Securities Enforcement in China: 2026 Review

Securities enforcement in China in 2026: the short answer

Securities enforcement in China in 2026 was defined by scale, reach and coordination. The China Securities Regulatory Commission (CSRC) reported record activity for 2025, with 661 administrative penalty decisions and fines and confiscations of about RMB 15.5 billion. It also widened its focus from issuers to everyone who helps a fraud happen: controlling shareholders, auditors, sponsors, suppliers, customers and banks. Criminal referrals and investor class actions now follow administrative findings as a matter of course.

The policy direction has been stable since the State Council's April 2024 opinions on strengthening capital market supervision, often called the new "Nine Articles", and the July 2024 opinions on preventing and punishing financial fraud. What changed in 2025 and 2026 was the machinery. Regulators, courts and prosecutors formalised joint working arrangements, courts handled sharply more investor claims, and new disclosure and governance rules raised the standard against which directors are judged.

For foreign businesses, the practical point is that exposure no longer depends on being listed. A foreign parent of an A-share company, a foreign director who signs periodic reports, an overseas fund trading through Stock Connect or a foreign supplier asked to confirm balances can each be drawn into a case.

This review sets out the numbers, the main enforcement themes, the civil liability picture and what to watch in 2027. It is general information about the Chinese legal environment from a cross-border perspective. PRC legal advice, submissions to the CSRC and court representation in mainland proceedings must be provided by licensed PRC law firms.

The numbers: what the CSRC reported for 2025

In April 2026 the CSRC published its enforcement results for 2025, as reported by China Securities Journal on the CSRC website. The headline figures show steady growth in penalty decisions and individuals sanctioned, while total fines and confiscations were broadly flat.

The mix of cases is as revealing as the totals. Information disclosure cases fell to 200, down about 20%, and cases against intermediaries fell to 77. Insider dealing cases rose to 218, up about 22%, and market manipulation cases rose to 85, up about 20%. The shift suggests the CSRC is spending more effort on trading misconduct and on the largest, most complex fraud cases, rather than on a high volume of smaller disclosure breaches.

Earlier, on 5 January 2026, at a cross-departmental meeting convened by the CSRC with the Supreme People's Court, the Supreme People's Procuratorate and other bodies, regulators reported that since the start of 2024 the CSRC had handled 159 financial fraud cases, penalised 111 and transferred 112 suspected criminal cases, according to Xinhua's report of the meeting.

Financial fraud and the third-party chain

Financial fraud remained the centre of securities enforcement in China. In 2025 the CSRC investigated 97 fraud cases and penalised 65 listed companies and 392 responsible individuals, with fines totalling about RMB 3 billion. It also pursued 43 companies that had already delisted, fining 31 of them a combined RMB 1.5 billion under the principle that delisting does not end liability. Sixteen listed companies were delisted for serious fraud.

The CSRC's 2025 results also highlighted 32 cases in which controlling shareholders or related parties occupied more than RMB 100 million each of a listed company's funds. In the most prominent, the actual controllers and controlling shareholders of Dongxu Optoelectronics and Dongxu Lantian were fined RMB 1.7 billion, 19 individuals received market bans and the matter was referred to the police. Misappropriation through guarantees and related-party transactions is a recurring pattern, and the CSRC's draft State Council regulation on listed companies proposes dedicated penalties for it.

The most important trend for non-listed businesses is the pursuit of third parties. The CSRC reported referring 869 entities that had assisted fraud to local governments and ministries for follow-up. The January 2026 meeting named suppliers, customers and financial institutions that help falsify accounts as a priority. A foreign supplier whose local staff sign inflated balance confirmations, or a customer that participates in round-trip sales, can therefore face penalties, criminal investigation and civil claims.

Criminal enforcement is also delivering results. The CSRC cited the conviction of ten executives of Zijing Cunchu, a STAR Market company found to have committed fraud, with the longest sentence being seven years and six months. Amendment XI to the Criminal Law, in force since 1 March 2021, raised maximum sentences for fraudulent issuance and disclosure offences and made controllers who organise or instruct the conduct expressly liable. The Supreme People's Procuratorate's January 2026 report describes the prosecution side.

Market abuse, quantitative trading and online manipulation

Trading misconduct took a larger share of the docket. The CSRC reported 19 manipulation cases with illegal gains of more than RMB 100 million each. In one, an individual who controlled a large number of accounts to trade continuously and match orders was ordered to forfeit more than RMB 1 billion. In another, an individual who used programme trading tools to manipulate prices was fined RMB 400 million. The CSRC also reported 68 insider dealing cases linked to mergers and acquisitions.

Programme trading now has its own rulebook. The CSRC's securities market programme trading provisions took effect in October 2024, exchange implementing rules followed on 7 July 2025, and parallel futures market provisions took effect on 9 October 2025. High-frequency trading is defined by thresholds of 300 or more orders and cancellations per second or 20,000 or more per day, and exchanges aggregate activity across products run by the same institution. Our page on quantitative and programme trading rules explains the regime.

A third theme is online market manipulation. The CSRC reported 19 cases involving rumours or manipulation through online channels, including a social media influencer who was fined RMB 83 million and banned from the market. Companies should expect closer scrutiny of investor communications on social media, of paid promotion and of the conduct of investor relations agencies.

Inside dealing risk is not limited to Chinese insiders. Foreign shareholders and their deal teams who receive price-sensitive information about a listed subsidiary are within the insider dealing rules, as are advisers. Information barriers, insider lists and pre-clearance procedures for foreign parents are therefore part of the response to securities enforcement in China, not just a local compliance formality.

Civil liability: investor claims and the courts

The civil side grew fastest. According to Supreme People's Court figures reported in March 2026, courts nationwide received about 27,000 securities disputes in 2025, up 63.6%, and concluded about 25,000. Disputes arising from financial fraud numbered about 25,600, up 67.2%. The growth reflects the 2022 SPC provisions that removed the need for a prior regulatory finding before investors can sue, and the willingness of courts to process large numbers of claims through demonstration judgments.

Large awards continued. In a case reported by the Supreme People's Procuratorate, a first-instance interim judgment in December 2025 ordered a company to compensate about 43,300 investors nearly RMB 775 million. The opt-out special representative action, brought by the China Securities Investor Services Center, remains rare but is no longer exceptional, and guidelines issued by the SPC and the CSRC in May 2025 call for its regular use and for more consistent methods of calculating loss.

Liability is joint and several across the chain. The issuer is strictly liable; controlling shareholders, actual controllers, directors, senior managers, sponsors and service providers are jointly liable unless they prove they were not at fault. Courts assess fault proportionately for independent directors, as the Kangmei judgment of 2021 showed, but the documented record of what each person asked and was told is usually decisive. See securities misrepresentation class actions.

Advance compensation, under which a controlling shareholder or intermediary pays investors first and then seeks recourse against others, has been used in several fraud cases and can reduce the overall cost of a dispute. The administrative enforcement commitment procedure, under which a party offers corrective steps and compensation in return for termination of an investigation, remains available in suitable cases but not for serious fraud.

Gatekeepers, governance and the new disclosure rules

In 2025 the CSRC penalised 66 intermediaries for a combined RMB 602 million. The audit firm Yongtuo was permanently barred from securities work for helping a client falsify accounts, and its signing accountants were banned for life. Sponsors and law firms were penalised for failing to exercise due diligence. For international groups using Chinese auditors and sponsors, this raises the bar for verification and the value of documented working papers.

Three rule changes raised the standard against which conduct is judged. The CSRC's revised Measures for the Administration of Information Disclosure by Listed Companies took effect on 1 July 2025, triggering major-event disclosure when directors know or should know of an event. Under the Company Law transition, listed companies had to replace supervisory boards with board audit committees before 1 January 2026. And on 5 December 2025 the CSRC published for consultation a 74-article draft of State Council Regulations on the Supervision and Administration of Listed Companies, which would prohibit third parties from assisting fraud and strengthen recovery of compensation.

Our page on listed company advisory and disclosure covers these obligations in more detail.

How a case unfolds in 2026: a worked example

A hypothetical case shows how the strands of securities enforcement in China now connect. A Shenzhen-listed manufacturer, 30% owned by a European industrial group, reports strong revenue growth for two years. An exchange enquiry letter questions unusual year-end sales to a small number of distributors. Months later the company announces a CSRC investigation notice and its share price falls sharply.

1. Investigation. CSRC investigators interview finance staff, request bank records and send enquiries to customers and suppliers, including the European parent's trading subsidiary, which supplied components and signed balance confirmations.
2. Prior notice. The CSRC proposes fines on the company, its chairman and chief financial officer, and market bans. The European parent's nominee director receives a notice as a responsible person because he signed the annual reports.
3. Third parties. Two distributors that took part in circular sales are investigated separately. The parent's trading subsidiary must show that its confirmations matched its own ledger.
4. Criminal referral. Because the inflated revenue is large, the case is transferred to the police for the individuals who organised it.
5. Investor claims. Investors file claims in the designated intermediate court, and the investor services centre considers a special representative action. Plaintiffs name the company, the controllers, the directors and the auditor.

The outcome for the European group depends largely on records created before any problem arose: the nominee director's notes of the questions he asked, the trading subsidiary's confirmation policy, and evidence that the parent had no role in the distributor arrangements. Groups that put these controls in place in 2025 and 2026 are in a markedly better position than those relying on assurances from local management.

Cross-border dimensions of securities enforcement in China

Article 177 of the Securities Law prohibits overseas securities regulators from investigating or collecting evidence directly in China, and bars any entity or individual from providing documents relating to securities business to overseas parties without approval. Cooperation runs through memoranda of understanding, including with the Hong Kong Securities and Futures Commission. For groups with listings or investors abroad, any foreign regulatory request, internal investigation or litigation discovery involving documents in China has to be planned around these limits and around data export and state secrets rules.

• Hong Kong. A+H issuers face the SFC and HKEX alongside the CSRC, and positions taken in one forum will often be visible in the other.
• United States. US-listed Chinese companies may face SEC enquiries and Rule 10b-5 class actions; audit inspections of mainland and Hong Kong firms run under the 2022 protocol with the PCAOB.
• European Union. EU-listed parents of Chinese subsidiaries must reconcile Market Abuse Regulation disclosure duties with the mainland timetable.
• Foreign investors in A-shares. QFII and Stock Connect investors are subject to the same disclosure, short-swing and insider dealing rules as domestic investors, and can also be claimants in Chinese collective actions.

The Securities Law also reaches conduct outside China that disrupts the domestic market or harms domestic investors. A coordinated response, with one factual record shared across regulators and courts, is now the norm for serious securities enforcement in China. See cross-border regulatory investigations and securities compliance and CSRC enforcement.

What to watch in 2027

We expect securities enforcement in China to continue on its current path, with the following points most likely to affect foreign businesses and investors.

For boards reviewing their position at the end of 2026, a short checklist helps:

• Map every group entity and individual that touches a Chinese listed company: shareholders, nominee directors, suppliers, customers and lenders.
• Adopt or refresh a written policy on audit and balance confirmations, with sign-off outside the sales function.
• Check insider lists, trading windows and pre-clearance for staff at the foreign parent who receive price-sensitive information.
• Review D&O cover, indemnities and the procedure for appointing separate counsel for individuals.
• Agree in advance how foreign regulatory requests involving documents in China will be handled under Article 177 and data rules.

Practical preparation is the same in every case: a clear escalation route for enquiry letters and investigation notices, document preservation that complies with data rules, separate advice for individuals where interests diverge, and a single factual record across regulators. Our China regulatory tracker records related effective dates.

How TRW & Co helps

TRW & Co's Shenzhen representative office helps listed companies, foreign shareholders, directors, financial institutions and counterparties respond to securities enforcement in China within a cross-border strategy. We design and run internal investigations, coordinate forensic accountants, manage document preservation and cross-border data issues, and align responses to the CSRC, the SFC, the SEC and auditors. We advise on parallel exposure under Hong Kong, US and other non-PRC laws, and on compliance programmes for insider information, confirmations and related-party transactions. Submissions to the CSRC, hearings, PRC legal advice and court proceedings are handled by licensed PRC law firms, which we select and work with closely. Please contact us in confidence.