* Agency could sue on behalf of individual investors
* Share buys would give agency seat at shareholder meetings
* CSRC head says hard for individuals to influence
SHANGHAI, Dec 10 China may create an agency that
could file corporate governance lawsuits on behalf of individual
investors as regulators attempt to restore confidence in the
country's struggling domestic equities markets, the official
Shanghai Securities News reported on Monday.
China Securities Regulatory Commission (CSRC) head Guo
Shuqing said he is considering establishing one or more agencies
that would buy shares in listed Chinese companies, which would
allow the agency to participate in shareholder meetings and file
complaints or lawsuits to protect the interests of retail
"A public company must have strong corporate citizenship and
not allow controlling shareholders to arbitrarily intervene in
excess of their legal rights at the expense of the interests of
small and medium-sized shareholders. This is the only way to win
the trust of the market," Guo said in the report.
The agency would be focused on helping small shareholders
fight decisions by company management that are legal yet
contrary to shareholder interests. Examples of such behaviour
include the widespread practice by Chinese listed firms of
sitting on cash instead of paying out dividends, repeatedly
fundraising through new share issuances that dilute the value of
existing shares, and acquiring other companies from related
parties at inflated prices.
While small investors are technically able to file their own
lawsuits, Guo said that because it is impractical for most of
them to do so, an agency that could act on their behalf might
prove more effective.
The CSRC has enacted incremental reforms to domestic bourses
in 2012 in hopes of encouraging value-oriented investors to
return to the market. The moves include reducing trading
transaction fees, increasing quotas for foreign investors and
reforms to the initial public offering process.
Both the CSI300 Index, which tracks the largest stocks in
Shanghai and Shenzhen, and the Shanghai Composite Index,
which tracks all the companies listed in Shanghai, hit their
lowest point since 2009 in the first week of December.
Markets have recovered slightly since then, but still look
set to close out a third consecutive year in negative territory,
barring an abrupt recovery.
While Chinese macroeconomic indicators have shown signs of
recovery in recent months, the improved sentiment has yet to
trickle down to domestic equities markets, causing some analysts
to question whether a sustainable stock market revival is
actually around the corner.
However, foreign interest in Chinese stocks - in particular
those listed in Hong Kong - has strengthened in recent months.
(Reporting by Pete Sweeney; Editing by Matt Driskill)