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on september 6, the china securities regulatory commission issued the "regulations on the supervision of resigned personnel of the china securities regulatory commission system buying shares in companies to be listed (trial)" (hereinafter referred to as the "regulations on the supervision of resigned personnel"), which put forward further supervision requirements for resigned personnel of the china securities regulatory commission system to buy shares in companies to be listed. the new regulations will be officially implemented on october 8.

china securities journal reporters learned that the "regulations on the supervision of resigned personnel" is intended to strictly regulate the "revolving door" between government and business, and strictly prevent resigned personnel from using their public power while in office and their influence after leaving to obtain improper and illegal benefits. in the next step, the csrc will continue to strictly control the entry gate, strengthen cooperation with the discipline inspection and supervision departments, and resolutely transfer clues of violations of laws and disciplines to relevant departments for handling, so as to maintain a fair, just and open issuance supervision order.

stricter supervision requirements for former employees to buy shares

the "regulations on the supervision of resigned personnel" has a total of 12 articles, which make specific provisions on the circumstances in which resigned personnel may make improper shareholdings, the verification requirements of intermediary institutions, the work process arrangements, the scope of regulation of resigned personnel, and the definition of the prohibited period for shareholdings.

according to the regulations, for companies applying for an initial public offering of stocks or depositary receipts and listing them on the shanghai and shenzhen stock exchanges, or publicly issuing stocks to unspecified qualified investors and listing them on the beijing stock exchange, intermediary institutions must conduct a thorough review of the shareholding of former employees, determine whether it is an improper shareholding and issue a clear opinion. the new regulations put forward stricter regulatory requirements in three aspects based on the "guidelines for the application of regulatory rules - issuance category no. 2" (hereinafter referred to as "guidelines no. 2").

first, the prohibition period for resigned personnel to purchase shares will be extended. on the basis of further extending the prohibition period for resigned personnel to purchase shares, the requirements will be highlighted for resigned personnel who have served in issuance supervision positions within five years before leaving, or were related to resigned personnel who were under the supervision of the association before leaving.

second, the scope of strict supervision of resigned personnel will be expanded. the scope of intermediary agency verification will be expanded from the resigned personnel themselves to their parents, spouses, children and their spouses.

third, higher requirements are put forward for the verification of intermediary institutions. intermediary institutions shall verify the investment background of relevant personnel, fairness of prices, source of funds, authenticity of exit, etc. and express clear opinions. the csrc shall verify and review the relevant work.

information can be verified through the former employee database

the reporter learned from relevant people of the csrc that in order to ensure the implementation of the system, the csrc has established and improved the database of resigned personnel, which contains the information of relevant resigned personnel and their parents, spouses, children and their spouses. to facilitate the verification work of intermediary institutions, the database has set up query ports in all dispatched institutions of the csrc. intermediary institutions can apply for relevant information at the dispatched institutions as needed.

in terms of intermediary agency verification, the new regulations put forward clearer regulatory requirements in terms of verification scope and content. if there are resigned personnel and their parents, spouses, children and their spouses holding shares, intermediary institutions must verify four aspects in detail and express clear opinions. first, the relevant investment background, the ways and methods of obtaining investment opportunities, and whether they are related to the influence of the original position; second, the fairness of the price, whether there is a significant difference with the comparable price of the same period, whether the pricing basis is reasonable, and whether there is a situation of obvious unfairness or benefit transfer; third, the source of funds, whether it is self-owned funds, matching with personal income and family background, whether there is any equity holding behavior, etc.; fourth, the authenticity of the exit, such as whether the relevant holdings have been cleared, the path and method of clearing shares, the source of funds of the transferee, the fairness of the price, and the payment of consideration, etc.

according to the verification requirements of the intermediary institutions, if there are improper shareholdings such as former employees buying shares during the prohibited period or using their original positions to obtain investment opportunities, the issuer needs to clean up the relevant shareholdings; if there are no improper shareholdings, the former employees need to make relevant commitments. after the sponsor and the issuer's lawyers fully verify and express their opinions on the relevant issues, they will issue and submit special explanations. on this basis, the stock exchanges will promote the initial public offering review of the relevant companies in a normal and orderly manner in accordance with regulations. the csrc will verify the shareholding of former employees as needed, review the review and registration process, and transfer any clues of violations of laws and regulations to the relevant departments for handling.

strictly and strictly improve the management of resigned personnel

the csrc has always strengthened its regulatory requirements for former employees and attached great importance to the issue of former employees investing in companies to be listed. the current "guideline no. 2" was implemented in may 2021, which clearly requires intermediary institutions to conduct a thorough investigation of the shareholders of former employees in the csrc system, and stipulates improper shareholding situations. if relevant circumstances exist, they must be strictly cleaned up.

over the past three years, under the strict supervision of the regulatory authorities, the shareholding of former employees in listed companies has been effectively supervised. the number of newly-approved companies with former employees holding shares has dropped significantly; among the existing companies under review, the number and proportion of companies with relevant situations are very small. the review cycle of companies involving former employees is generally longer than that of general companies. the market generally feels that former employees will not only not receive "special care", but will be subject to stricter constraints.

"the rules are clear. issuers, intermediaries and relevant former employees can all check whether there are any problems and make timely corrections by referring to the requirements of the regulations on the supervision of former employees." market insiders pointed out that in the past few years, some companies that were to be listed and involved former employees' equity investment have been verified by intermediaries to meet the requirements of the rules and have been listed one after another after passing the review and registration. in general, the former employees' equity investment supervision system has fully played the role of strict supervision and strong constraints on the one hand, and on the other hand, it also supports the initial listing of companies that meet the requirements of the rules.

market insiders said that the promulgation and implementation of the "regulations on the supervision of resigned personnel" is an important measure for the csrc to implement the relevant requirements of the "several opinions of the state council on strengthening supervision, preventing risks and promoting high-quality development of the capital market" on "strictly and tightly improving the management of resigned personnel". it will be conducive to improving the credibility of supervision work, promoting the healthy development of the capital market, and maintaining the stable operation of financial markets and financial institutions.