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In order to regulate the operations of the on-site supervision of the sponsorship business for issuance and listing on the Sci-Tech Innovation Board (STAR Market) and urge sponsors and securities service agencies to perform their duties diligently and effectively fulfill the responsibilities as “gatekeepers” of the capital market, the Shanghai Stock Exchange (SSE) has issued the Guidelines No. 1 of Shanghai Stock Exchange for Application of the Rules for Review of Issuance and Listing on the STAR Market - On-site Supervision of Sponsorship Business (the “On-site Supervision Guidelines” for short), based on the experience in the implementation of the on-site supervision.
Launched in June 2019, the on-site supervision was a vigorous effort and a specific measure to implement the information disclosure-centered requirement and effectively check the “entrance” for the listed companies in the process of piloting the registration-based IPO system on the SSE STAR Market. In the past two years, the SSE imposed the on-site supervision on the sponsors of 45 projects reviewed for the issuance and listing on the STAR Market, 37 of which voluntarily withdrew the materials of application, and 6 saw the registration come into effect; 4 of the projects filed a second application after supplementing and improving the application materials following the withdrawal, and two of them have been registered and put into effect. On the one hand, the on-site supervision has conveyed a clear orientation toward tightening the responsibility of the sponsors for checking, urged the sponsors to effectively perform their duty of verification, and guided the sponsors in shouldering the primary responsibility for due diligence and the duty of coordinating the verifications; and on the other hand, the on-site supervision has created the synergy with the review inquiries, enriched the means of reviewing and checking, formed an effective regulatory deterrent, and to a certain extent restrained the impulse of issuers and intermediaries to “pass checks by sheer luck”.
The released On-site Supervision Guidelines summarize the previous practices of on-site supervision in the issuance and listing review for the STAR Market, and institutionalize and publicize the existing approaches. Specifically, the On-site Supervision Guidelines clarify the targets of the on-site supervision and the criteria for identifying them, the obligations of sponsors and other relevant entities to cooperate with the supervision, the procedures, modes and results processing of the on-site supervision, and the follow-up regulation of the projects withdrawn after the on-site supervision, and stipulate the linkage with the on-site inspections and other issues. In addition, the following issues are specified as needed: first, it is made clear that the sponsors are the main targets of on-site supervision, but the accounting firms and other securities service agencies can also be put under the on-site supervision at the same time as required; second, it is clarified that for the projects withdrawn after the SSE’s issuance of the notice on the on-site supervision, or before/during the implementation of on-site supervision, if the project renews the application within 12 months after the withdrawal, the on-site supervision will be initiated immediately after the acceptance; and third, the arrangements for the linkage with the on-site inspections are stipulated, as the implementation of on-site inspection will be required according to the rules if the issuer is found in the review to have relevant major questionable points or abnormalities, and fail to provide a reasonable explanation, which affects the review judgment.
