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Shenzhen Stock Exchange (“SZSE”) called the first on-site press conference on 2018 Members’ General Meeting on April 24, 2018. SZSE press spokesman Lu Xusheng, Director of Member Management Department Tang Rui, Director of Legal Department Fu Yan, and Member of the Administrative Committee and Director of China Merchants Security Wang Yan took questions from reporters during the press conference with regard to the 2018 Members’ General Meeting.
Question 1: SZSE 2018 Members’ General Meeting was convened on April 16 and voting closed on April 20, attracting considerable attention from the market. Would you brief us on the background, the theme and the meeting?
Answer: It was the first members’ general meeting convened following the implementation of the revised Measures on Administration of Securities Exchanges (“Administration Measures”), and was significant not only in gathering, mobilizing and leading members to learn more about the Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and to implement the decisions and arrangements of the central government, and but also in pushing forward central tasks of SZSE. The meeting marks the establishment of a regular mechanism for the convening of the SZSE Members’ General Meeting as per the Administration Measures, which requires that the Members’ General Meeting be held once a year.
The theme of the General Meeting is to forge consensus and seek development; to fully study and implement the Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, and the guiding principles of the 19th CPC National Congress, the Central Economic Work Conference, and the National Financial Work Conference; to focus on and push forward the three major tasks proposed in the financial work conference; to enhance the CPC’s leadership; to strengthen and fulfill responsibilities, unite and lead members to implement relevant decisions and arrangements, and to jointly build world-class investment banks, a leading stock exchange, and an internationally competitive capital market.
The Meeting was held off-site on April 16, with considerable attention and active participation from members. By the time the polls closed at 17:00 on April 20, representatives of all of the 116 members, and 3 special members had participated. The average time spent by member representative was 3 days from logging on and downloading meeting materials to casting their votes, during which time they may fully consider and review relevant proposals before making a cautious vote. After a witnessed vote counting, the 2017 work reports of the Administrative Committee, the General Manager and the Supervisory Committee, 2017 annual accounts, 2018 financial budget report, and the Charter of Shenzhen Stock Exchange (2018 revised draft) were passed unanimously. Besides, the revision of the Administration Measures and relevant arrangements of SZSE were also reported during the meeting.
Question 2: Different from an on-site meeting, the Members General Meeting was convened off-site and voting was done via the internet, in which case, what has SZSE done to guarantee the quality of the meeting? How well does it work?
Answer: The meeting was held off-site with the full use of modern technologies and voting was conducted via the Internet for the first time, which was an important exploration in implementing the guiding principles of the CPC Central Committee’s Eight-point Regulation, streamlining meetings, improving efficiency, and saving social costs. It was also an important innovation to further improve SZSE’s governance structure and fully safeguard members’ right to know, right to participate, right to vote, and right to supervise.
Upholding the principles of “openness and transparency” and “to rule the market by law”, SZSE formulated a thoughtful procedure for the off-site meeting as follows:
First, a Members Meeting Column was set to serve as the online voting platform, highlighting the ceremonious sense and decorum of the meeting. Second, our Chairman addressed at the Members Meeting Column, expressing the requirement stated in the Charter that the General Meeting was presided over by the Chairman. Third, members were clearly required to have their chairmen or general managers as the delegates, develop written voting opinions and archive the same, indicating the representativeness and solemnness of the meeting. Fourth, the time for reviewing documents and voting was sufficient, allowing delegates to make thorough consideration and deliberation and discrete voting. Fifth, authentication was required for the Members Meeting Column, ensuring that it’s the delegates who log in. Moreover, a successful login was deemed as attendance to the meeting, guaranteeing that the Charter-set requirement of more than two thirds of attendance was met. Sixth, counting witnesses were arranged to announce the voting result, showcasing the fairness and openness of the meeting. On the morning of April 23, we counted the votes under the supervision of the witnesses approved by our board meeting. The witness panel this time is composed of the designated representatives from three member director units and one member supervisor unit and our internal representatives of legal and audit departments etc. The voting results will be released in the Members Meeting Column, ensuring members’ right to know and right to supervise.
The off-site approach of convening the meeting was well received among vast members. They believed that an off-site meeting is economic and flexible, helping saving economic cost and free of the time and space restrictions applicable to an on-site meeting. Also, online voting is conducive to improve efficiency and convenient to operate, which is in line with the trend of both technology and times development. Next, we will summarize experience and listen to members’ opinions and suggestions to further perfect the convening model of members’ general meetings.
Question 3: With full preparation centering on the theme of “forging consensus and seeking development”, the General Meeting was highly praised by the members. Can you tell us the achievements made through the meeting?
Answer: In convening the General Meeting, we strictly followed the requirements stated in the Measures on Administration of Securities Exchanges and the SZSE Charter. We made detailed arrangements and full preparation on the scope of participants, the meeting agenda, the proposals to be voted and the supervision of ballot counting to ensure a quality meeting delivering actual effect.
Through the meeting, SZSE and all members have further unified thoughts, forged consensus and truly improved our stance to consciously make our work fit with the greater development picture of the CPC and the state’s cause. In so doing, we aim to better build the SZSE multi-tiered capital market, serve and support the national strategies such as supply-side structural reform, innovation-driven development and the “Belt and Road” Initiative. First, we’ve fully recognized that amendments to the Administration Measures and the SZSE Charter have substantial significance to and profound influences on the development and stability of capital market reform. We’ve understood, acknowledged and followed the Charter to implement the requirements on law-based governance of the market and the exchange. Second, we’ve always prioritized the precautions against and reduction of financial risks and jointly shouldered the mission for a bellwether of preventing capital market risks to hold fast to bottom-line of zero systemic risks and play well in the tough battle of risk prevention and reduction. Third, by upholding the philosophy that “the vocation of finance is to serve the real economy” and implementing in depth the new development concept, we have earnestly served national strategies, played the role of resources allocation, reinforced market cultivation services and enriched product instruments to power quality economic development with greater force and more practical moves. Fourth, we’ve jointly promoted and fully ensured the implementation of major reform measures by consolidating and deepening the “member-regulation-oriented” transaction behavior regulation model, soundly moving forward the pilot program of innovative enterprises’ domestic share offering or voucher custody, deepening the ChiNext reform and amplified the support to new economy. Hence, speeding up the process of internationalization and building an internationally leading innovation capital formation center.
Question 4: A priority of the Members’ General Meeting was to review the Charter of Shenzhen Stock Exchange (2018 revised draft). Would you introduce the background and main points of the revisions?
Answer: Last revised in April 2017, the Charter serves as a foundation and guidance for the smooth running of SZSE. The National Financial Work Conference, 19th CPC National Congress, the Central Economic Work Conference served as guiding lights to the reform and development of the capital market. The Administration Measures was revised by CSRC in November 2017 and put into force on January 1, 2018, with a series of system adjustments made to the frontline regulatory responsibilities of securities exchanges. To fully implement the guiding principles of relevant conferences and to meet the new requirements raised in the Administration Measures, SZSE made further amendment to the Charter which could be summarized as follows.
First, improving relevant regulations on strengthening the Party leadership. The central role of political leadership of Party committee is further clarified to ensure materialization of the Party and state’s policies. It is also specified that the party’s centralized and unified leadership over major matters shall be upheld; major decisions shall be reviewed by the Party Committee. Second, strengthening frontline oversight functions. The exchange’s scope of functions is expanded. More front-line regulatory measures are introduced. Members’ responsibilities for management of members’ transaction behaviors is strengthened and risk control on the part of the exchange is enhanced. Third, optimizing governance structure. The authority of the Administrative Committee, General Manager and Board of Supervisors are further clarified; regulations on the nomination of chairman, deputy chairman, and chief supervisor are revised; reporting by the Administrative Committee and Board of Supervisors to the CSRC is specified. Fourth, improving relevant procedural requirements. Market players may apply for hearings and review to safeguard their legitimate rights and interest.
Question 5: One major revision of the Charter is to enhance SZSE’s responsibility of frontline regulation, which is also an issue of concern of the market. Would you introduce in detail the new provisions in this regard?
Answer: The revision of the Charter emphasizes the self-regulatory nature of the exchange, optimizes its internal governance structure and enhances its responsibilities of frontline regulation by making adjustments to relevant systems. The revision has actually strengthened the SZSE’s frontline regulatory responsibilities as per the requirements in the Measures on Administration of Securities Exchanges.
First, to strengthen SZSE’s responsibilities of risk prevention and control. Provision regarding the SZSE’s establishment of risk management and monitoring mechanisms to maintain the safe and stable operation of the market was added in the Article 17 of the Charter. Second, to expand the scope of the SZSE’s functions. Provision regarding the Exchange’s functions of determining the suspension, resumption, termination and re-listing of securities, the providing transfer services for private placement securities, and supervising securities service institutions were explicitly specified in the Article 7 of the Charter. Third, to further enrich the frontline supervision means of the SZSE. It is clarified in the Article 14 of the Chapter that "punitive liquidated damages" could be used as a disciplinary punishment, and "issue supervision advice letters to relevant competent authorities" was added as a means of supervision. Fourth, to improve the members’ responsibilities of managing customer transaction behaviors. It is added in Article 21 of the Charter that members shall “agree on the verification of entrusted transaction instructions and the rejection of abnormal transaction instructions” in the agreement with customers; that members shall “perfect the monitoring system for customer transaction behaviors” and “reject the entrustment of abnormal transaction behaviors which might seriously affect the normal transaction order” so as to further put into practice the “member-regulation-oriented” transaction behavior regulation model. The fifth is to include bond issuers and other bodies into the scope of regulation, which provide a basis for SZSE’s organization and supervision of bond transactions.
Question 6: Since the 2017 Members’ General Meeting, SZSE have made remarkable achievements in various work. After this General Meeting, how will SZSE implement the relevant work deployment of the Meeting?
Answer: SZSE is a membership stock exchange. After years of standardized development and continuous exploration, the corporate governance structure of the “Members’ General Meeting, Board of Directors, Board of Supervisors, Senior Management” has been significantly improved and operating effectively, providing strong organizational guarantees for the steady progress of SZSE’s work. Since the 2017 Members’ General Meeting, our Fourth Board of Directors have held 4 on-site meetings and 7 communications and voting meetings and generated 27 resolutions, giving full play of our decision-making functions. In addition, our Second Board of Supervisors have held 4 on-site meetings where 12 resolutions were made, effectively exerting our supervisory functions. And our Senior Management has been implementing the board deployment and accepting the supervision by the Board of Supervisors to strengthen implementation and ensure task effectiveness. The 2018 General Meeting has reviewed and approved the work reports of Board of Directors, General Manager and Board of Supervisors, which fully acknowledges their performance in the past year and clearly defines the next steps.
As the decision-making body of SZSE, the Board of Directors will follow the resolutions of the General Meeting, thoroughly implement the new development concept, coordinate the overall development and unite the strength of members so as to promote the integration of SZSE’s work on market construction with the implementation of the CPC and the state’s major policies and match with the requirements on steady reform and development of the capital market. We will comprehensively deepen market reforms with the guide of promoting quality economic development. We will vigorously enhance the capabilities of direct financing services with the focus on assisting the deployment of national strategies. We will effectively prevent and resolve risks by adhering to the principle of integrative national security. We will continue to strengthen front-line supervision with the goal of protecting investors’ legitimate rights and interests. We will promote internationalized development in an orderly manner under the guideline of the new round of high-level opening-up requirements. And we will strengthen the Board construction, concentrate and give play to the strength of industry parties so as to make greater contributions to serve the Five-Pronged Approach and Four Comprehensives.
According to the decisions of the Board of Directors, our Senior Management will be deployed with a tight focus on the Three Critical Battles of a fully built well-off society and the three major tasks of financial work to pay close attention to implementation. We will continue to exert efforts on preventing risks, strengthening supervision, advancing reforms, expanding opening-up, optimizing services and standardizing management. Besides, we will enhance the ability of utilizing innovative capital to solve the problem of underdeveloped and imbalanced development in order to support the development of new technologies, new industries, emerging businesses and new business models, thus facilitating the quality, efficiency and drive upgrades for economic development.
The Board of Supervisors will further exercise its supervisory functions. We will adhere to the overall steady situation of SZSE’s reform and development, supervise the implementation of the requirements in the Administration Measures and strengthen the supervision on risk management to promote the improvement of capabilities for risk prevention and control, stress greater supervision on financial internal control and subordinate institutions. Through these moves, we aim at holding fast to the bottom line of no systematic risks and fully safeguarding the standardized and stable development of SZSE.
Question 7: Mr. Wang Yan, as Director of China Merchants Securities and member of SZSE Administrative Committee, what do you think of the 2018 SZSE Members’ General Meeting?
Answer: This time, I participated in the Members’ General Meeting with two identities: first, as a member of the fourth Administrative Committee of SZSE, I attended the meetings of the Administrative Committee and gave opinions on overall arrangement of the meeting; second, as a representative of China Merchants Securities, I reviewed the meeting materials, and voted on the proposals based on my opinions on them.
The Members’ General Meeting impressed me in three aspects. First of all, the Members’ General Meeting has a clear theme. The meeting was organized and prepare in strict compliance with the requirements in the Administration Measures and the Charter with a firm position and clear attitude. The second one is careful preparation. This could be reflected not only by the innovative mode of the off-site meeting, scope of participants, contents of the proposals, the voting, and the witnessing of vote counting, but also by the publicity and meeting arrangement. People may feel their careful preparation everywhere. Their efforts make me feel that the meeting is more a “home” where all members gather together to discuss home affairs than an annual meeting, conveying a sense of affability and responsibility. The third would be the delightful effect. All issues were passed unanimously, showing all members’ full recognition of the efforts of SZSE in the last year and their high expectations for SZSE. The meeting further strengthens the bond between SZSE and all members, and provides a platform for all parties to enhance mutual consensus, identify the future direction, and make joint efforts to advance the development of the exchange, securities industry, and capital market.
Question 8: Mr. Wang, as member of the administrative committee and representative, what do you think of the amendment to the Charter to strengthen frontline regulation, to improve the duties of members in management of client transaction behaviors, and to enhance risk prevention and control duties?
Answer: We made significant amendments to the Charter in strengthening the frontline regulatory function of the exchange, which will expand the scope of functions and enrich the regulatory methods of the exchange. The charter explicitly provides that the exchange should establish a risk management and supervision mechanism. Especially in the implementation of the “member-oriented supervision”, the charter further improves members’ duties of managing transactions of clients and places higher expectations on members. As for members, they should fully understand and abide by the Charter, duly exercise their rights and perform relevant obligations, strengthen bottom-line thinking, always put financial risk prevention and resolution in an important position, increase the practical skills of forestalling and diffusing financial risks, maintain the steady operation of the market, protect the legitimate rights and interests, share with the exchange the frontline responsibility of forestalling risks of the capital market, stick to the underlying principle that no systematic risks are allowed, and firmly guard against and diffuse risks.
Question 9: Do member companies have any suggestions on the future job of the SZSE?
Answer: Year 2018 opens a new chapter to implement the guiding principles of the 19th CPC National Congress, marks the 40th anniversary of the reform and opening up, and is also a critical year of building a well-off society and carrying out the 13th Five-Year Plan. Against this background, SZSE carried out in-depth studies of the spirit of the 19th CPC National Congress, earnestly implemented the decision-making and deployment of the Party Central Committee and the State Council, and closely focused on the three central tasks of financial work. The SZSE have made a series of work deployments on preventing risks, strengthening frontline supervision, and serving the real economy and supporting entrepreneurship and innovation, expanding market opening. SZSE also put forward the objectives of working with members to build a “world-class investment bank, world-class stock exchange, and internationally competitive capital market”.
It is recommended that the SZSE should be adhere to the market-oriented, the rule-of-law-oriented, internationalization-oriented development trend, increase the support for innovative companies, vigorously promote the ChiNext reform, optimize the multi-level market system, highlight the characteristics of the new economy and new industries, continue to improve the product system of the Shenzhen market, and achieve a balanced development of the bond, fund, and derivatives markets. It was also suggested that SZSE should further improve the market basic operating mechanism, actively embrace modern technologies such as big data, artificial intelligence, and comprehensively increase the level of scientific and technological intelligence.
As a director of the membership and the person in charge of the member unit, I will fully support all aspects of the work of the SZSE. At the same time, I also urge all members to join hands with the SZSE to work together to forge ahead, jointly promote capital market reform, innovation and development, and serving the implementation of the “Five-in-One” overall layout and the “Four-Pronged Comprehensive Strategy” layout, and make due contributions to the full implementation of the objectives and tasks set by the 19th CPC National Congress.
