Shanghai Stock Exchange New Measure For "Disclosure And Supervision" Lauded

Last week, the Shanghai Stock Exchange (SSE) started to disclose the "Shareholding Change of Directors, Supervisors and Senior Management" in the column of "Listed Companies Credit Record" on its official website (www.sse.com.cn). This has won wide praise from the market. Most insiders of the trade as well as small and medium-sized investors hold that timely disclosure of the senior management's shareholding change to the public enables investors to understand their shareholding trend. Moreover, by preventing them from purchase and sale of their own companies' shares through inside information, it has upheld the principle of equality, fairness and openness of the securities market.

To reinforce the supervision work for information disclosure of the shareholding change of listed companies' senior management, the SSE Listed Company Department issued a notice in December last year. The notice requires that the listed companies' senior management should make timely report on their shareholding change to their companies. Meanwhile, the listed companies should disclose the shareholding change on the SSE website within 2 working days upon receiving the report.

It is learnt that this requirement is not a fancy idea from nowhere. According to Article 3.1.6 in the "Stock Listing Rules" newly modified by the SSE in May 2006, the directors, supervisors and senior management should make timely report on their shareholding change (except that resulted from dividend distribution or capitalization from capital public reserve) to their companies. Besides, the companies should make announcement on the SSE website upon receiving the report. The SSE's implementation this time is in line with the Article.

In the column, investors can get the updated information about shareholding change of the listed companies' senior management. Furthermore, they can search for the records of shareholding change of any or all of a certain company's senior managers. After browsing the page, some investors said that the senior managers, as operators and governors of an enterprise, are the "backbone" for the company's development. Therefore, the company's performance will be closely related to their performance. Of course, investors hope to take the risks together with the senior managers who hold shares in the companies they invest in. Meanwhile, they wish a transparent shareholding change of the senior management so as to know quickly the management's recognition degree for the company's investment value. Besides, they can also find out whether the senior managers' individual interests are truly tied with the company's interests.

Experts of the industry have also given high evaluation for this measure of the SSE. According to authorities, to enhance the active management and incentive mechanism of the management, shareholding by the listed companies' senior managers should be advocated. However, they can take the advantage of earlier information knowledge to reap huge profits in securities trading. Therefore, these "key persons" must receive strict supervision on their shareholding. It is clearly stated in the "Securities Law" that listed companies' insiders are prohibited from engaging in securities trading through inside information. Nevertheless, the all-floating environment has greatly enhanced the market manipulation capacity of the listed companies' senior management. The senior management and some institutions are likely to cooperate in private information to cash out on the secondary market with good news stimulating the stock price. Accordingly, the SSE has taken this measure to effectively stop possible damage to the interests of listed companies as well as small and medium-sized shareholders.