CHINA'S securities regulator has issued rules on listed companies' incentive plans in an effort to prevent management officials from making improper gains arising from favorable timing.

Companies should not introduce share option schemes shortly before announcing major decisions, according to two notices issued by the China Securities Regulatory Commission.

A listed company should not carry out major actions such as new stock issues, asset injection or bond offerings within 30 days after having announced an incentive plan and obtained shareholder approval, the regulator said.

Likewise, companies shouldn't introduce an incentive plan during and or within a 30-day period after the announcement and execution of major decisions, it said.

The rules also prohibit shareholders from directly awarding or transferring shares to management officials as some companies have done to avoid regulatory scrutiny.

Controlling and major shareholders who hold 5 percent or more of a company's shares may not be offered incentive plans, except with the approval of shareholders, CSRC said.

Media reports said that the regulator's action was taken in response to recent attempts by several companies to introduce incentive plans immediately before disclosing positive information.

"This action (the rule) would benefit both listed companies and their shareholders, as it improves regulation of the market," said Li Feng, a Galaxy Securities analyst.

Zhang Qi, an analyst with Haitong Securities Co, said that giving away shares can be a sensitive issue.

''The terms in the notice are straight forward and clear, making supervision easier," Zhang said.

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