SHANGHAI, Aug.31 (Reuters) – The Chinese securities regulator has stepped up oversight of brokerage firms’ margin lending and securities borrowing activities after recently detecting misconduct, reported on Tuesday. China Securities Official Journal.
The China Securities Regulatory Commission (CSRC) urged brokerage firms to step up monitoring of trading activity on investors’ credit accounts in order to prevent the misuse of margin loans, the newspaper said, citing a CSRC opinion.
Some investors have recently bypassed the rules, using margin loans to buy ineligible assets, converting them to cash or using them for other illegitimate funding, the newspaper said.
Such activities flout regulations, disrupt trading mechanisms, increase the risk of risk contagion and make it more difficult for brokers and regulators to identify risks, according to the article.
The CSRC cautioned against turning margin lending into unrestricted lending, the newspaper said.
China’s outstanding margin loans hit a six-year high of 1.87 trillion yuan ($ 289.21 billion) this week.
On Monday, the CSRC pledged to crack down on mismanaged private funds and eliminate fake ones, as regulators tighten screws on the capital market. ($ 1 = 6.4658 Chinese yuan renminbi) (Reporting by Samuel Shen and Andrew Galbraith; editing by Kim Coghill)