I. Q&A about Online Issuance
1. What are the major changes concerned in the modification?
A: The major changes include:
Firstly, the provision that investors shall pay subscription capital in full amount when entrusting their subscription was cancelled, and replaced by the stipulation that investors shall pay subscription price based on the issuance price finally determined and the quantity of lot-winning, with relevant business procedures nailed down.
Secondly, it’s defined that in case an investor doesn’t pay subscription capital in full amount despite lot winning for 3 times accumulatively within 12 consecutive months, he/she shall be listed among those restricted from subscription. Within 180 days (the next day included) since his/her latest abandoning of such subscription, he/she shall not be allowed to subscribe for new shares online.
Thirdly, investors are required to state the intent for their subscription in person; securities companies shall not conduct subscription for new shares on behalf of the investors by carte blanche.
Fourthly, it’s defined that the new shares concerned in lot-winning, the subscription for which is abandoned due to insufficient capital of the investor, shall be underwritten by the lead underwriter or handled otherwise as defined and disclosed by the issuer and the lead underwriter.
2. After the modification, is there any change about the requirement of market capitalization held, calculation rules of market capitalization and relevant stipulations on the use of securities account for new shares subscribed for by an investor?
A: There’s no change about these issues. The market capitalization held for new shares subscribed for by an investor refers to the market value of average daily A shares without sales limit held by the investor on the Shanghai market for a period of 20 trading days before the T-2 day (T-2 day included) calculated by the unit of the investor. The bonds, funds, ETFs, LOFs and other products held by the investor shall not be included in calculating market capitalization; the market capitalization of unqualified, dormant and write-off securities accounts shall not be counted; and the market capitalization of normal, frozen, loss-reported securities accounts, and credit-backed securities accounts of clients for margin trading and securities lending, shall be counted.
To subscribe for shares publicly issued online, an investor can only use one securities account. Credit-backed securities accounts of clients for margin trading and securities lending may directly enter for subscription for new shares. In case that an investor tries to subscribe for a new share via several securities accounts or that an investor uses one securities account to subscribe for a new share for several times, only the first entry of the investor’s subscription will be deemed valid, leaving others invalid.
3. What’s the specific flow of online issuance of new shares?
A: The specific flow of online issuance of new shares goes into details as follows:
1) On the T-1 day, the issuer and the lead underwriter publishes announcement of online issuance.
2) On the T day, an investor may inquire about the market capitalization held by him/her or the subscription limit he/she is allowed through the designated securities company for trading so that the investor may subscribe for new shares based on the limit. On the same day, number matching shall be conducted, with the results also delivered.
In case that the issuer and the lead underwriter, in accordance with Article 10 of the “Administration Measures on Securities Issuance and Underwriting”, arrange for backing the amount of online and offline issuance of new shares, they shall inform the exchange of the backing amount between online and offline issuances on the T day.
3) On the T+1 day, the lead underwriter shall publish the lot winning rate, and carry out issuance lotting to reach the result of lot winning, which shall be sent to securities companies by the Shanghai Stock Exchange (SSE) post market closing on the same day. The former step of capital verification for subscription on the T+1 day shall be cancelled.
4) On the T+2 day, the lead underwriter shall publish the issuance price and the result of lot winning, and the investor may also inquire about the result with his/her designated securities company for trading. The lot-winning investor shall observe the obligation of capital settlement based on the result and ensure sufficient capital for subscription for new shares in his/her capital account on the T+2 day.
5) Before 15:00 on the T+3 day, clearing participants shall report data of subscription abandoning by investors to China Securities Depository and Clearing Co., Ltd. (CSDC); at 16:00, CSDC shall make settlement as to the subscription capitals and transfer the capitals to the capital settlement account of the lead underwriter.
6) On the T+4 day, the lead underwriter will transfer the subscription capital, with underwriting fees deducted, to the issuer, and publish the result of online issuance.
4. If an investor changes designated trading on the T day, could he/she inquire about the subscription limit he/she is allowed at the securities business department after the change of the designated trading and normally subscribe for new shares?
A: On the T-1 day, Shanghai Branch of CSDC shall send the data of the market capitalization held by the investor to the SSE, which shall calculate the data of the subscription limit the investor is allowed and sent them to the securities company designated by the client’s securities account for trading in the evening of the T-1 day.
For an investor subscribing for new shares after the change of the designated trading on the T day, the investor may inquire about the data of the subscription limit of new shares at the originally-designated securities business department in the evening of the T-1 day. If the securities company fails to handle the transfer of the market capitalization data, on the T day, the investor will fail to inquire about the data of the new share subscription at the securities business department after the change of the designated trading, and he/she can not normally subscribe for new shares.
According to Article 12 of the “Detailed Rules on Online Issuance”, with regard to an investor subscribing for new shares, the securities company shall not apply for canceling designated trading for an investor participating in subscription for new shares before the T+3 day (T+3 day included). Besides, it is suggested that the investors who want to subscribe for new shares do not change designated trading on the T day.
5. How to deal with the situation if the subscription capital for new shares is not enough despite an investor’s lot winning?
A: The investor shall observe the obligation of capital settlement based on the result of lot winning and ensure sufficient capital for subscription for new shares in his/her capital account on the T+2 day. An investor will be deemed to abandon the subscription in case of insufficient subscription capital, and the new shares for which subscription is abandoned shall not be registered in the investor’s securities account. If an investor accumulatively abandons subscription for 3 times within 12 consecutive months, he/she will be listed among those restricted from subscription. Within 6 months (180 natural days, the next day included) since the clearing participant’ latest application for the investor’s abandoning of such subscription, the investor shall not be allowed to subscribe for new shares online.
6. If an investor’s new share subscription is identified as invalid as the clearing participant does not have enough capital to complete the capital settlement for new share subscription, will it be regarded as the investor giving up subscription?
A: It will not be regarded as the investor giving up subscription. The result and relevant legal liabilities caused by the insufficient capital of clearing participant shall be borne by the clearing participant.
7. How to deal with the new shares for which subscription is abandoned by an investor or is invalid?
A: The new shares for which subscription is abandoned by an investor or is invalid shall not be registered in the investor’s securities account, and they shall be underwritten by the lead underwriter or handled otherwise as defined and disclosed by the issuer and the lead underwriter. For the new shares to be underwritten by the lead underwriter or to be handled in other ways, the lead underwriter shall complete the payment of relevant capital with the issuer when the online issuance is over, and the issuer shall be responsible for submitting an application for shares registration to Shanghai Branch of CSDC while the latter will complete the shares registration accordingly.
8. With regard to the stipulation that in case an investor doesn’t pay subscription capital in full amount despite lot winning for 3 times accumulatively within 12 consecutive months, the investor shall not be allowed to subscribe for new shares online within 6 months (180 natural days, the next day included) since the clearing participant’s latest application for the investor’s abandoning of subscription, how to understand it?
A: The situation of giving up subscription should be judged by each investor as a unit. That is, if an investor has several securities accounts, each time he/she uses a securities account under his/her name to participate in the new shares subscription but finally gives up the subscription, it will be included in the times of giving up subscription by this investor. The way of affirming that several securities accounts belong to one investor is to make sure that the “Name of Securities Account Holder” and the “Number of Valid Identity Certification” in the registered materials of these securities accounts are the same; the “12 consecutive months” refers to any 12 successive months calculated in a roll; the times of giving up subscription shall be calculated by the number of the new shares that the investor actually gives up to subscribe for.
For example, as Investor A does not have sufficient capital in the day-end capital account on November 19, 2014, the subscription capital for the three new shares that are to be paid on that day is insufficient, and the clearing participant thus makes three applications for giving up subscription for Investor A on November 20, 2014. This investor will thus be listed among those restricted from subscription from the next day (November 21, 2014) for 180 natural days till May 19, 2015. And this investor can normally subscribe for new share from May 20, 2015.
From May 20, 2015 to November 19, 2015, if Investor A gives up subscription again (if his/her clearing participant applies for giving up subscription on August 12, 2015), Investor A will be listed among those restricted from subscription again from August 13, 2015 for 180 natural days as he/she has given up subscription for 4 times in 12 consecutive months.
9. How should an investor inquire whether he/she has been listed among those restricted from subscription for new shares?
A: In case an investor doesn’t pay subscription capital in full amount despite lot winning for 3 times accumulatively within 12 consecutive months, the investor shall not be allowed to subscribe for new shares online within 6 months (180 natural days, the next day included) since the clearing participant’s latest application for the investor’s abandoning of subscription.
When an investor is listed among those restricted from subscription for new shares according to the stipulation, the re-subscription shall be deemed as invalid if the investor subscribes for new shares again. The investor may inquire about the specific reason for the invalid subscription at the designated securities company’s business department at the end of the day.
10. If an investor wins the lots of several new shares on the Shanghai market but does not have sufficient subscription capital, how should the clearing participant allocate the non-paid-in capital of such new shares?
A: In this case, the clearing participant and the investor may settle through negotiation. The clearing participant may decide the settling methods and sign relevant agreement in advance with the investor. Once it occurs, the clearing participant may, according to the prior agreement, rationally allocate the non-paid-in capital for the investor's subscribing for several new shares.
11. For IPOs of total number of shares below 20 million (20 million included) with no transfer plan of old shares, are there any special provisions?
A: For IPOs of total number of shares below 20 million (20 million included) with no transfer plan of old shares, the issuance price shall be determined through the direct pricing by the issuer and the lead underwriter, and all the shares to be publicly issued shall be issued at set price to online investors.
Attachment: Notice of Issuing “Detailed Rules on Online Issuing IPO Shares on Shanghai Market”
II. Q&A About Offline Issuance
1. What are the main contents in the revision to the business rules?
A: Firstly, the rule that offline investors shall pay the subscription capital in full amount on the subscription day has been cancelled, and the requirements and the related business process for the offline investors paying the subscription capital on the basis of the finally determined issuance price and the allocated quantity have been specified;
Secondly, it has been specified that the subscription day for the offline issuance of new shares is the same day as the online subscription day, and the subscription time for offline issuance is from 09:30 to 15:00 on the T day;
Thirdly, if the issuance price is directly determined through the independent negotiation of the issuer and the lead underwriter, all the shares that the issuer plans to offer publicly shall be issued to the online investors after being priced directly, with the offline issuance no longer arranged.
2. After the revision, what requirements have been made for the offline investors participating in preliminary enquiry in holding the market capitalization?
A: The lead underwriters shall, according to the related provisions of the self-regulatory rules of the Securities Association of China, require the offline investors and the allotment objects under their management to hold a daily average market capitalization of RMB10 million (included) or above for the A shares without sales limit on the Shanghai market within 20 trading days prior to the base day (including the base day) which shall be the two trading days before the starting day of the preliminary enquiry day, and the market capitalization shall not be lower than the requirement for market capitalization determined and announced by the issuer and the lead underwriter in advance.
The rules for calculation of market capitalization stipulated in the “Detailed Rules on Online Issuing IPO Shares on Shanghai Market” are applicable to calculation of the market capitalization of the A shares without sales limit on the Shanghai market held by the offline investors and the allotment objects under their management participating in the offline subscription business.
3. What is the specific process for the offline issuance of new shares?
A: The specific process of offline issuance of new shares is as follows:
(1) In two trading days before the starting day of preliminary enquiry, the lead underwriter releases the IPO prospectus and the announcement on the preliminary enquiry.
(2) Before 10:00 on the trading day prior to the start of the preliminary enquiry, the lead underwriter inputs parameters for the preliminary enquiry through the electronic platform of the SSE for offline subscription, and confirms the qualification for participation of the offline investors and the allotment objects.
(3) During the preliminary enquiry, the offline investors offer quotes for the objects under their management. The same offline investor can only offer one quote, and the non-individual investors shall offer quotes in the unit of institution.
(4) On the T-3 day, the preliminary enquiry ends.
(5) On the T-2 day, the issuer and the lead underwriter determine the issuance price (or the range of issuance price).
(6) On the T-1 day, the issuer and the lead underwriter publish the announcement on the offline issuance; after eliminating the quotes that cannot participate in the subscription in the preliminary enquiry, the lead underwriter determines the list of investors offering valid quotes, which shall be confirmed before 15:00 on the electronic platform of the SSE for offline subscription.
(7) On the T day, the offline investors make subscription, in which it is not necessary to pay the subscription capital.
(8) On the T+1 day, the lead underwriter uploads the results of the initial allotment. The offline investors inquire about the funds to be paid for the offline allotment. The original process of the accounting firms verifying the subscription capital on the T+1 day is cancelled.
(9) On the T+2 day, the lead underwriter announces the result of the preliminary allotment, and the offline investors accordingly pay the subscription capital for the new shares before 16:00 on the same day.
(10) Before 14:00 on the T+3 day, the lead underwriter uploads the ultimately determined result of allotment to the electronic platform of the SSE for offline subscription.
(11) On the T+4 day, the lead underwriter transfers the subscription capital to the issuer’s account.
(12) After the completion of the offline issuance, the lead underwriter shall announce the result of the offline allotment to the market.
4. When shall the offline investors winning the allotment pay the subscription capital? If an offline investor fails to pay the subscription capital in full amount or is unable to transfer the capital from the filed bank account within the prescribed time, how shall it be handled?
A: Before 16:00 on the T+2 day, the offline investors winning the allotment shall pay the subscription capital in full amount. If an investor fails to pay the subscription capital in full amount or transfer the capital from the filed bank account within the prescribed time, their relevant allotted shares will be regarded as invalid subscription and will not be registered in the securities account of the offline investor. The shares shall be underwritten by the lead underwriter or be handled in other ways determined and disclosed by the issuer and the lead underwriter in advance.
5. What matters should the offline investors pay attention to in paying the subscription capital?
A: Firstly, the offline investors are obliged to transfer the capital to CSDC from their bank accounts registered at the Securities Association of China within the prescribed period of time.
Secondly, the offline investors are obliged to transfer the subscription capital to the special account for offline issuance opened by CSDC at the settlement bank.
Thirdly, when an offline investor transfers the subscription capital, the information attached in the payment voucher (such as stock code and securities account) shall be in accordance with related requirements (see the detailed rules on offline issuing IPO shares on the Shanghai market and the business guide of Shanghai Branch of CSDC).
