What Loss Of Control Looks Like: Chinese Regulator Urges Traders To Rat Out "Malicious Sellers"

Zero Hedge ^ | 07/27/2015 | Tyler Durden

[SeekAndFind]

After pledging a whopping 10% of China's GDP, or just about $1 trillion, to its various (at last check over 40) discrete measures to prop up its collapsing market, among which such threats as arresting shorters of stock and "malicious sellers", actions which have merely slowed down the bursting of the world's biggest stock bubble in recent years, China has finally reverted to what the communist regime does best to preserve "order" - implement witch hunts in which the population rats out any criminals who dare to go against the protocols of the communist party. In this case, the targets are "malicious sellers" with the regulator adding that those found guilty of shorting will be "dealt with severely."

This is what appeared moments ago on the website of the Chinese stock market regulator, the CSRC - an interactive online box allowing "traders" to rat out anyone who sells... maliciously (as opposed to non-maliciously).

 

Google translated:

Online Reporting Notes

 

Note: This website is in trial operation stage, the event can not normally access, please understand!

 

According to "securities and futures law violations Report Interim Regulations", the Center received reports meets the following conditions:

1. to report the matter belongs to China Securities Regulatory Commission and the various supervisory duties range;
2. provided by an informer's name (name), identity and other information;
3. to provide violate securities and futures laws and administrative regulations of specific facts, clues or evidence.

The same illegal behavior securities and futures are reporting has been accepted or processed, no new facts or clues of informants to report when no longer be accepted.

 

Second, note

1. to encourage real name, real name informants should provide my real name (name) when making a report, document number and valid identity information telephone number.
2. Respond limited real name reporting centers and Zhengjianju accepted.
3. please fill out the form to report each item. Fill out the "summary report the matter," a time, to write clearly illegal acts involving personnel, time of occurrence, and the main evidence and other circumstances, limited to 500 words or less.
4. marked with "*" are required items.
5. informants should be realistic, not fabricate facts, falsification of evidence, cheat reward or false accusation against others. Report defraud reward for the use or bringing false charges against others, shall bear The corresponding legal responsibility.
6. China Securities Regulatory Commission and each will be in strict accordance with the relevant provisions of confidential informants and report content.

The new policy is already "working":

BREAKING: Shareholders of 9 listed firms incl. Southwest Sec (600369) under CSRC investigation for illegally selling stocks -company filings

— George Chen (@george_chen) July 27, 2015

And that, dear readers, is what total loss of control looks like.

* * *

Instead of repeatting what we have said countless times about what happens when a government finally loses control of not one but numerous credit-driven bubbles of which China now has at least three (the downside is clear: social unrest, rioting, perhaps even civil war should stocks resume their crash to a fair value which BofA said last night is 50% lower from here) here is the running commentary from SCMP's George Chen, whose views on the matter are identical to ours.

China Securities Regulatory Commission urges everyone to report illegal trade and you can report malicious sellers at http://t.co/xNGiLniBLq

— George Chen (@george_chen) July 27, 2015

China Securities Regulatory Commission says to continue to monitor market activities and will forward case to police for arrest if necessary

— George Chen (@george_chen) July 27, 2015

CSRC spokesman: we welcome all parties in society to provide clues about, report those who conduct malicious selloff. Hotline +8610 88060082

— George Chen (@george_chen) July 27, 2015

Remember Mao's Cultural Revolution? Now there is Cultural Revolution in Chinese stock market: welcome everyone to report each other! Insane!

— George Chen (@george_chen) July 27, 2015

My view: China stock market crisis now proved to be more than market crisis but crisis in governance - show how incompetent, insecure gov is

— George Chen (@george_chen) July 27, 2015

Here one wonders why what the Fed and its peer central planning banks have done, by throwing trillions in fresh funds at an identical problem - of both asset values and collapsing confidence in capital markets - across the globe, is any different.

As for China, our visual summary from three weeks ago is more accurate now than ever:

"I shorted" pic.twitter.com/Q3FzGh7gVC

— zerohedge (@zerohedge) July 9, 2015

[Jane Long]

When Free Markets and Communism collide?

[Pearls Before Swine]

They can bouy the market. But I see a problem:

At some point, people will realize that stocks that are limit down are truly zombie money. There’s no way to get that money out—the account is frozen until the stock goes up a bit. This will most likely lead to waves of selling, causing limit after limit.

The government may restrict short sales, but it would cause a panic if closing sales on long positions are stopped out for any length of time.

[Kartographer]

It will be years or maybe even never before anyone really knows just how bad China is.

[EagleUSA]

Yes, what a fine mixture of communism and fascism sprinkled with many forms of corruption.

[Sir Napsalot]

Other more pressing internal unrest(s) will be their top concern by then.

Who knows, the unrest may even be more wide spread.

[Tenacious 1]

I might need a bit of education here. Apologies for the ignorance in advance.

I understand: China has determined that “short selling” is now illegal. That is betting that a stock will drop is a win much the way betting “don’t come” in craps. You essentially invest in the downturn of the stock (or market).

But “selling” a stock at it’s current price is still legal. Right? If so, then investors looking to offset losses in segments of the markets are hedging by further investing in future losses to reduce their own liability for what they hold. Right? Then there is the foreign investor that is looking to jump in and gain on the economic collapse (like a Soros).

Here is the question. If they have made “short selling” illegal, is that not the same as making the sale of stock also illegal (as it pertains to the stock)? How soon before they forbid anyone from selling their own stocks outright? China is trying to FORCE the decline to stop but disallowing the value of any stock from falling. But if there are no sales of stock (new investor money), how does that “help”?

Thanks for any education you can provide.

[SeekAndFind]

RE: But “selling” a stock at it’s current price is still legal. Right?

One proviso — If you are a large investor ( i.e., you own at least 5% of the company ) , YOU CANNOT SELL AT ALL until the government says so.

[Yo-Yo]

I work at a large Midwestern University. I think I shall see fewer Maseratis, Porsches, and McLarens being driven by Chinese students on campus this fall.

[SeekAndFind]

RE: I think I shall see fewer Maseratis, Porsches, and McLarens being driven by Chinese students on campus this fall.

The rich Chinese have already brought their money OUT of the country.

I am not surprised at the sudden jump in real estate prices in my area ( NYC and suburbs ) and Australia ( where I have family members ).

Guess where the money that left China is going to?

[Yo-Yo]

I thought Australia had laws forbidding foreign nationals from owning real estate?

[Tenacious 1]

One proviso — If you are a large investor ( i.e., you own at least 5% of the company ) , YOU CANNOT SELL AT ALL until the government says so.

So... Your only defense, if you are in this situation, is to "short sell" the future price? It's no wonder they made it illegal.

[SeekAndFind]

RE: I thought Australia had laws forbidding foreign nationals from owning real estate?

There are many ways to doit.

Australia has an Immigration program that allows “investors” who “invest” at least $500,000 ( last I heard ) in order to create jobs to apply for permanent residency.

Of course with a permanent residency, you can buy property.

Guess who have the money to “invest”....

Also, the Australian Government insists that all applications from foreign citizens or companies to buy residential real estate (either already developed - such as houses and apartments - to be developed, to be redeveloped or existing only at plan stage) are put before the Foreign Investment Review Board (FIRB), one of its advisory boards.

This advisory board reports to Treasury and reviews all applications by to purchase residential real estate, no matter what the value of the intended purchase is, by anyone who is NOT an Australian citizen, an approved migrant, a permanent resident of Australia, a foreign national holding a permanent visa or a person who, despite being a foreign citizen, is entitled to permanent residence status in Australia, should they take it up, such as a citizen of New Zealand. These people are holders of “special category visas”.

Thirty days is needed for an application to be looked at by the FIRB. There are no “general” approvals available. An approval can only be granted on a specifically nominated property. Therefore, real estate contracts with foreign citizens must contain a clause saying that going ahead with the purchase is conditional upon getting FIRB approval and that 30 days must be allowed for that approval to be granted or denied.

[Fitzy_888]

If you forbid selling, why not legislate ever increasing stock prices. If you can FIND a buy, than you can sell - good luck with that.