news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

Tuchong Creative/Photos provided by Su Ke/Table creation by Zhai Chao/Graphics

Securities Times reporter Su Ke

Recently, a Securities Times reporter learned from a securities dealer that the China Securities Association (hereinafter referred to as "China Securities Association") plans to improve the public disclosure mechanism for negative evaluations of sponsors, and will solicit opinions from sponsor institutions for this purpose.

From the revised content of the "Securities Company Sponsorship Business Rules" (hereinafter referred to as the "Rules"), the China Securities Association plans to add information on withdrawn and rejected projects (i.e., withdrawal of application materials for projects under review or rejection at the meeting) on ​​the basis of the sponsor representative classification list A (comprehensive practice information). At the same time, a new sponsor representative classification list D (suspension of business category) will be added, such as announcing the names of sponsor representatives who are deemed inappropriate candidates, or announcing the names of sponsor representatives who have been fined and whose documents related to administrative licenses are temporarily not accepted.

Improve the negative review disclosure mechanism

A Securities Times reporter learned that the China Securities Association has sought opinions from sponsors on the revision of the "Rules" and required feedback before July 29.

It is reported that the "Rules" were first issued in 2020, establishing a self-discipline and restraint mechanism for sponsors and sponsor representatives. In September 2022, the China Securities Association revised the "Rules" to further improve the requirements for the professional responsibilities of sponsors, refine the provisions for self-discipline management of honest practice, and clarify relevant provisions such as internal checks and balances and accountability. Now the "Rules" have ushered in the second revision.

The China Securities Association stated that the purpose of this improvement is mainly to implement the new "Nine National Regulations" on "further establishing and improving the classification list system for practitioners and the professional reputation management mechanism", strengthen the reputation constraints on sponsors, implement the "reporting means taking responsibility" requirement to individuals, and improve the public disclosure mechanism for negative evaluations of sponsors.

Currently, the China Securities Association has established three types of classification mechanisms for the list of sponsors. Classification List A (comprehensive practice information) is intended to publicize the comprehensive practice information of sponsors; Classification List B (institutional verification category) is intended to publicize the list of sponsors whose professional ability level evaluation test results do not meet the basic requirements and whose professional ability level is explained and verified by their sponsoring institutions; Classification List C (penalty category) is intended to publicize sponsors who have been subject to administrative supervision measures by the China Securities Regulatory Commission, disciplinary sanctions by industry self-regulatory organizations, or self-regulatory management measures in the past three years.

According to the revision plan, the China Securities Association intends to adjust the sponsor representative classification list A (comprehensive practice information) and add sponsor representative withdrawal and rejection project information to the original list.

At the same time, the China Securities Association plans to add a new classification list of sponsors D (suspended business category), which mainly announces three situations: one is that they have been subject to administrative penalties by the CSRC in the past three years; two is that they have been subject to administrative supervision measures such as "determined as an inappropriate candidate" or "temporarily not accepting documents related to administrative licenses" by the CSRC during the above-mentioned period; three is that they have been subject to disciplinary sanctions such as "determined as unsuitable to engage in related business" or "temporarily not accepting signed documents" or "temporarily not accepting issued related business documents" by industry self-regulatory organizations during the above-mentioned period and are in the list of sponsors at the time.

Further strengthening of insurance agent reputation constraints

If the above-mentioned revisions to the "Rules" are implemented, it will undoubtedly have a deterrent effect on sponsors engaged in initial public offering (IPO) business.

An investment banker from a Shenzhen securities firm said that the professional information of sponsors disclosed by the China Securities Association is like a personal resume, reflecting their professional capabilities, project experience, etc., which can be checked and seen by peers or customers. According to the China Securities Association's Sponsor Representative Classification List A (Comprehensive Professional Information), the China Securities Association currently mainly displays: the sponsor's professional change record; professional ability level evaluation; information on projects that have been listed or listed or sponsored, including fixed increase, convertible bonds, etc.; continuous training; and professional reputation information.

"Although there have been many cases of securities firms withdrawing materials in recent years, which is basically the norm, if new information on project withdrawals is added, it will be stressful for insurance agents who withdraw a lot of projects." However, the person also said that insurance agents who withdraw a large number of projects are usually the backbone of the company and usually undertake many projects. It is expected that there may be many successful cases of relevant people.

According to incomplete statistics from Wind data by Securities Times reporters, among the top sponsors with the highest number of project rejections, CITIC Securities and Changjiang Securities each had one sponsor who rejected 6 IPO projects; Haitong Securities and Minmetals Securities each had one sponsor who rejected 5 IPO projects. Judging from their titles, some of the above sponsors are full-time or deputy positions in the company's investment banking department, and some are EDs (executive directors) or MDs (managing directors).

In recent years, regulatory authorities have attached great importance to the phenomenon of "withdrawal of IPO projects upon investigation" and "withdrawal of projects upon supervision". They believe that relevant project teams have a mentality of "passing the gate with problems", are lucky, are eager to "rush to occupy a position", adopt "delay tactics", and are accustomed to covering up problems until they are discovered in the review process, causing adverse negative impacts.

To this end, the regulatory authorities have taken a number of measures against sponsors, including interviews, special inspections, and incorporating the rejection rate into the professional quality evaluation. Now the regulatory authorities have implemented the "reporting and assuming responsibility" requirement on individuals, imposing strong constraints on the professional behavior of practitioners.

In addition, the new classification list D (suspended business category) of sponsor representatives to be added by the China Securities Association also has an important impact. Taking the "Jintongling fraud case" as an example, in the first half of this year, the Shenzhen Stock Exchange imposed a "qualification penalty" of 2 years on the two signing sponsor representatives who served as Jintongling's 2020 fixed increase project. In addition, in 2022, the sponsor representatives of several securities companies were subject to relevant penalties such as suspending the acceptance of documents related to administrative licenses for 3 months, or being identified as inappropriate candidates for 6 months. The above-mentioned list of relevant persons may be separately announced on the official website of the China Securities Association.

Since the beginning of this year, the intensity of supervision has been continuously strengthened, and financial fraud in the capital market has been investigated and dealt with quickly, with a number of major "fines" issued in succession. The regulatory authorities have taken strong measures to crack down on financial fraud, fraudulent issuance and other "cancers" in the capital market, with a significant deterrent effect, making supervision truly "with fangs and thorns."

Returning to the basics of beneficial business

2024 marks the 20th year of the implementation of the sponsor system, but the working environment for sponsors is no longer the same as before.

20 years ago, the sponsor system was opened, and the first batch of 609 sponsors made their debut and attracted much attention. For a long time, the signing fee of sponsors was quite valuable, on the one hand due to the approval system for IPOs, and on the other hand due to the low passing rate of the sponsor examination, which made them scarce.

However, when the registration system was launched, the "golden collar" halo of sponsor representatives gradually dimmed. In 2020, the regulatory authorities officially abolished the pre-qualification admission system for sponsor representatives, and the value of the sponsor channel plummeted. The era of enjoying high salaries due to policy dividends has become a thing of the past. When value returns, winning by professionalism is the only choice for survival and development.

After the threshold was lowered, the number of underwriters surged, exacerbating the situation of "too many people and too little porridge". As of July 17, there were 8,775 underwriters in the securities industry, but only 4,362 of them successfully issued or listed underwriting projects, accounting for about 49%. Now that the pace of IPOs has tightened, most underwriters are facing a shortage of projects. Some investment banks have laid off employees and cut salaries, reducing their business teams.

In the face of increasingly fierce market competition, insurance agents are faced with stricter regulatory and judicial environments. In the view of industry insiders, insurance agents should not only use their professional capabilities to enhance value discovery for enterprises, but also serve as gatekeepers of the capital market.

In April this year, the new "Nine National Regulations" proposed that the gatekeeper responsibilities of intermediaries should be further strengthened, and the "reporting means taking responsibility" should be adhered to, and illegal and irregular issues such as fraudulent issuance should be strictly investigated. The first-instance judgment of the Beijing Financial Court on Blue Mountain Technology this year also had a far-reaching impact on the insurance agent group: the signing insurance agent must bear joint and several liability within 40% with the sponsoring institution. This means that the quality of practice not only determines whether the insurance agent will face administrative penalties, but also determines whether he will bear huge civil compensation in the future.

A former chairman of a small and medium-sized securities firm said in an interview with a Securities Times reporter: "In the past, the risks and benefits of insurance agents were not matched. The vested benefits were high, but the responsibilities they had to bear were few. The direction of the registration system reform is correct, and it can greatly reduce the number of beneficiaries who want to gain something for nothing." He emphasized: "Insurance agent is just a symbol, just like a certified public accountant. You just need to meet the qualification threshold, and the concept of 'golden collar' should no longer be emphasized."