New Regulations Of CSRC Urge Securities Firms To Return To Their Positions And Fulfill Their Responsibilities

Under the registration system, a special chapter is added to the supervision of investment banking business.

On July 9, the China Securities Regulatory Commission (CSRC) issued the guiding opinions on urging securities companies to return to their original positions and fulfill their responsibilities in investment banking business under the registration system (hereinafter referred to as the opinions), which will be implemented from the date of promulgation.

"Since the pilot registration system, the internal control level of securities companies and the practice quality of investment banking business have improved, but many problems have also been exposed. Some securities companies have not really possessed the concept, organization and ability to match the registration system. The internal control is not perfect, the project selection is not prudent, and the inspection is not strict, which affects the quality of listed companies and the image of the industry." Ren Shaoxiong, deputy director of the institutional Department of the CSRC, pointed out that it is necessary to comprehensively implement policies and tackle both the symptoms and root causes, so as to promote the continuous improvement of the practice quality of securities companies, and actively create conditions for steadily promoting the reform of the whole market registration system.

Specific to the main content of the "opinion", including five aspects: establish and improve the working mechanism, enhance the regulatory force; Improve the system and rules, improve the standardization level of supervision and practice; Comprehensively strengthen the three-dimensional accountability and purify the market ecology; Third, strengthen the internal control of the organization; We should improve the restraint and incentive mechanism and promote the recommendation agencies to return to their original positions and fulfill their responsibilities.

SFC. Visual China

Perfect the system rules and clarify the boundary of responsibility

To supervise and urge the securities investment banks to return to their positions and fulfill their responsibilities, the relevant systems are bound to go ahead.

In the opinion, it is clear that the system and rules will be improved and the standardization level of supervision and practice will be enhanced. In terms of specific content, the CSRC will strengthen the construction of investment banking practice standard system, improve the supervision rules or mechanism arrangements of investment banking business such as guidance acceptance, due diligence, working papers, information disclosure, on-site inspection and on-site supervision, and optimize the standards and procedures of guidance and acceptance without new access.

In addition, the supervision will further clarify the responsibility boundary of securities companies, accounting firms, law firms and other intermediary agencies, and form a mechanism of performing their own duties, assuming their own responsibilities and restricting each other.

The CSRC also disclosed in the opinions that it will timely revise and improve the on-site inspection regulations and on-site supervision guidelines for IPO, further clarify the inspection and supervision standards, timely report the inspection and supervision results, and improve the transparency.

In addition, the issuance and underwriting system is expected to be improved. To be specific, the CSRC should strengthen the supervision and inspection of quotation institutions and securities companies to standardize the quotation and pricing behavior. We will improve the relevant rules of stock issuance pricing, underwriting and placing. We should evaluate and improve the business norms of corporate bond underwriting, and focus on preventing "structured issuance" and other illegal activities.

In terms of the practice standards of investment banking business, the opinions pointed out that it would improve the practice norms of securities companies such as recommendation and underwriting, due diligence of financial consultants for major asset restructuring, working papers, etc., give full play to the professional advantages of intermediary agencies, and moderately reduce the duplication of work between securities companies and other intermediary agencies. In addition, the Opinions also focus on the needs of investors to improve the pertinence, effectiveness and readability of information disclosure.

"It is true that there is a lot of duplication between the sponsor and other intermediary agencies, such as the basic financial verification work such as letter of credit, inventory supervision and so on. The core responsibility of the sponsor institution should not simply repeat the same verification work as accountants and lawyers, but focus on improving the investability of listed companies. " Ma Yao, head of CITIC Securities investment banking business, pointed out.

It is worth mentioning that in addition to improving the rules and regulations related to IPO, the Opinions also clearly establishes an on-site inspection system for bond audit and registration.

"In fact, this one is more representative of the regulatory attitude. In the past, there was no on-site inspection on bond issuance." There are registered accountants in charge of IPO business in South China.

However, some close to regulators pointed out that it is not only the investment banks' own problems, but also the regulatory system and market constraints.

People close to the regulatory authorities pointed out that it is not only the investment banks' own problems, but also the regulatory system and market constraints. Therefore, it is also clear in the "opinions" that a sound working mechanism will be established and improved to enhance the regulatory force. Specifically, the Securities Regulatory Commission should establish a regulatory cooperation mechanism for the investment banking business of securities companies, strengthen overall coordination, strengthen supervision and inspection, and enhance the regulatory joint force and regulatory efficiency.

"Declaration means responsibility", strengthen supervision and accountability

In January 2021, China Securities Regulatory Commission (CSRC) officially issued the regulations on on on-site inspection of first-episode enterprises. Less than two days after the promulgation of the new rules, the Securities Industry Association organized the spot inspection and drawing of trust paper quality of enterprises applying for IPO. Among the 407 companies applying for the science and technology innovation board and the gem, 20 companies were selected.

However, under the pressure of supervision, 16 of the 20 enterprises selected for on-site inspection announced their withdrawal of IPO applications, with a withdrawal ratio of 80%.

"China Securities Regulatory Commission (CSRC) and Shanghai Shenzhen Stock Exchange have been very angry about the high proportion of IPO withdrawals this year. Recently, the Securities Industry Association organized another round of on-the-spot inspections, and 19 enterprises were selected. Everyone is very concerned about the withdrawal of these enterprises." Beijing area head securities investment bank personnel said.

Prior to this, Yi Huiman, chairman of the Securities Regulatory Commission, also commented on the high proportion of withdrawal of declaration in the on-site inspection of IPO, saying that "according to the preliminary information, it is not to say how big the problems of these enterprises are, nor is it because of the false account withdrawal. One of the important reasons is that the quality of practice of many sponsor institutions is not high.".

Because of this, the "opinion" released this time has a lot to say about Comprehensively Strengthening the three-dimensional accountability system.

Specifically, in the front-end inspection work of IPO, the opinions requires Shanghai and Shenzhen exchanges to improve the quality of inquiry and strictly implement the normalized audit quality inspection mechanism. In particular, the exchange should take timely self-discipline supervision measures for securities companies' investment banking business violations, and make good use of such measures as temporary non acceptance of documents. In the future, the exchange will also realize mutual recognition of relevant investment bank violations.

On the other hand, the Opinions also proposed to strengthen the supervision and accountability.

Ren Shaoxiong, referring to the contents of the opinions, said that in the future, the CSRC will further expand the scope of on-site inspection and supervision, adhere to the principle of "declaration means responsibility". For the items withdrawn after receiving the on-site inspection or supervision notice, the CSRC and the exchange will organize verification according to law, and resolutely eliminate the behavior of "breaking through the customs with illness".

In addition, the opinions will also focus on the establishment of a standing book on illegal investment banking business. Special inspection shall be organized at least once a year for securities companies with high withdrawal rate of investment banking projects, high default rate of corporate bonds, low evaluation of practice quality and many problems reflected in the market; Administrative supervision measures should be taken in accordance with the law; If it meets the requirements, it shall be investigated and filed for punishment according to law; We should make good use of such measures as suspending business and identifying them as inappropriate candidates as required by laws and regulations; Those suspected of committing a crime shall be transferred to judicial organs.