China is to strengthen controls over staff members' share ownership in their state-owned companies, according to a draft rule published to seek public opinion.

Issued by the State-owned Assets Supervision and Administration Commission, the draft rule said staffers in state-owned companies can't hold shares of their employer's subsidiaries or enterprises whose shares are purchased by the employer.

Also, staffers can't hold shares of the suppliers of fuel, raw material, supplementary material, or equipment to their employer and other closely-related entities.

Encouraged

The basic principle was that staffers are encouraged to hold shares of their company but no companies can ask their employees to invest in them.

"Previously there were no rules to regulate staffers' share ownership in their company, which created loopholes for misdeeds such as unfair trading or even insider trading," said Zhang Qi, an analyst with the Haitong Securities Co.

"It is a good sign that the regulator has observed the problems and worked out a draft rule."

People can submit their opinion on the draft rule to the SASAC before July 5.

Earlier this year, China rolled out a rule to restrict incentive schemes for management officials, preventing them from making improper gains as a result of favorable timing.

The rule said that a listed firm should not carry out new stock issues, asset injection or bond offerings within 30 days after having announced an incentive plan which shareholders have approved.