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the investment banking business quality evaluation method will be changed again.

recently, china securities journal reporters learned from brokers that the securities association of china has revised the "evaluation methods for the quality of investment banking business of securities companies" (hereinafter referred to as the "evaluation methods") and solicited opinions from brokers. the above-mentioned document is the second revision since its release in 2022.

this revision focuses on three major aspects. first, it improves the evaluation indicators for the quality of stock recommendation business and the performance of duties and responsibilities. the reporter noticed that the main purpose is to clarify the relevant deduction standards. for example, projects that are subject to on-site supervision and apply for termination before the regulatory authorities enter the market must 100 points will be deducted from the basic points. the second is to optimize the indicator of “investment banks supporting high-level technological self-reliance and self-reliance”. the third is to add special evaluation indicators for "new stock valuation and pricing capabilities", including the breakout indicator and bid report valuation indicators that have attracted much market attention, in order to guide underwriters to rationally set prices.

"withdrawing materials during the registration process" or deducting the basic points of the project

according to the previous "measures for the quality evaluation of investment banking business of securities companies", the investment bank evaluation index system includes three parts: internal control evaluation (basic score of 25 points), practice quality evaluation (basic score of 75 points) and evaluation adjustment (maximum 15 points).

among them, the "practice quality evaluation" with a relatively high weight mainly includes detailed indicators such as penalties, negative audit results, and negative behavior records.

to this end, the securities association of china recently revised the "measures for the quality evaluation of investment banking business of securities companies" to improve the evaluation indicators for the performance of duties and responsibilities in terms of "practice quality evaluation".

according to the china securities association document obtained by china securities journal from the industry, it is mainly divided into five points:

first, the points deduction standards for major negative matters in sponsored projects are clarified. that is, when the issuer and relevant personnel of the sponsored project, the sponsoring institution and relevant personnel are subject to criminal punishment measures by judicial authorities, administrative punishment measures are taken by the china securities regulatory commission due to the project, or there are circumstances that seriously damage the interests of investors or the public interests of society, the 100 points will be deducted from the basic score for each project.

when a sponsored project has the issuer and relevant personnel, the sponsoring institution and relevant personnel being investigated by judicial authorities due to the project or being investigated by the china securities regulatory commission for suspected violations of laws and regulations, the project will be deducted 80 points from the base point.

second, the china securities association has improved the points deduction standards for the termination of review of sponsored projects. brokerage china reporters noticed that it was newly clarified that when a sponsored project is terminated due to issues found during the registration process that affect issuance and listing conditions, information disclosure requirements, etc., 100 points will be deducted from the basic points of the project.

it is reported that since this year, many ipo projects have been terminated due to "just a shortcut" in the registration process. some brokers and investment bankers believe that such projects are usually found to have "flaws" by supervision and need to implement rectification; reports in the industry and sharp declines in performance will take time to eliminate the negative impact.

third, when a sponsored project is “identified as the subject of on-site supervision or on-site inspection and the review is terminated before admission”, 100 basic points will also be deducted. from this regulation, it can be seen that supervision will strictly crack down on “withdrawal upon inspection”. behaviors such as "dismissal at the first sign of supervision". when a sponsored project is terminated for review due to failure to respond to review inquiries or submit updated financial information within the specified time limit, 60 points will be deducted.

fourth, the china securities association has improved the scope and deduction standards for negative behavior records of sponsored projects, and set an upper limit for total deductions. according to documents obtained by china securities journal, the new revisions include "failure to fully disclose litigation, guarantees or arbitrations and other matters that have an impact on the issuer", "inaccurate industry classification", "failure to fully disclose financial investments, previous fundraising" the negative behavioral records of "fund use, etc." show the determination of the regulatory authorities to strictly enforce the responsibilities of intermediaries.

fifth, the china securities association appropriately adjusts the points deduction standards for administrative regulatory measures and self-regulatory regulatory measures. for example, if relevant personnel of a sponsoring institution are subject to supervisory measures such as "not accepting the issuance and listing application documents and information disclosure documents submitted by them within a certain period of time" due to the sponsorship project by the stock exchange, the china securities association will deduct 100 basic points.

highlight the guiding role of new service productivity

at the beginning of this year, the china securities regulatory commission made many statements and planned multiple measures to support the high-level development of technology companies and serve new productivity. to this end, the "sixteen measures for the capital market to serve the high-level development of science and technology enterprises" and "eight measures for deepening the reform of the science and technology innovation board to serve the development of scientific and technological innovation and new productivity" were issued.

as sponsors play an important role in connecting capital and the real economy in the capital market, how to further optimize the functional orientation of investment banks in supporting high-level technological self-reliance has become a topic explored by regulatory authorities.

in the category of "evaluation adjustments" in the aforementioned evaluation system, the china securities association has recently adjusted the special evaluation indicators of "investment banks support high-level technological self-reliance and self-reliance".

the china securities association stated that two new standards will be added to projects sponsored by investment banks:

first, as a typical representative of new quality productivity, it has made breakthroughs in key core technologies in new industries, new formats, and new technologies.

second, the core technologies possessed are recognized by the national competent authorities as having an international leading and leading role or are of great significance to the national strategy.

it is reported that the maximum score for the above-mentioned "service high-level science and technology self-reliance and self-reliance" indicator is 10 points.

"new stock valuation and pricing ability" has been newly included in the assessment

another highlight of this revision is the addition of a special evaluation indicator of "valuation and pricing power of new shares" in the aforementioned "evaluation adjustment" category. in response, the china securities association said it would urge securities companies to improve their pricing capabilities for new shares and improve the quality of new share investment value reports.

it is reported that this special indicator mainly counts projects that are issued through inquiry methods under the registration system. this indicator has a maximum score of 5 points and consists of two standards. the first is the pricing power evaluation standard, which mainly considers situations such as breakouts and issuance price deviations; the second is the bid report quality evaluation standard, which considers valuations, profit forecasts, etc. .

the china securities association stated that the setting of the breakout indicator mainly takes into account the market outlook during the issuance of new shares, which is the core factor that investors are most concerned about and is directly related to their vital interests.

according to the document, if the number of unfinished projects/the number of all projects is greater than 60%, the score of the relevant investment bank will be increased by 1 point; if a single project's breach rate is more than twice but there is no over-funding, 0.5 points will be deducted for a single project; a single project's breach rate is higher than that of the industry if the break range is twice the average and there is over-raising, 1 point will be deducted for a single event.

in terms of valuation indicators, considering that the bidding report plays an important reference role in pricing new shares, reasonable valuation pricing can further protect the legitimate rights and interests of investors. according to the document, the valuation deviation of the bid report = (weighted average closing price - the average valuation of the bid report) / the average valuation of the bid report. if there are 5% projects among the securities company's current year projects with a low absolute value of valuation deviation in the bid report, 0.5 points will be added to each project; if there are 5% projects with a high absolute value of valuation deviation in the bid report, 0.5 points will be deducted for a single project. .