Listed firms have been told to set stricter thresholds over equity options owned by senior management as part of moves to prevent illegal benefit transfers, the China Securities Regulatory Commission has reportedly said.

The exertion price of stock options can't be set at less than 50 percent of the average share price of a listed company in the 20 sessions before the incentive program is unveiled, the Shanghai Securities News reported today, citing notices delivered to listed firms by the stock regulator.

Controlling shareholders who receive shares as incentive can't dispose of them within 36 months. Also, big shareholders can't directly offer stock incentives to senior management while supervisors of a public firm are not allowed to be included in the incentive program.

Also, the program can only be carried out when the firm performed no worse compared to its historical record and the shares reserved for the program can't be more than 10 percent of total equity.

"These are all very sensitive points in giving away shares. The terms in the notice are straight and clear, making the regulation easier," said Zhang Qi, an analyst with Haitong Securities Co.

The CSRC has beefed up efforts to improve discipline over listed firms and securities companies.

Last month, China passed in principle two draft rules on the supervision and risk management of securities companies.

(Shanghai Daily May 6, 2008)