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The Shanghai Stock Exchange (SSE) has recently published the "Guidelines for Issuing and Listing Securities" to strengthen its supervision over securities issuance and listing. The "Guidelines", constraining the behaviors of securities issuance participants including issuers, sponsors, underwriters and price inquiry institutions, aim to improve the efficiency and transparency of pricing in the process of securities issuance by urging all participants to fulfill their duties.
The "Guidelines" requires sponsors and lead underwriters to be adequately staffed and establish relevant internal management systems to improve the quality of securities issuance and listing, while defining the regulatory and punishment measures against violations of issuers, sponsors, lead underwriters, price inquiry institutions and investors. Two new systems are the highlights of the "Guidelines".
I. "Guidelines": a significant supplementary measure for reform of IPO system
According to an official from the SSE, the "Guidelines" further perfect the existing IPO system from a micro and basic level while carrying on the requirements of the China Securities Regulatory Commission for the reform of IPO system.
From 2009, regulators launched two rounds of reform on IPO issuance system to optimize systems and intensify constraints on market by focusing on price inquiry, pricing and shares placement mechanisms. The first wave of reform built up the market constraint on quotation by forbidding the behaviors of quoting at high prices but not buying and buying at high prices but quoting at low prices as well as encouraging the expression of true will in the process of quoting. Furthermore, the market-oriented pricing mechanism was optimized in phase I reform by decreasing administrative guidance. In the second round of reform launched in November this year, institutional investors who are more capable of pricing and have long-term investment intentions were introduced to the shares placement mechanism to participate in offline price inquiry and placement, further improving the quality of pricing. Moreover, the offline drawing mechanism was adopted to constrain the quotation of price inquiry institutions from the aspect of the amount of shares allotted and encourage them to deepen their research on the investment value of new shares, thus facilitating reasonable quotation. Fortunately, the transparency of price inquiry and pricing were improved by publishing the specific quotes of price inquiry institutions and the valuation results of underwriters.
The two rounds of reform not only achieved favorable results but also put forward higher requirements for micro-foundation of the market. First of all, underwriters are expected to assume their responsibilities earnestly and improve their professional services in an all-around way to lay a solid micro-foundation for the thorough reform of IPO issuance system. Secondly, the internal departments of underwriters are expected to fulfill their respective duties and keep relative independence, while the capital market department should bring its function of connecting issuers with investors into full play. Thirdly, a tracking and monitoring mechanism should be established to intensify the supervision over price inquiry institutions and the constraint on their integrity. Finally, an advanced business and investment culture is desired.
In this context, the release of the "Guidelines", meeting the need of building market micro-foundation, is a significant supplementary measure for reform of IPO system.
II. "Guidelines": a necessity for the SSE to play its role of supervision as a self-regulatory organization
According to the official from the SSE, different from that on overseas securities markets, the public issuance and listing of China's securities has for a long time been conducted through the systems and platforms of exchanges, which not only saves the issuance costs for issuers but also facilitates small and medium investors' participation in IPO subscription. It is a crucial link in securities issuance system.
As a self-regulatory organization on securities market, ensuring the safe operation of trading system, creating a transparent, open, safe and efficient market environment, and safeguarding investors' rights and interests have always been the key duties of the exchange. The "Guidelines", standardizing the behaviors of all participants of securities issuance and listing, improves the efficiency of securities issuance and listing and guarantees the safe operation of system and protect investors' interests as well.
The official was quoted as saying that the SSE will sum up the experience in implementing the "Guidelines" and make timely amendments to the "Guidelines" according to the change on market and the requirements of regulatory systems to meet the need of market growth.
