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The trading suspension/resumption system for listed companies is a fundamental institutional arrangement for the capital market. CSRC recently released the Guidance on Improving the Trading Suspension/Resumption System for Listed Companies (hereinafter referred to as the Opinions). It defines the basic principles of trading suspension/resumption, shortens the trading suspension period, and intensifies the disclosure requirements to safeguard trading order, stabilize market expectations and fully ensure investors' trading opportunities. To practice the requirements of the Opinions, SZSE has drafted the Guidelines for the Trading Suspension/Resumption Business of Listed Companies on Shenzhen Stock Exchange (Exposure Draft) (hereinafter referred to as the Trading Suspension/Resumption Guidelines) and sought public opinions from the market.
In recent years, SZSE has been standardizing the trading suspension/resumption behavior of listed companies by perfecting rules, strengthening supervision and encouraging simultaneous multiple measures to reduce trading obstruction and protect investors' trading right. Specifically, efforts are mainly made from the following three aspects. First, in May 2016 SZSE introduced the Memorandum on the Trading Suspension/Resumption Business of Listed Companies to specify the trading suspension period, detail the disclosure requirement and tighten the trading suspension constraint. Second, as for companies whose information disclosure is false, incorrect or incomplete and who are suspected to abusing trading suspension, SZSE adopts in a timely manner such regulatory measures as issuing letters, arranging interviews and conducting field inspections to urge them resume trading in time. Third, SZSE encourages and guides enterprises not to suspend trading, to use short-time trading suspension, and to disclosure major events by stage so as to flexibly employ discontinuous trading suspension.
With the efforts from all parties, the issues of "suspension at will", "arbitrary suspension" and "long-term suspension" among listed companies have been alleviated. In 2016, there were around 9% of SZSE-listed companies undergoing trading suspension. Currently, that figure lowers to about 1.4%. Before the Memorandum was introduced, there were 68 SZSE-listed companies whose trading suspension lasted for more than three months; but now, it's been cut to 14 companies of such kind. Since the year beginning, many SZSE-listed companies have planned major asset restructuring and disclosed restructuring plans or reminders without implementing trading suspension. The market consensus of "no trading suspension", 'less trading suspension" and "short-term trading suspension" has been gradually formed.
Compared with the mature international market, our national capital market still features the issues of multiple causes and long periods of trading suspension. Since this year, the cases of "trading suspension for avoiding risks" have been apparently on the rise. In drafting the Trading Suspension/Resumption Guidelines, SZSE sets footholds on summarizing the previous regulatory practice, earnestly copes with new situations and new problems and upholds the concept of "taking no/short-term/discontinuous trading suspension as the principle and the vice versa as exceptions" to guide listed companies to prudently exercise their suspension right and ensure the efficacy of trading suspension/resumption mechanism.
The Trading Suspension/Resumption Guidelines offers key standards to the trading suspension/resumption business of listed companies from such aspects as reducing suspension causes, shortening suspension period, intensifying information disclosure and perfecting suspension/resumption supervision. For example, it cancels the trading suspension caused by restructuring planning not involved with share offering, non-public share offering, outward investment and signing material contracts etc. It clearly states that only the share offering restructuring is qualified for trading suspension, that such suspension period is 10 trading days at maximum, that the term of suspension due to the planning of control right changes and tender offer etc. shall not exceed 5 trading days, and that the suspension caused by exceptional events shall not last for more than 25 trading days in principle. It stipulates that in case of planning share offering restructuring without trading suspension, relevant information shall not be disclosed before the disclosure of such restructuring plans. It defines that in principle, trading suspension is not allowed during the period when the exchange reviews and questions restructuring plans and the companies prepare replies. In addition, it states that the exchange may adopt measures such as field inspection and mandatory trading resumption in the cases abusing trading suspension, extending suspension for no reasons and rejecting trading resumption at suspension maturity. As for the companies whose stocks have been suspended frequently or suspended for too long in an accumulative manner, the Trading Suspension/Resumption Guidelines requires the establishment of a trading suspension information bulletin system.
The deadline for seeking the public opinions is December 21, 2018. SZSE, according to the market feedback, will further improve the Trading Suspension/Resumption Guidelines to deepen the reform of information disclosure system, perfect the fundamental system for market operation and protect investors' legitimate rights and interests.
