On April 30, SZSE released the Business Guidelines for Review of Stock Issuance and Listing on the ChiNext Board No. 1 – On-site Supervision of Sponsorship Business (the “Guidelines for On-site Supervision” or the “Guidelines”). It is a concrete measure adopted by SZSE to conscientiously implement the requirements of the new Securities Law, refine the basic systems of the market, and ensure high-quality operation of the registration-based IPO system on the ChiNext Board. It is also a useful exploration in putting in place the working philosophy of being open-minded, transparent, honest and impartial, standardizing on-site supervision, strengthening performance of information disclosure duties, and improving information disclosure quality.
The Guidelines for On-site Supervision, which has been formulated based on the practice of the registration-based IPO system pilot, aims to institutionalize and standardize on-site supervision. First, it sticks to the law- and market-based direction to ensure openness and transparency. Centering on the needs of market entities, the Guidelines has defined the applicable scope of supervision, methods of supervision, duration of supervision, application of results and other market concerns, in an effort to refine the basic systems of the market and foster a stable and foreseeable market environment. Second, it focuses on the “critical minority” and the practice quality of intermediaries. By monitoring and inspecting the practice of sponsors and securities service agencies, it can improve issuers’ information disclosure quality and urge sponsors and securities service agencies to fully fulfill their review duties. Third, it adheres to being problem- and risk-oriented and reflects importance, precision and professionalism. The Guidelines focuses on important events that affect issuance and listing conditions, to make regulation more precise and targeted and ensure on-site supervision is objective, impartial, independent and efficient.
The Guidelines for On-site Supervision has specified the objects of on-site supervision and their determination criteria and situations leading to termination, the obligation of relevant entities such as sponsors to cooperate in the supervision, the procedures, methods and results handling of on-site supervision, subsequent oversight of re-declared projects, connection to on-site inspection, etc. Specifically, first, it has clearly defined the objects of on-site supervision and their determination methods. The objects of on-site supervision will be mainly sponsors. They may also include securities service agencies such as accounting firms when necessary. The objects of on-site supervision will be determined by two ways, problem orientation and random drawing. Second, it has laid down the on-site supervision requirements for rejected projects and withdrawn projects in their re-declaration. If a rejected project is re-declared within 12 months and it still has relevant problems, on-site supervision will be initiated after the application is accepted. Regarding a project that is withdrawn due to supervision and re-declared, if the project applies for withdrawal before the supervision team enters the site and re-declares within 12 months after withdrawal, on-site supervision will be initiated after the application is accepted. Third, it has provided the reference scope of on-site supervision. Besides ChiNext Board IPO sponsorship business, the refinancing by ChiNext Board-listed companies, board changing sponsorship business of NEEQ-listed companies, and independent financial consulting business on major assets restructuring also have been included into the scope of on-site supervision. Fourth, it has laid out the situations leading to continuous review and the regulatory requirements on withdrawn projects. Projects that have passed on-site supervision without any abnormal condition found will continue review procedures. The issuer who withdraws the application for stock issuance or listing or the sponsor who withdraws sponsorship may still be subject to work measures, self-disciplinary regulation measures or disciplinary punishment according to regulations.
On-site supervision is a critical link in the regulation chain of issuance and listing review and an important institutional arrangement to ensure stable and sustained implementation of the registration-based IPO system reform. As at April 30, 2021, SZSE organized on-site supervision on 44 projects. IPO projects that already went through on-site supervision accounted for about 7% of the total number of IPO applications. Together with review and inquiry, on-site supervision has formed effective regulatory deterrence. Next, SZSE will continue to practice the principles of “system building, non-intervention, and zero tolerance”, and follow the requirements of standing in awe of the market, rule of law, professionalism and risks and pooling the efforts of all sides to develop the capital market. We will do a good job in guarding the market access by adhering to take information disclosure as the center, and further urge sponsors and securities service agencies to fully perform their duties. We will give full play to our role as the “gatekeeper” of the capital market, and work with market participants to improve the quality of listed companies and maintain healthy development of the market.
