The China Securities Regulatory Commission (CSRC) released the "Basic Rules for Administrative Penalties of the China Securities Regulatory Commission," which will be implemented starting from March 1, 2025.

On January 17, 2025, the China Securities Regulatory Commission (CSRC) issued the "Basic Rules for Administrative Penalties Discretion of the China Securities Regulatory Commission" (hereinafter referred to as the "Discretionary Rules"), which will take effect from March 1, 2025. The regulation of administrative discretion is a key link in promoting the construction of a rule of law government. Refining and quantifying the principles in laws, administrative regulations, and rules or the flexible enforcement authority and scope of discretion directly affects the uniformity of enforcement standards and regulatory authority, which is of great significance for promoting fair law enforcement and stabilizing market expectations. In recent years, the Securities Law and Futures and Derivatives Law have been revised and enacted successively, raising the upper limits of fixed and multiple penalties. In the new situation, how to effectively use the administrative penalty power granted by the law is an urgent issue. Therefore, it is necessary to formulate and promulgate specific rules and regulations on administrative penalty discretion to clarify the hierarchy of administrative penalties, unify the discretion standards of all law enforcement agencies, and provide institutional guarantees for fair administrative law enforcement. From June 7 to July 7, 2024, the CSRC solicited public opinions on the "Discretionary Rules" and listened to opinions from relevant parties through seminars, written consultations, and other forms. The public generally supported the content of the "Discretionary Rules" and proposed suggestions for improvement, which were carefully studied by the CSRC, and reasonable suggestions were absorbed and adopted. The "Discretionary Rules" consist of 25 articles, mainly including the following contents: first, clarifying the hierarchy of discretion and the circumstances of discretion. Setting up six levels of discretion including "no penalty, exempt from penalty, mitigated penalty, lenient penalty, general penalty, severe penalty", and stipulating the circumstances in which each level of discretion applies. Second, clarifying relevant penalty rules. For joint violations, the discretionary rule of "recognizing as a whole before distinguishing penalties" is established. For direct responsible personnel of entities, the degree of responsibility and the extent of punishment are comprehensively analyzed based on their roles, duties and performance in the illegal acts, level of awareness, and actions taken after being informed. For multiple violations, the basic rule of "cumulative penalties for multiple independent violations" is clarified. Third, establishing the system of approval by the principal or collective discussion. For complex or significant illegal acts receiving administrative penalties, decisions should be made through collective discussion by the responsible persons. In cases where the application of the "Discretionary Rules" may appear clearly improper or unfair, or when there are changes in objective circumstances, adjustments should be approved by the principal of the CSRC or through collective discussion. Fourth, implementing the "multi-dimensional accountability" and "linking of administrative and criminal enforcement". Connecting administrative penalties for securities and futures violations with criminal liability, civil liability, administrative supervision measures, and self-discipline management measures. The handling methods for the three types of "linking of enforcement" situations are specified. Fifth, strengthening the supervision and guidance of the CSRC. It is clarified that the CSRC supervises and guides the exercise of the penalty power by its dispatched agencies to achieve the uniform application of penalty standards. In the next step, the CSRC will strictly implement a series of decisions on the rule of law administration made by the Party Central Committee and the State Council, further standardize and unify the administrative penalty discretion standards, ensure fair and transparent law enforcement, implement the provisions of the Securities Law, Administrative Penalty Law, and the "Discretionary Rules", and quickly establish a clear, logically sound, scientifically complete, and effective administrative penalty discretion system to further stabilize market expectations, uphold fairness and justice, and provide solid legal protection for the construction of a safe, standardized, transparent, open, vibrant, and resilient capital market. This article is excerpted from the CSRC release, edited by GMTEight: Chen Wenfang.