also highlights the fight against financial corruption and securities-related crimes, including to strictly punish people who disturb registration-based IPOs, and to increase fines on those engaging in insider trading and market manipulation.

Individuals and enterprises that swindle government funds going to support tech industries will face criminal liabilities, while securities-related offenders are less likely to be given a suspended sentence, the guideline stipulates.

"China has more than 150 million stockholders and the stock market has become increasingly close to people's daily lives, so safeguarding their legitimate rights by the rule of law is the responsibility of courts nationwide," Liu Guixiang, a senior judge of the top court, said when explaining the guideline on June 21.

He noted the guideline is also a key move to maintain order in the capital market and improve its transparency.

Liu Junhai, director of the Business Law Center at Renmin University of China, said the guideline lays a solid legal basis for the registration-based IPO reform on the STAR Market, adding that it could help the judicial system to synchronize with, rather than lag behind, the capital market reforms.

"The guideline emphasizes investor protection and a crackdown on breaches by listed firms, which is conducive to boosting investor confidence for the STAR Market," he said.

For instance, the guideline calls for stricter criminal liability for issuers and intermediaries that engage in fraudulent floats, and identifies the civil liability of brokerages in reviewing investors' suitability to shield those unable to deal with the risks of investing in high-tech companies.

According to Liu, it is of great importance to strengthen the protection of investors in the new board.

"It's not only because inadequate investor protection has been a bane of the whole A-share market, but also because innovations on the new board could induce risks that could be prevented by a sound judicial system."