To Prevent Illegal And Illegal Wealth Creation, CSRC To Curb Improper Stock Taking Of Employees Leaving The System

Facing inward, the CSRC has set up new rules to strictly prevent employees leaving the system from illegally creating wealth.

On May 28, China Securities Regulatory Commission (CSRC) issued the guidelines on the supervision of stock taking behavior of system leavers (hereinafter referred to as the "guidelines"), which was formally implemented from June 1.

According to the requirements of the guidelines, the staff leaving the CSRC system who seek investment opportunities by taking advantage of their original positions, transferring interests in the process of entering shares, taking shares during the prohibition period of shares, taking shares as unqualified shareholders, illegal and illegal sources of funds, etc., are considered as improper shares. The intermediary institution shall conduct a comprehensive check on whether the shareholders of the enterprises to be listed have improper shares. If the shares are not properly invested, they shall be cleaned up in time.

Some people close to the regulator said that the release of the guidelines is an important supplement to the guidance on the application of regulatory rules on information disclosure of shareholders of enterprises applying for initial listing issued in February 2021, aiming to strengthen the supervision of shareholders of enterprises to be listed, and strive to prevent illegal "wealth creation".

The implementation of "target management" on the improper stock ownership of the system's resigned personnel

As a matter of fact, as early as April this year, the CSRC disclosed that it was working hard to make up for the shortcomings of the system and systematically regulate the stock taking behavior of the resigned personnel.

At that time, there was a market rumor that the regulatory authorities once again conducted additional checks on some shareholders with special identities in the proposed IPO projects. These special shareholders "strictly controlled" by the regulatory authorities included former officials who had worked in the CSRC system and former IEC members who had served in the IEC.

In this regard, on April 19, the CSRC refuted the rumor, saying that for IPO applications involving system leavers investing in shares, the CSRC normally accepted them, and strictly promoted the examination and review procedures in accordance with the law. However, the CSRC also stated that it would conduct a comprehensive investigation on the enterprises under examination, strengthen the verification and disclosure of those who have left the company systematically and become shareholders, and strictly check and verify the situation. Earlier, the CSRC also required issuers and intermediaries to report on the situation of the stock taking of employees who left the Securities Regulatory Commission system.

The guidance issued this time is the implementation of relevant regulatory ideas.

Specifically, the guidelines first define the situation of improper investment, including but not limited to: using the influence of the original position to seek investment opportunities; There is benefit transfer in the process of equity participation; To become a shareholder during the prohibition period; As an unqualified shareholder; The source of the equity capital is illegal. Among them, the prohibition period for shares refers to within three years after the resignation of the staff at the deputy department level (middle level) or above of the CSRC system, and within two years after the resignation of other staff.

In order to curb the illegal share taking behavior of the staff leaving the Securities Regulatory Commission system, the guidelines strengthen the verification responsibility of intermediary agencies.

According to the guidelines, in the process of carrying out shareholder information verification, intermediary institutions should comprehensively check whether there is a situation in which employees who leave their posts in accordance with the guidelines and determine whether they are improper shares. If they are improper shares, they should be cleaned up.

When submitting an application for listing or listing, the issuer and the intermediary institution shall make a special explanation on the verification of the stock taking by the quitters of the CSRC system. After submitting the application, if it is found that the shares are improperly invested or questioned by the major media, the intermediary institution shall check and report in time.

In addition, the guidelines also aim to strengthen audit supervision and establish an independent review system, that is, for the IPO or listing projects involving the stock ownership of the staff leaving the CSRC system, the audit process should be reviewed to ensure the fairness and fairness of the audit process and compliance with the law. If any clues of violation of laws and disciplines are found, they will be handed over to the relevant departments for handling.

Li Weiyou, deputy director of the issuance department of the CSRC, said that the review of the audit process of the IPO projects involving the ex employees' shares is to better implement the legal compliance, fairness and fairness of all market participants. Li Weiyou specially pointed out that according to the system, the review will be started after the completion of the audit progress, and the review time will not be included in the time limit of audit registration.

Tian Lihui, President of the Institute of financial development of Nankai University, said that it is easy to transfer interests and form unfair competition when the staff leaving the Securities Regulatory Commission invest in the companies to be listed. Based on the personal connections of the resignants in the system, some of them want to transfer their stocks to the quitters in the system at a low price for rent-seeking, so as to seek relaxation of audit or fast track, thus damaging market equity and infringing the interests of investors. Even, after using their power to pave the way for individual companies to be listed, a very few civil servants take the initiative to resign in order to avoid legal punishment, so as to obtain the return of the companies to be listed through the amount of stock investment, thus forming a new type of corruption.

Three types of shares will be exempted from the new rules

At the same time, the guidance also clarifies the circumstances of exemption from the new rules.

According to the regulations, the provisions of the guidelines will not apply to the employees who leave the Securities Regulatory Commission system to obtain shares through the following three kinds of situations. Including: the provisions of the guidelines are not applicable to those who have left the company to acquire shares through listed companies or enterprises listed on the new third board; If the resigning personnel are shareholders who are increased by the issuer's participation in the public offering of shares to non-specific qualified investors through call auction, continuous bidding, market making and other public trading methods during the listing period of the new third board market, the provisions of the Guidelines shall not apply; The resigned personnel belong to the shareholders who have acquired the shares of the issuer due to inheritance, enforcement of court judgment or arbitration award, and the provisions of the guidelines are not applicable.

"The regulation still considers that the share price of the secondary market through the new third board is relatively fair, and the existing system does not leave sufficient space for interest transmission. In addition, in the future, the listing of new third board companies is more to meet the substantive threshold requirements of the science and technology innovation board and the growth enterprise market, which is different from the IPO issuance and examination committee mode, and the power rent-seeking space is relatively small. " For the exemption from the guidelines, senior investment banks in Beijing pointed out.

In addition, the guidelines also specify the new and old separation arrangements, which means that the Securities Regulatory Commission system personnel who have left their posts before the new rules are issued are not applicable to the provisions on clearing up the prohibition period of shares, but should be checked and explained in accordance with the requirements of the guidelines.

It is worth mentioning that on the same day, the relevant person in charge of the CSRC also responded to the new problem of penetration verification of IPO shareholder information disclosure.

The CSRC pointed out that recently, some intermediary agencies have expanded the scope of verification for the purpose of exemption. Some shareholders can not penetrate the verification, and some shareholders with a small proportion of shares have to check, which increases the burden of enterprises.

Therefore, in the next step, the CSRC will, on the one hand, adhere to the principle of substance over form in the process of shareholder penetration inspection, and effectively prevent the occurrence of such situations as the use of listing for profit transfer and illegal "wealth creation" and on the other hand, try to quantify the principle of importance, Intermediary agencies can normally promote the audit after providing opinions based on facts. At the same time, we should also correct the negative tendency of exemption and simplification in the verification work of intermediary agencies.