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The regulation on information disclosure is not only the core of the regulation work of listed companies carried out by the Shanghai Stock Exchange (SSE), but also one of the fundamental parts for the regulatory system of the capital market. Xiao Gang, Chairman of the China Securities Regulatory Commission, said that regulatory authorities should further cement “In-process and Aftermath Regulation” and rationalize regulation tasks according to the requirement of vigorously promoting the transformation of functions put forward by the State Council. Adhering to the basic concept of “Relaxing Restriction and Strengthen Regulation” and striving to meet the requirements put forward by Chairman Xiao Gang, the SSE has propelled the transformation of its functions, boosted the innovation on regulatory concepts, and specified the relationship between prerequisite admittance and aftermath regulation, so as to change from “Prerequisite Examination” to “Aftermath Regulation” and improve the regulatory efficiency. The to-be-implemented direct channel for information disclosure results from the regulatory thought above.
I. The significance of implementing the direct channel
The direct channel for information disclosure: the SSE-listed companies register announcements and directly submit them to the SSE website and other designated media through the SSE electronic information disclosure system. Specifically, it has the following two meanings: first, the direct physical path for submitting announcements is built on the Internet; second, the SSE will not conduct prerequisite examination on the listed companies’ announcements, as the listed companies could directly disclose their announcements, which will go through the procedure of the SSE’s aftermath regulation later. In April 2012, the SSE started to launch the “Direct Channel” work. The direct channel for information disclosure will be open on July 1, 2013 as the preliminary work has been completed on the whole and all the relevant conditions have been mature after repeated brewing, considerate planning, meticulous preparations, and gradual advancement.
The implementation of the direct channel marks a significant transformation in the way of listed companies’ information disclosure and that of the SSE’s regulation, which contributes to making all the market players “fully responsible in their places” and optimizing the credit mechanism and responsibility system of the market. According to the “Securities Law” and the “SSE Stock Listing Rules”, every listed company, the obligor of information disclosure, should ensure the authenticity, accuracy, completeness of legally disclosed information. However, in consideration of preventing market risks preliminarily, the SSE has been conducting prerequisite examination on all kinds of information disclosed by the listed companies. The defect of prerequisite examination, namely the unclear duties, has emerged gradually and the replacement of the regulation with the examination also affects the SSE’s duties and function positioning, as the capital market unceasingly matures and the legal environment is continuously perfected. The implementation of the direct channel will contribute to on one hand reinforcing the role of the listed companies as the obligors of information disclosure, and on the other hand carrying out the concept of “Relaxing Restriction and Strengthen Regulation”, considerably decreasing prerequisite form examinations, pooling all the existing regulatory resources, transforming to aftermath regulation on violations, and better protecting the legal rights and interests of investors.
Besides, the implementation of the direct channel will be conducive to further improving the efficiency of information disclosure and market operation. Due to the IT growth and the reform on information transmission carries, all market participants put forward higher requirements for instantaneity and timeliness of information acquirement. The “Direct Channel” disclosure, based on the electronic system and the aftermath regulation, will better meet the requirements for instantaneity and timeliness, and dramatically improve the overall efficiency of the capital market.
Moreover, the implementation of the direct channel will facilitate the rule-of-law development and openness of the market. Synchronized with the to-be-implemented direct channel, the SSE will further perfect and disclose the regulatory standard and business process for the listed companies’ information disclosure.
II. Preparations for the Direct Channel
In accordance with the work plan for the direct channel, the SSE completed the direct physical path for submitting announcements in November 2012, thus realizing the electronic, networking, and paperless submission. Currently, the preparations for changing the regulatory approach have also been completed. Therefore, the conditions for the full implementation have been met.
First, the preparation for the applicable standard has been in place. In principle, the direct channel is applicable to all the SSE-listed companies with the categories of direct disclosure accounting for 66% of the total. In the principle of being responsible for the market and considering the interests of investors, the prerequisite form examination on the information disclosure, involving business operations, as well as mergers & acquisitions, and reorganizations, bankruptcy reorganization, delisting, refinancing, and other major issues, will be retained while the direct channel will not be implemented for the time being.
Second, the preparation for transition has been finished. The SSE has set a transitional period of half a year after the full implementation of the direct channel. During the transitional period, the SSE will step up counseling and replies to consultation for the listed companies. Meanwhile, according to the principle of combining punishment with leniency, on the one hand, the SSE will effectively prevent and severely punish the behaviors of making malicious use of the direct channel to disrupt the market and manipulate the stock prices; on the other hand, the SSE will play down to some extent or excuse the minor mistakes made by listed companies unintentionally with little impact on the market.
Third, the preparation for rules has been in place. On the basis of the existing rules for information disclosure, the SSE has specially formulated and revised 8 rules and systems related to the direct channel, including the “Business Guidelines on Direct Channel for Information Disclosure”, the “Implementation Scheme on Direct Channel of Information Disclosure”, the “Guidelines on Announcement Format”, the “Business Manual for Information Disclosure”, the “FAQs about Information Disclosure”, the “Working Regulations on After-action Check”, the “Measures for Assessment of Information Disclosure”, and the “Detailed Rules for Regulatory Measures and Disciplinary Sanctions”. In addition, it has been planned to compile the above-mentioned rules and guidelines into a book which will be released online and in the form of paper manual to facilitate the reference of the listed companies.
Fourth, the technological preparation has been made. The SSE has set up the technological system featuring safety, stability, and efficiency, and pushed forward the construction of the supportive SSE internal business management process system.
Fifth, the preparation for training has been completed. The SSE has organized 10 rounds of trainings for the direct channel with the participation of all of the 954 SSE-listed companies and more than 3,000 trainees, thus effectively helping all the listed companies to get fully prepared for the direct channel.
Sixth, the preparation for communication and publicity has been accomplished. The SSE has organized 6 forums for executives of listed companies to strengthen the publicity for the direct channel and listen to the listed companies’ opinions and suggestions face to face, and it has perfected the relevant processes as well.
III. The Work on the Direct Channel in the Next Step
In the next step after the full launching of the direct channel, the SSE will continue to pay great attention to all the processes in the operation of the direct channel, implement aftermath regulation, and effectively prevent all kinds of possible market risks. We will focus on the following tasks:
1. Stepping up service. After the implementation of the direct channel, the SSE will continue to provide the listed companies with professional services for information disclosure, take the initiative to explain the various laws and regulations and business rules applicable to specific cases in the trainings organized by it, and continually offer the listed companies advices in advance.
2. Controlling risks. Based on the “Working Regulations on After-action Check”, the SSE will sum up the internal and external risk points in all the business processes under the mode of after-action check and set up the preventive measures, continue to strengthen the monitoring over news before the opening every day, make effective use of the means of “Emergency Trading Suspension”, and urge the companies to timely correct the misleading disclosures of major issues and sensitive events.
3. Responding rapidly. In order to timely handle the emergencies highly concerned by the media with extensive social influence, the SSE will, according to the rapid response mechanism for emergencies, speed up the response, step up the punishment, require those with the obligation to disclose related information to make the explanation and clarification to the market in no time, and further disclose the regulatory processes and measures of the SSE.
4. Tightening punishment. The SSE has drawn up the “SSE Implementation Measures for Disciplinary Sanctions and Regulatory Measures (Draft)” recently and has officially solicited opinions from the public. The “Implementation Measures” has further enriched the regulatory means of the SSE. After the launching of the direct channel, the SSE will focus on stepping up the regulatory deterrence, seriously and resolutely handling the violations of laws and rules occurring in the direct channel.
IV. Expectations for All Direct Channel Participants
The implementation of the direct channel will lead to significant changes to the mode of the listed companies’ information disclosure, and as the obligators of information disclosure, the listed companies will completely independently control the processes of information disclosure. We hope that the listed companies could be aware of the significant change, attach great importance to the work related to the direct channel, carefully study the relevant rules, arrange for necessary professionals as well as software and hardware facilities, and effectively accomplish the tasks related to the direct channel. In addition, although the SSE has made full preparations for the direct channel, at the beginning of the launching, some listed companies may increase the number of additional or corrected announcements as a result of insufficient adaptation to the business rules and processes as well as unintentional mistakes. Therefore, we requested the understanding of the media.
The ultimate goal of all SSE’s reforms including the direct channel is to maintain openness, fairness, and justice in the market, and safeguard the legitimate rights and interests of the investors, especially the small and medium-sized investors. The SSE welcomes the opinions and suggestions from all market players, in a bid to help us constantly improve and perfect all the work related to the business of direct channel, enhance the quality and efficiency of the listed companies’ information disclosure, and ultimately promote the sound development of the capital market.
