The confidence of small and medium investors is the foundation for the steady and long-term development of the capital market.

Recently, the China Securities Regulatory Commission (CSRC) released its report on the progress of law-based government building in 2025. In 2026, the CSRC will strengthen the protection of retail investors in the capital markets, promote the implementation of more representative litigation and advance compensation cases, and effectively enhance investors’ sense of gain.

At present, the number of A-share investors in China has exceeded 250 million, the vast majority of whom are retail investors. Retail investors are the foundation of the capital market—this not only concerns the vitality of the stock market and investment confidence, but also relates to the overall picture of reform and development in the capital market. Precisely for this reason, securities regulatory authorities have always placed strengthening the protection of retail investors at the top of their regulatory priorities.

At this time, trading activity in the A-share market remains active and the number of new account openings is rising, with retail investors actively participating. Under these circumstances, the regulatory authorities have taken initiative, continued to intensify efforts to protect retail investors, and promoted the implementation of various institutional arrangements to achieve practical results.

In fact, strengthening the protection of retail investors is not only an inevitable requirement for fulfilling the mission of serving finance the people, but also a key move to lay a solid foundation for the long-term stable development of the capital market, deepen comprehensive reforms of investment and financing, and promote high-quality development of the market. In the author’s view, it carries three far-reaching implications.

First, stabilize investment confidence and solidify the foundation for market operation.

In the A-share market, retail investors, which hold an absolute numerical advantage, are an important source of market vitality and also the basic support for market operations. Their confidence directly affects the market’s valuation logic and operating resilience.

By integrating the protection of retail investors throughout the entire process of institutional design and regulatory enforcement, regulatory authorities can genuinely unleash the centripetal force of long-term investment, making investors willing to hold shares and ready to plan, and forming stable and rational market expectations.

Only when the lawful rights and interests of retail investors are fully respected can the market have greater resilience in self-repair, maintaining steady operation in complex environments. Protecting investors’ rights and interests is both a safeguard for the steady operation of the market and a prerequisite for high-quality development.

Second, make up for shortcomings in rights protection and maintain a fair market order.

In the capital market, retail investors generally face disadvantages such as information asymmetry and weak professional ability to identify risks, along with the real difficulties that individual rights protection often involves high costs, hard-to-provide evidence, and long timeframes. Mechanisms such as representative litigation and advance compensation precisely provide institutional supply from the standpoint of regulatory authorities to address shortcomings in individual rights protection.

This institutional arrangement regulates the market order from two dimensions. On the one hand, it raises the cost of wrongdoing and strengthens regulatory deterrence. Representative litigation aggregates dispersed claims into collective action, significantly increasing the economic costs of illegal conduct; advance compensation allows damaged investors to receive compensation quickly. Coordinating these measures with administrative penalties and criminal accountability builds a three-dimensional regulatory deterrence system. On the other hand, it optimizes the market ecosystem and lays a solid bottom line for fairness. Executable channels for relief turn abstract legal rules into fairness and justice that market participants can perceive. In the final analysis, this is both substantive protection of the rights and interests of retail investors and a source-level safeguard of the market’s fair order.

Third, enhance investors’ sense of gain and promote coordinated development between investment and financing in the market.

For a long time, regulatory authorities have continued to optimize institutional arrangements for the protection of retail investors, aiming to enhance investors’ sense of gain, including effective remedies when rights are infringed and reasonable returns in fair trading.

From the investment side, when investors genuinely feel that “rights are protected, damages have remedies, and returns are foreseeable,” their behavior patterns shift from short-term games to long-term adherence to value, forming stable and sustainable capital supply. From the financing side, investors’ rational choices in turn impose effective constraints on listed companies. With capital concentrating in companies with standardized governance and an emphasis on returns, listed companies are pushed to standardize governance, improve quality, and enhance efficiency, thereby driving the effective operation of a survival of the fittest mechanism. This promotes dynamic coordination between both sides of investment and financing, improves the efficiency of resource allocation, and lays a solid foundation for long-term stability and prosperity in the capital market.

As can be expected, with more cases protecting investors—such as representative litigation and advance compensation—being implemented and producing results, market confidence will be further boosted, the bottom line for fairness will be even more solid, investors’ sense of gain will continue to increase, and the foundation for high-quality development of the capital market will become ever more solid.

(Source: Securities Daily)