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Recently, Shenzhen Stock Exchange ("SZSE") completed the adaptability assessment of industry information disclosure guidelines on all fronts, of which 18 guidelines have been amended and taken effect today. This is both an important measure taken by SZSE to conscientiously implement the regulatory concept of "information disclosure centered" and consolidate basic rules of capital market, and a staged result achieved in comprehensively exercising industry regulation and continuously deepening category-specific regulation. SZSE Press Secretary answered the questions of reporters with respect to the amendments.
I. Please introduce SZSE's industry information disclosure guideline system.
In recent years, new economy enterprises featuring "new technology, new industry, new business form and new model" have been developing rapidly. Strategic emerging industry companies made up more than 40% of SZSE-listed companies, of which strategic emerging industry companies on ChiNext Board accounted for 70%. By the end of September 2019, medical biotechnology, electronics and computer were ranked top three by market value, reflecting the direction and result of economic structural transition and upgrading. New economy enterprises differ greatly from traditional ones in aspects of industry characteristics, business model, value and risk, entailing higher requirements for industry-specific information disclosure. Formulating industry information disclosure guidelines and strengthening industry information disclosure not only cater to the market demand of fully understanding listed companies but also can help investors to make a value judgment in a more professional fashion.
SZSE has been continuously and steadily advancing regulation by industries since 2011. In early 2013, it firstly released information disclosure guidelines for film and TV and medicine on ChiNext Board, standardizing and refining industry-specific information disclosure requirements. On the basis of pilot implementation on ChiNext Board and through continuously summarizing regulatory experience and industry characteristics, SZSE has successively published 22 information disclosure guidelines for emerging industries and some traditional industries with prominent characteristics and gradually established two industry information disclosure guideline systems. Firstly, the guidelines for ten emerging industries on ChiNext Board cover film and TV, drug and biological product, photovoltaic industry chain, energy conservation and environmental protection service, Internet game, Internet video, e-commerce, Internet marketing, LED industry chain and medical device. Secondly, the guidelines for 12 industries on SZSE cover livestock and poultry aquaculture, solid mineral resource, real estate, seed industry and planting, engineering machinery, decoration, civil engineering, retail, express delivery service, civil explosion, jewelry, and software and information technology service. Suited for specific industry characteristics, industry information disclosure guidelines raised disclosure requirements for the information (such as industry development trend, corporate business model, key business information, core competitiveness and specific risk) concerned by investors, introduced the mechanism of "on disclosure or explanation" and made the guidelines more flexible in an appropriate manner.
II. What's implementation status of industry information disclosure guidelines?
While constantly improving the rule system, SZSE has continuously stepped up efforts in rule implementation and endeavored to raise information disclosure regulation efficiency. Recently, SZSE has assessed the implementation adaptability of 22 industry guidelines. The assessment showed that industry guidelines have been well implemented on the whole,. About 90% companies have disclosed industry information according to guidelines, most companies have disclosed information in a full and accurate manner and conducted thorough analysis, with information disclosure becoming more transparent and understandable, and the guideline implementation has met expectations. Firstly, increasing market transparency. Industry guidelines have enriched non-financial information disclosure contents (such as business model and technical level). They can help investors deeply understand companies and better understand and see through listed companies and promote market perception of emerging industries. Secondly, making disclosure more convenient. The opinions of institutional investors were fully solicited for the formulation of guidelines. More information of their concern was increased. This practice not only cut the cost of communication between companies and them but also reduced on-site survey frequencies and improved information disclosure fairness. Thirdly, raising regulation efficiency. Industry guidelines are an important foundation and way to carry out industry regulation. They can help regulatory personnel grasp the nature of corporate business, identify major risks and make regulation better targeted and more effective.
It is also found in comprehensive assessment that the disclosure by a few companies was too brief and general and guidelines were implemented incompletely or perfunctorily, which was arising from deviation in understanding provisions and difficulty in implementing particular provisions and indicated weak awareness and initiative of industry information disclosure. Industry information is an important basis for investors to judge the value and risk of listed companies. Full disclosure of industry information is helpful to enhance corporate reputation and image, strengthen communication with investors, and facilitate the discovery of corporate market value. Listed companies should give high priority to industry information disclosure. Under the regulation and guidance of industry guidelines, they should strengthen the sense of responsibility for information disclosure, improve the quality of industry information disclosure, and better reveal corporate business development to investors.
III. Please introduce main revisions to industry guidelines.
SZSE has amended and issued 18 industry guidelines in total, ten for industries listed on ChiNext Board and eight for industries listed on SZSE. Specifically, they have the following four characteristics:
Firstly, adhering to the market-oriented and law-based principles and making rules more adaptable. With the rapid development of the market, laws, policies, business models and operation characteristics have changed greatly. Some provisions are no longer applicable to the status quo of industry development. Therefore, guidelines should be adjusted. For example, many business models have emerged in the Internet marketing industry. In this amendment, the scope of application of guidelines and disclosure contents were adjusted. Specifically, the scope of application was amended as "marketing method based on Internet that uses digital information and internet media to attain marketing goals and other data services (such as technical push and user portrait) related to the vertical areas" from "engaged in Internet-related businesses such as search engine marketing, offer wall marketing, programmed purchase and marketing data service". In addition, the requirements that are no longer suitable for actual conditions were deleted. For instance, in the E-Commerce Law issued in early 2019, the scope of application of e-commerce guidelines was widened, and differentiated disclosure requirements were put forward regarding two types of business models (i.e., selling commodities or providing labor services through information network and via platforms).
Secondly, upholding the concept of boosting development via regulation and refining some provisions. For example, some pharmaceutical companies said in assessment that, drug application and clinical trial are usually conducted at an early stage, it takes a long time to get approval and go into production and there are high uncertainties. Thus, it is insignificant to make detailed information disclosure, vulnerable to leakage of trade secrets and adverse to new drug R&D and clinical trial. For this reason, this provision has been deleted from the guidelines for pharmaceutical and biological products. In addition, key disclosure requirements (e.g., "products pass or fail consistency evaluation") were added in response to the latest changes in medical regulatory policies.
Thirdly, balancing information disclosure effect and cost to reduce burden on enterprises. Some provisions whose implementation is costly and implementation effect is not good and that is of low usefulness to decision-making were deleted or adjusted. The understandability of disclosure contents was highlighted. For example, quarterly report disclosure requirements were deleted from five industry guidelines (such as film & TV and photovoltaic), reducing corporate disclosure cost and information redundancy. In view of the characteristics of energy conservation and environmental protection industry, requirements on procedures for reviewing guarantee for subsidiaries were properly simplified in the guidelines, it was allowed to expect and review guarantee limits with a certain term and provide convenience for corporate operation.
Fourthly, making information disclosure deeper and more accurate and highlighting the disclosure requirements for key industry information and risk matters. Relevant provisions were improved based on industrial development trends, new cases and problems arising in market and regulatory practice. For example, the following requirements were added to the guidelines for pharmaceutical and biological products: in case of group's adverse drug reaction, wide-ranging media doubts, safety complaint or quality complaint with respect to corporate products, disclosure shall be made and response shall be given in a timely manner to people's concerns and public sentiments. The real estate guidelines refined the disclosure requirements for such information as land reserve, real estate development, sale, lease, class-I land development and financing cost, aiming to facilitate investors to learn more about the operation quality and development prospect of real estate enterprises.
IV. What is the process of this amendment? What opinions are solicited from the market?
In this comprehensive amendment of the industry information disclosure guidelines, SZSE considered both internal and external factors and both supply and demand. In addition to organizing internal supervisors to systematically review the problems encountered in the regulatory practice, SZSE also solicited opinions and suggestions through on-site discussions, visits to companies, telephone exchanges and other ways. SZSE fully listened to the demands of markets and institutions, investors and other information demanders, and collected extensive evaluation opinions of listed companies on the enforceability of rules, disclosure costs and the impact on their business development, in an effort to balance the information between the supply and demand sides. In the process of formulation, SZSE talked to hundreds of companies and received about 350 written opinions from them. For some of the substantially amended guidelines, SZSE held symposiums with listed companies and fund researchers of securities companies to conduct face-to-face exchanges and discussions, fully listened to the voices of all parties and accomplished market consensus. SZSE attached great importance to and carefully studied the opinions and suggestions provided back by market players, and adopted the reasonable ones.
V. How will SZSE make the industry information disclosure guidelines more effective?
The guidelines are extensive and substantial, and making them effective requires the joint efforts of all parties in the market. SZSE will prioritize both regulation and service, perform the first-line regulatory responsibilities, continuously improve the supply of rules and policies, improve the service efficiency, guide and urge the implementation of these guidelines, and help listed companies achieve high-quality development. Firstly, by means of Board secretary training, regular report training and issuance of exemplary annual reports, SZSE will guide the listed companies to attach importance to these guidelines, accurately understand their requirements and improve the quality of information disclosure. Secondly, SZSE will continue to follow up the implementation of these guidelines, and in case of inadequate implementation, will urge the listed companies to strengthen disclosure by taking measures such as strengthening inquiry and calling for supplementary disclosure. Thirdly, based on market development and the new changes in the industrial structure, and by learning the in-depth characteristics of the industry and summarizing regulatory experience, SZSE will continue to promote the disclosure rules system for the industry, and improve the fundamental systems of the capital market.
