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On January 6, Shenzhen Stock Exchange (“SZSE”) issued the information disclosure guidelines for five industries, namely, food & liquor making, electric power, automobile manufacturing, textile & apparel and chemical industry. This is another important measure taken by SZSE to further advance the building of the industrial information disclosure rule system and constantly solidify the capital market rule foundation in accordance with the requirements on refining industry information disclosure standards as set forth in the Opinions of the State Council on Further Improving the Quality of Listed Companies. Before this move, SZSE comprehensively revised 18 industrial guidelines and released four new ones last year.
Industry-based regulation is an important exploration made by SZSE to center on investors’ demands and increase the effectiveness of regulation. Since January 2013, SZSE, based on the distribution of SZSE-listed companies in terms of industries, has continuously summarized the operation law and risk characteristics of featured industries, and gradually established two industrial guideline systems for the ChiNext Board and SZSE-listed companies, starting with emerging industries and traditional industries that receive high market attention. Industrial guidelines have been drafted in accordance with the following three principles. First, representativeness. The industries drawing high attention from market players (such as industry associations, securities brokers and investors) and having a wide scope of application are covered for the convenience of market understanding. Second, applicability. During the drafting, deep understanding of listed companies was gained through e-mails, visits, discussions, phone calls, questionnaires and other methods. Meanwhile, opinions and suggestions were extensively collected from listed companies, industry analysts, industry associations, small and medium investors and other market players. Third, flexibility. Mandatory and encouraging requirements were reasonably distinguished. The mechanism of “disclose or explain” was highlighted to avoid excessive costs of information disclosure of listed companies.
The industrial guidelines released this time deeply tapped the characteristics of five traditional industries attracting high market attention, focused on key issues (such as corporate business model, product features, key operation information and specific risks) and is intended to make information disclosure more effective and pertinent. First, food & liquor making. Corporate brand operation, sales channels, depositing and management of cash and equivalents, food safety and other information are common concerns in the market. The guideline requires companies to increase the disclosure of information about representative brand, brand positioning, sales model and number of distributors, and fully disclose the accounting policies on income recognition in different sales models, accounting methods adopted in special cases (such as post-period return, profit return and reward of sales), advance receivable and inventory composition and adequacy of provisioning for bad debts and depreciation in the notes to financial statements in regular reports. In the meantime, food safety events that may have material effect on companies shall be disclosed. Second, electric power. It is greatly affected by macroeconomic and industrial policies and exhibits regional characteristics. The guideline requires companies to disclose operating results and financial indicators by power types and business regions, and encourages the disclosure of major investment plans such as capacity expansion of power generation through new energy and asset acquisition. Third, automobile manufacturing. The market is concerned about production & sales, new energy business and risks in special sales models. The guideline requires companies to disclose production & sales data and the production & operation of new energy vehicles and parts, and prompts risk exposure in sales models such as mortgage, financial leasing and distributors’ warranties. Fourth, textile & apparel. The market pays much attention to the inventory, sales channels and sales costs of companies. The guideline requires companies to fully disclose key industry information such as inventory age and other inventory information of companies, operation models and operation data from different sales channels, sales cost composition and reasons for change thereof. Fifth, chemical industry. The purchase prices of raw materials and energy have great effect on the operation and finance of companies. In addition, this industry has big environmental impact. The guideline requires companies to fully disclose the purchase prices of raw materials and energy for main products and promptly disclose heavy administrative penalties imposed by environmental protection authorities.
Adhering to the unified plan of China Securities Regulatory Commission, SZSE will remain committed to the regulatory concept of focusing on information disclosure, earnestly perform frontline regulatory responsibilities, and refine industrial regulation and rules. It will also guide and urge listed companies to comply with industrial guidelines, enhance the implementation effect of the guidelines and the information disclosure quality of listed companies, and work hard to form a SZSE-listed company cluster according to the high-quality development requirements.
