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On December 13, the Shanghai Stock Exchange (SSE) and China Securities Depository and Clearing Corporation Limited (CSDC) jointly released the “Measures on Offline Issuance of IPO-related Shares on Shanghai Market” (the “Measures” for short). An official of the SSE answered the following questions concerning the “Measures”.
Q1. What are the differences in the processes of investors’ participating in offline new shares issuance compared with those before the reform? How should offline investors apply and file relevant documents?
This reform has ushered in the independent allotment mechanism of lead underwriter. According to Article 7 of the “Administration Measures on Securities Issuance and Underwriting”, “In the initial public offering of shares, an issuer and relevant lead underwriter can negotiate and decide the conditions of investors participating in offline price inquiry, the requirements for valid quotes, the allotment principles, and the allotment methods, and choose the shares allotment objects among the offline investors with valid subscription in accordance with the decided allotment principles”. Besides, Article 8 further specifies that investors participating in offline quotes and subscription of IPO-related shares should be the subjects who are able to engage in stock investment according to laws. … An issuer and relevant lead underwriter can put forward specific requirements on offline investors’ qualification, research ability, and risk tolerance, and release these requirements in advance in an announcement.
Accordingly, the “Measures” specifies that offline investors should apply to relevant lead underwriter for participating in offline issuance according to the quoting requirements as announced by the lead underwriter in advance, and complete the registration and filing at the lead underwriter. The lead underwriter should examine and verify the offline investors’ qualification, assume the responsibility of disclosing relevant information, and provide the information of the offline investors that plan to participate in this offline issuance to the relevant subscription platform.
In practical operation, offline investors that plan to participate in the offline issuance of a certain kind of new shares should apply for and obtain the CA certificate issued by the SSE’s offline issuance subscription platform (the “Platform” for short) in advance (Those having got the certificate should not apply again), inform the lead underwriter of their participating intention, make sure from the leader underwriter whether they meet the quoting requirements as announced by the issuer and the lead underwriter before the deadline of preliminary price inquiry, and put on record at the lead underwriter the relevant information about the offline investors and the allotment objects that plan to participate in quoting.
Q2. How to apply for CA certificate?
As the Securities Association of China will no longer accept and deal with price inquirers’ filing applications after the reform, investors planning to participate in the offline issuance of new shares should apply to the lead underwriter that plans to participate in the issuance for filing relevant documents. Offline investors that need to newly apply for the CA certificate to log on the SSE’s offline subscription platform should commission the underwriter to handle the application. For the detailed procedures, please see the “Notice on Adjusting Procedures of Applying for the User’s Certificate of the SSE IPO Offline Subscription Platform” released in the column of “Electronization of Offline Issuance” of the SSE’s website.
The users that have obtained the CA certificate of the previous price inquiry object before August of 2013 can use that certificate and the corresponding trader codes to log in the system and should not apply for the CA certificate again. Those whose certificates have been lost or damaged should first change the log-in username in line with the procedures as specified in the “Instruction on Procedures” and apply to SSE InfoNet Ltd. for the certificate through the relevant lead underwriters that plans to participate in the offline issuance.
CA certificate can be repeatedly used in offline issuances.
Q3. What are the issuing methods for offline issuance?
On the Shanghai market, if the initial public issuance adopts the method of price inquiry, an issuer and relevant lead underwriter can first decide the issue price range after initial price inquiry and then decide the issue price through accumulative bidding price inquiry and allot shares to the objects participating in accumulative bidding price inquiry, or they can decide the issue price through initial price inquiry and then allot shares to the objects participating in subscription.
Q4. What are the differences in the process of lead underwriter’s operating the subscription platform compared with that before the reform?
With regard to the uploading of investor’s information documents, as an issuer and relevant lead underwriter make quoting requirements for offline investors, the lead underwriter should upload to the “Platform” the information of qualified offline investors in the set pattern before the starting of initial price inquiry. During initial price inquiry, the lead underwriter can add the information documents of offline investors and the allotment objects managed by them, and revise other information documents of the allotment objects apart from their accounts. The format of these data has been released in the column of “Electronization of Offline Issuance” of the SSE’s official website.
In terms of the launching of this issuance, the lead underwriter should also, in accordance with the requirements of the automated management of the offline issuance system, type in and submit the stock code, the issuer name, and other data related to the initial price inquiry through the “Platform” before 10:00 on the day before the day when the initial price inquiry is launched. This offline issuance will be launched after the affirmation of these data has been completed.
Over the matter of excluding invalid quotation and the corresponding planned subscription quantity, after the closing of initial price inquiry, a lead underwriter should, in line with the rules of the “Administration Measures on Securities Issuance and Underwriting” and the valid quoting requirements decided and released by the relevant issuer and the underwriter in advance, exclude the initial price inquiry and quotes that should not participate in subscription and the corresponding planned subscription quantity, such as excluding the part with the highest quote in the total planned subscription quantity, or excluding the quotes of people related to the issuer and the lead underwriter.
With regard to the launching of subscription process, the lead underwriter should type in and submit the decided share issuance price range (or the issuance price) and other subscription data through the “Platform” and complete the affirmation of relevant data before 16:30 on the day before the day when the subscription is launched.
Q5. What are the specific procedures of the lead underwriter excluding the part with the highest quote among the total planned subscription quantity through the SSE’s subscription platform?
After the closing of initial price inquiry, the “Platform” will present to the lead underwriter the record of each quote of each allotment object, and the lead underwriter can exclude the planned subscription price with the highest quote and the corresponding planned subscription quantity one by one. For the following two exceptional cases, the “Platform” can provide the specific handling methods: 1) if there is only one allotment object with one highest quote and the planned subscription quantity of this quote exceeds 10% of the total planned subscription quantity of all offline investors, the relevant lead underwriter can only exclude this quote; 2) if there are several allotment objects with several highest quotes of the same price and the planned subscription quantity of these quotes exceeds 10% of the total planned subscription quantity of all offline investors, the lead underwriter can exclude them one by one according to the excluding principles announced in advance. For example, the lead underwriter can first exclude a certain highest quotation of one allotment object and the corresponding planned subscription quantity according to the agreed principles of time preference or subscription quantity preference, and the total excluded amount should be no less than 10% of the total planned subscription quantity of all offline investors.
Q6. What are the differences in the quoting process of offline investors during initial price inquiry compared with that before the reform?
There is no obvious change in the quoting process during the initial price inquiry. Investors can engage in quoting as usual as long as they meet the quoting requirements released by the relevant underwriter and the underwriter has uploaded the investors’ information to the “Platform”. That is to say, offline investors can fill in and submit several planned subscription prices for each allotment object under their management and each planned subscription price should correspond to a planned subscription quantity. Having type in the quote records of all allotment objects that plan to participate in quoting, the offline investors should submit all the information at one time. Offline investors can submit the quote records for several times, and the last submission of all quote records will be regarded as the final result.
Q7. What are the differences in accumulative bidding price inquiry, quoting, and subscription of offline investors compared with those before the reform?
If the quote made by the offline investors for their allotment objects during the initial price inquiry is lower than the issuance price or the lower limit of the issuance price range decided by the issuer and the lead underwriter, the quote should be regarded as invalid and the corresponding planned subscription quantity should not be included in the subscription and allotment limits of the allotment objects during the subscription stage. Besides, it has been added in the reform that the planned subscription quantity with the highest quote that has been excluded by the lead underwriter after the closing of initial price inquiry shall not be counted into the subscription and allotment limits.
The specific process during the subscription stage remains the same as before. That is, offline investors should submit in a lump the subscription records that they have typed in for all their allotment objects participating in subscription, and the records cannot be canceled or revised after submission. The total number of the shares subscribed for in several subscription records of each allotment object’s securities account should be no less than the total number of the “planned subscription quantity” corresponding to the valid quote in the initial price inquiry, no more than the upper limit of the subscription quantity for each allotment object specified by the lead underwriter, and no more than the total number of issued shares offline.
Q8. What are the offline share allotment methods of the lead underwriter?
According to the independent allotment principle of lead underwriter as specified in this reform, the SSE’s offline issuance subscription platform allows the lead underwriter to engage in independent allotment after downloading all subscription records and to upload the allotment result data to the “Platform” within the specific time. Meanwhile, in order to meet the demands of the lead underwriter’s independent allotment, the “Platform” has also provided the function of numbering the valid subscription records. The lead underwriter therefore can complete the numbering of a certain subscription unit in the system and carry out drawing for allotment accordingly.
Q9. Can the status of subscription capital and the allotment result be looked up in the subscription platform?
The functions of the “Platform” have been improved recently. Offline investors can look up the status of the subscription capital of their managed allotment objects through the “Platform” on the day after the subscription day. On the T+2 day, they can look up the allotment result of this issuance uploaded by the lead underwriter through the “Platform”.
Off line investors should log in the CSDC’s PROP Integrated Service Terminal to look up the real-time status of the subscription capital.
