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Q1: Recently, we have noticed that the China Securities Regulatory Commission (CSRC) has organized and carried out random on-site inspections on the quality of information disclosure among the companies applying for IPO, and some companies have withdrawn their applications. Can you tell us about the relevant companies applying to the STAR Market? What does the Shanghai Stock Exchange (SSE) make of the situation?
A: The on-site inspections of the quality of information disclosure of the companies applying for IPO involved 9 projects applying to the STAR Market, 7 of which saw their issuers withdraw the application for IPO and their sponsors cancel the sponsorship within 10 working days after receiving the written notice of on-site inspection, with 6 of them in the period of replying to the first round of inquiries. Attaching great importance to the withdrawal of the above-mentioned projects, the SSE is analyzing and sorting out the related issues. Judging from the current situation, there were various reasons for the withdrawal of the projects, and the SSE had paid special attention to the problems related to information disclosure and verifications by sponsors during the review process.
The on-site inspections of the applying companies are a key part of the full procedure of regulation for the issuance and listing review, an important means to further strengthen the supervision of the information disclosure of the IPO companies on the STAR Market and strictly check the entrance to listing, and a significant institutional arrangement for adhering to the three principles for the reform of the registration-based issuance system (respecting the fundamentals of the registration-based issuance system, drawing on international best practices and reflecting Chinese characteristics and development stage), steadily advancing the reform of the registration-based issuance system and ensuring the enduring progress in the development of the STAR Market. The SSE will provide strong support for the on-site inspections in accordance with the unified deployment of the CSRC, and will promptly adopt corresponding self-regulatory measures based on the inspection results to improve the quality of listed companies from the source.
Q2: In the issuance and listing review under the registration-based issuance system, how will the SSE check the “entrance” for the listed companies and ensure the high-quality development of the STAR Market?
A: Since the establishment of the STAR Market, the SSE has always adhered to its role, and strictly checked the “entrance” for the listed companies with the focus on information disclosure. Since its opening, the STAR Market has accepted the applications of a total of 540 companies, more than 80 of which were eliminated in the whole-chain regulatory process including review inquiries, on-site supervision, and self-regulation, etc., with the annual review elimination rates remaining at around 17%, thus effectively reducing the companies that “apply with defect, or rush to occupy a position.”
The SSE has set up an on-site supervision mechanism for the sponsors during the issuance and listing review process, adhered to the problem-oriented approach, and urged the sponsors to perform their duties diligently and continuously improve the quality of practice for the applied projects. In the past two years, the SSE has launched on-site supervision and guidance on the sponsors of 45 projects applying for issuance and listing review for the STAR Market, 37 of which voluntarily withdrew their applications, thus conveying a clear orientation toward tightening the intermediaries’ responsibility for inspections and checks.
Q3: Regarding the projects withdrawn during the current on-site inspections, does the SSE have any follow-up regulatory arrangements?
A: The SSE will, in accordance with the unified deployment of the CSRC, adhere to the guidelines of “building the system, non-intervention, and zero tolerance”, give full play to the regulatory coordination mechanism integrating on-site inspection, on-site supervision and review inquiries, and strictly check the “access” to listing. For the projects withdrawn before the arrival of the on-site inspection, if any major violations such as financial frauds and false statements are found, the sponsors and the issuers shall be held accountable accordingly, and are definitely not allowed to “conclude with the withdrawal” or “break through the checks with defect”.
