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Securities Watchdog Fines Social Media Site 200,000 Yuan Over Misleading Article

By Liu Caiping, Yue Yue and Dong Tongjian

(Beijing) — China's securities market watchdog has fined an online financial social media platform 200,000 yuan ($29,700) for publishing a misleading article, a move that indicates the government is stepping up efforts to crack down on online rumors and misleading information that could disrupt the stock market.

The penalized company is Midas, a financial news website and social media platform for investors run by the Internet finance arm of China's second-largest trust company, Zhongrong International Trust Co. Ltd., said Zhang Xiaojun, a China Securities Regulatory Commission (CSRC) spokesman, on Friday.

Midas published an article in February on WeChat, a messaging and social media platform run by Tencent Holdings Ltd., with a sensational headline saying that Zhao Ju, the deputy governor of China Merchants Bank, was demanding that the "national team" — a reference to CSRC-backed securities firms — pay back the bank's money. The article subsequently went viral online.

Zhang said the headline was deliberately sensational and factually incorrect, and that the banker was quoted out of context.

China's stock market has had a bad case of the jitters since June 2015, and banks have played a significant role in injecting capital into China Securities Finance Corp, which is owned by the CSRC, to help stabilize the market.

In response to the article, Zhao said such reporting was irresponsible and misleading, and the bank will "continue to cooperate with the China Securities Finance Corp. to actively support its role in China's capital market."

Since 2015, CSRC has investigated 19 cases of dissemination of fabricated information and rumors, five of which have been sent to public security bureaus for further investigation.

With rapid advances in Internet technology, market participants are now able to exert an enormous amount of influence on markets by posting information on social media networks, Zhang said. The benchmark Shanghai composite slumped more than 6.4% on Feb. 25, a day after another rumor was published on Sina Weibo, a Twitter-like microblog network, claiming that the regulator had stopped approving listings for the country's growth-enterprise market.

Zhang said the CSRC will join with other authorities, including those responsible for press, publications and cyberspace, and promote more cooperation with law enforcement departments. Anyone found to be disrupting the market order and undermining investment confidence and expectations by disseminating fake information will face prosecution.

But he also raised concerns about the challenges the authority faced. "Under the current context of cross-format media, the law and regulations need to be further improved, as the CSRC lacks judicial discretion and measures to restore information paths and track down original sources," Zhang said.

Contact reporter Dong Tongjian (tongjiandong@caixin.com); editor Kerry Nelson (Kerry@caixin.com)

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