To be sure, several senior executives of the firm were forced to resign because of their alleged involvement in the scandal. But none of them has been prosecuted for their alleged wrongdoings.

The Everbright case once again demonstrated that the cost of being caught is perceived to be low enough to justify the risks in profiteering from irregular activities. Since the outbreak of the credit crisis in the United States in 2008 plunged the world into a prolonged recession, authorities in various financial centers, including the Hong Kong Special Administrative Region and Singapore, have moved to toughen their securities laws, providing greater protection for investors' interests.

In Hong Kong, for instance, the law was revised to make failing to meet the minimum standard of due diligence or disclosure a criminal offence. Investors who lose money in the stock market are not supposed to lay the blame on the regulators. As a former top Hong Kong financial official once famously said: It's not the government job to stop people from losing money. But it's the regulator's job to ensure a level playing field and a transparent environment for all market players.

The Chinese stock market is far from being a level field, as any investor can tell you. It is skewed in favor of insiders with privileged information denied the investing public. What's more, the concept of fiduciary duty has remained alien to the privileged institutions, which enjoy all the advantages of the imperfect market without any sense of responsibility for the general good.

All the power of moral persuasion that Xiao and others can muster will not be able to change the market culture that rewards those who can get away with whatever tricks they can imagine, while punishing those who have been misled into buying worthless papers. To turn that around will require drastic actions augmented by tough laws.

The securities watchdog clearly needs some legal firepower to provide adequate protection for investors.

The author is a senior editor of China Daily. jamesleung@chinadaily.com.cn