Investors, please take note! The rules for offline new stock issuance will be greatly changed!
2024-08-28
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China Business News (Reporter Wang Tongxu)In order to thoroughly implement the new "Nine National Regulations" and the "Eight Sci-Tech Innovation Board Regulations" of the China Securities Regulatory Commission, and continuously strengthen the self-discipline management of offline investors, the China Securities Association recently drafted the "Decision on Amending the Rules for the Management of Offline Investors in Initial Public Offerings of Securities (Draft for Comments)" (hereinafter referred to as the Draft for Comments), and recently began to solicit industry opinions. The revised new regulations will be implemented from October 1 this year.
A securities trading outlet. (Photo provided by CNSPHOTO)
Strengthening professional requirements for investors
It is understood that the revision of the "Rules for the Management of Off-Network Investors for Initial Public Offering of Securities" involves a total of 30 articles, of which 22 articles have been revised, 6 articles have been added, and 2 articles have been deleted.
Specifically, the focus of this revision is to strengthen the professionalism of offline investors, optimize registration conditions, coordinate with the market value allocation system of new shares on the Science and Technology Innovation Board, and improve investor suitability management and behavioral management.
"The implementation of the new regulations will help create a more fair and transparent market environment, reduce negative public opinion and market volatility caused by improper bidding behavior, and protect the interests of small and medium-sized investors." Yuan Shuai, founding sponsor of the New Wisdom New Quality Productivity Living Room, told China Business News.
The draft for comments strengthens the professional requirements for off-market investors. As participants with professional research and pricing capabilities and playing an important role in price discovery in the primary market of new stock issuance, off-market investors’ price inquiry and subscription behaviors have an important impact on new stock issuance, which is related to the vital interests of issuers and other investors, and also to the success or failure of new stock issuance. Therefore, off-market investors should conduct in-depth research on issuers, make professional value judgments, and effectively play the role of market entities.
In order to further improve the professional capabilities of off-market investors, the draft for comments further strengthens the professional capabilities and remuneration constraints of investors in the registration conditions and business development process, and clarifies that institutional investors should establish a remuneration assessment mechanism for the initial public offering of securities, set up risk performance assessment indicators for initial public offering securities, and conduct retrospective verification of the objectivity and prudence of quotations. The relevant indicators or verification results should be included in the deferred payment or return mechanism for performance remuneration of researchers and investment decision-makers, and reported to the association regularly. In addition, the draft for comments clarifies that general institutions and individuals specializing in securities investment business can apply to register as off-market investors.
Setting risk performance evaluation indicators
Yuan Shuai believes that a new item added to the draft for comments, requiring off-market institutional investors to set up risk performance assessment indicators for initial public offering securities, is a move that has many meanings and impacts.
"By setting risk-performance assessment indicators and retrospectively verifying the objectivity and prudence of quotations, we can encourage off-market institutional investors to be more cautious and objective when quoting, reduce improper behaviors such as blindly following the trend or manipulating the market, and thus improve the rationality of pricing and market stability of new stock issuances. Requiring off-market institutional investors to establish a remuneration assessment mechanism and incorporate relevant verification results into the deferred payment or refund mechanism for performance-based remuneration will help strengthen internal management and supervision and ensure that the behavior of pricing team members complies with regulations," said Yuan Shuai.
Financial commentator Zhang Xuefeng told reporters that this mechanism can establish a closer link between remuneration and responsibility, so that investors no longer focus only on short-term gains, but take more long-term responsibilities. In addition, the requirement of "regularly reporting to the China Securities Association" has further strengthened supervision, improved market transparency, and helped to enhance the standardization and fairness of the market.
In addition, the new regulations further optimize the registration conditions for offline investors and strengthen the integrity constraints and sustainable operating capacity requirements for offline investors. In the draft for comments, the registration requirements for offline investors have been added that they have not been included in the list of dishonest persons subject to enforcement, the list of abnormal operations, the list of serious illegal dishonest persons in market supervision and management in the past 12 months, have not had major operating risk events in the past 12 months, and have not been ordered to suspend business for rectification, designated other institutions for custody, takeover, administrative reorganization and other risk disposal measures in accordance with the law.
Strictly control the registration port and strengthen supervision
In order to implement the requirements of strict supervision and management, the new regulations clearly state that the registration port must be strictly controlled, the construction of the off-market investor team must be strengthened, and the application for registration of off-market investors and off-market investors of allotment targets that deliberately conceal important circumstances or provide false materials will be rejected or refused to register, and they will be restricted from submitting another application within one year.
Yuan Shuai said that for off-market investors who violate the regulations, the new regulations will adopt more stringent punishment measures, such as restricting their participation in off-market inquiry and allotment business. This move will increase the cost of violations and form an effective deterrent.
"Through a series of reform measures, we can enhance the market's confidence in the pricing mechanism for new share issuances and increase the market's stability and attractiveness. The implementation of the new regulations will also encourage offline investors to continuously explore and experiment with business models and product innovations, injecting new vitality into the long-term and healthy development of the market," said Yuan Shuai.
Zhang Xuefeng believes that although this rule change is aimed at strengthening supervision and risk control, it is also necessary to balance market vitality and regulatory intensity. Overly strict performance appraisal and retrospective mechanisms may suppress the enthusiasm of some institutional investors in the short term, especially in the IPO (initial public offering) process of innovative enterprises and high-risk enterprises, which may cause some investors to be more conservative, thereby affecting market financing efficiency. Therefore, how to find a balance between risk prevention and control and market vitality will be a key issue that needs to be paid attention to in the future policy implementation process.
