These institutions, without authorization from the government to conduct brokering or related securities services, have greatly damaged the orderly operation of the stock market and caused losses for investors, said a spokesman with the China Securities Regulatory Commission (CSRC) over the weekend.

"They have cheated the public and made market regulation difficult, too,'' the spokesman said.

Many of the institutions, including some Internet-bars, labelled themselves as agents for securities companies but actually had never been licensed by the security firms.

It has been discovered in many cases that funds taken from clients were put into the accounts of the companies themselves for their own use or purposes other than stock trading.

Some of the investors did not even know the institutions were illegal until their money was gone.

Others were simply attracted by the promise of high returns.

To eliminate such practices, the CSRC will soon publish a list of legal securities brokerages and agents for investors' reference, the spokesman said.

Only authorized securities companies and trust firms and their trading outlets can provide securities brokering services.

"Investors should take more care in choosing brokerages,'' the spokesman said.

Investor education has already been made the priority task of securities regulators.

The authorities have also shut down a number of black market trading locations in several southern coastal cities as well as the northern cities of Xi'an, Xining and Beijing over the past few months.

But analysts said there are many other reasons contributing to the problem that should also be dealt with.

First, lawful securities brokerages still have to improve their services to attract more customers, said Wang Sha, an analyst with China Securities.

Some of them have also been caught in irregularities such as embezzlement of client funds, inside trading and manipulation of stock prices, which have sullied the image of the business.

"Full respect of investors' interests and further improvement of brokering and consulting services are crucial to attracting more investors,'' said Wang.

On the other hand, there is not enough legal protection for investors when their interests are hurt and the legal definition of and punishment for black market activities are to be further clarified, said a lawyer with a local law firm.

The rights of the CSRC in its investigations are also limited.

Anthony Neoh, chief adviser to the commission, said recently that the CSRC is considering asking for the assistance of judicial departments in the probe into irregularities to make it possible for them to act quickly to put a stop to such practices.

The new system would also help investors recover their losses more promptly, analysts said.

(chinadaily.com.cn 06/04/2001)