The head of China's securities watchdog, Xiao Gang, knows something that his agency needs: a few good men.

Xiao has talked openly about the difficulties the China Securities Regulatory Commission faces in combating stock market vagaries, and he has made it known that he is seeking to recruit 600 professionals, trained in accountancy or law, to be investigators. The new recruits will more than double the number of investigators at the agency, and they will account for 40 percent of the staff, compared to 32 percent in the commission's counterpart in the United States.

It is not clear how such an ambitious staff expansion plan can be achieved, given the budgetary and bureaucratic constraints the commission faces, but it can be assumed that Xiao has obtained the approval from higher levels - the regulatory commission reports directly to the State Council - to go ahead with his plan, the urgency of which has been highlighted by the Everbright Securities fiasco that exposed the myriad irregularities that exist in the Chinese capital market.

All eyes are now fixed on the regulatory commission which is expected to provide the answers to a host of questions raised by the abnormal trading by Everbright Securities that prompted a spike in the domestic stock market. That fiasco has pushed investors' tolerance of the much criticized stock market irregularities to the limit, and they are closely watching how the commission will handle the case, which involves a powerful State-owned enterprise.

In the past several days, the domestic media has been howling for blood. "Only when Everbright is severely penalized can there be hope," declared Xinhua News Agency, which said that the debacle poses a stern test of the commission's determination to enforce the law.

The stakes are indeed high for the commission, which has already been widely blamed, albeit unfairly, for the failure to lift the prolonged market gloom. It is expected to pull out all the stops in its investigation of the Everbright affair, so that it is seen to be thorough, fair and transparent.

This is a formidable challenge, given the constraints to which the agency is subject. Coincidentally, Xiao contributed a signed article to the authoritative Qiushi Journal just a week before the Everbright affair in which he outlined some of the specific constraints that have frustrated the enforcement efforts of the agency.

Not only does the agency lack the necessary power to do its job properly, it seems to be desperately short of funds that would enable it to acquire the technology able to detect and analyze irregular market activities, and to recruit enough qualified professional investigators to gather the evidence, track down the culprits and prepare legal cases leading to conviction. It is has not been uncommon for the powerful interests involved in irregular stock market activities to block the commission's investigations.

When Xiao made it known earlier this week that the commission plans to double its investigative team by adding 600 professionals, the move was hailed by some analysts and commentators as a brave first step in strengthening the agency's enforcement efforts. But there are others who remain skeptical that manpower alone will be enough to eradicate irregularities, citing the same reasons that Xiao mentioned in his article.

The obvious next step is to empower the regulatory commission with the legal authority to subpoena, search and detain. What's more, proper procedures have to be established to enable the commission's investigators to call on the assistance of the police in case of resistance to cooperate with their investigations, a not uncommon occurrence, according to Xiao.

Of course, there will need to be further steps that may involve reform of the underlying policy and approach. But let's take it one step at a time.

(China Daily USA 08/26/2013 page11)