It Takes A Long Time To Implement Registration System.

One of the key tasks of the party's the third Plenary Session of the 18th CPC Central Committee document on capital market reform is to promote the reform of stock issue registration system.

Registration system reform involves the revision of the securities law. In order to make the reform unrestricted by the revision process of securities law, in December 27, 2015, the eighteenth session of the Standing Committee of the Twelfth National People's Congress deliberated and passed the motion on the decision of the State Council to adjust the relevant provisions of the Securities Law of the People's Republic of China in the implementation of the stock issuing registration system reform.

This means that the legal obstacles to registration reform have been basically solved.

It takes a long time to implement registration system.

Registration system refers to the disclosure of all information and information related to the issuance of securities by the issuing applicant according to law, which is made into a legal document and sent to the competent authority for examination. The competent authority is only responsible for examining whether the information or information provided by the applicant has fulfilled the obligation of information disclosure.

The most important feature is that under the registration system, the securities issuance examination institutions only conduct formal examination of registration documents and do not make substantive judgments.

If the mode of disclosure is appropriate, the securities regulatory authority shall not refuse to register by issuing the price of securities or other conditions unfairly, or because the company's prospects are not reasonable.

Registration system advocates afterwards control.

The core of registration system is as long as the material provided by the issuer does not exist false, misleading or omission. The investment value of the securities is judged by the investors themselves.

The core of registration system reform is to straighten out the relationship between the government and the market. The overall goal is to establish a stock issuing and listing system with market orientation, responsibility in place, disclosure as the basis, expected clarity and strong supervision.

Registration system is a more market-oriented stock issuing system. It can not only solve the problems caused by information asymmetry between issuers and investors, but also regulate the boundary of responsibilities of regulatory departments, so as to avoid excessive intervention by regulatory authorities.

First of all, let the stock price return to normal level needs a process.

At present, the valuation of different types of stock in China's stock market is obviously divided: the average valuation level of the blue chips is about 10 times, which is close to the valuation level of other countries in the world, but the valuation of the small and medium sized board and the gem is seriously deviating from the reasonable level.

For the so-called growth stocks in emerging industries, the valuation of 15 times earnings is reasonable, higher than the 30 times price earnings ratio is abnormal, and the average valuation of the GEM market in 2015 is 100 times earnings per share, even if the gem and small and medium-sized boards have fallen by 50% from the high level, but the valuation level is still very high. As of February 29, 2016, the valuation of small and medium board and gem is 48 times and 72 times respectively.

Why is the valuation of the medium and small board and the growth enterprise board high and the valuation of the blue chips is relatively reasonable? The main reason is that the stock value of the domestic stock market is "shell value".

It is estimated that the price of each shell in the market is about 2 billion yuan. The smaller the share capital of the listed company is, the higher the "shell value" per share is. If the total share capital of a listed company is 100 million yuan, the shell value of each shell is 20 yuan.

Most of the capital stock of small and medium sized boards and GEM companies are small, resulting in the stock price exceeding the reasonable valuation range.

The premise of the existence of "shell value" is the scarcity of stocks. If the eligible companies can be listed, the "shell value" of the stock will disappear naturally.

In short, if the registration system is implemented, the SME board and the growth enterprise market will be revalued and priced.

The return of stock prices to a reasonable level with high valuation requires a process and can not be achieved overnight. If panic happens, it will lead to market panic selling and lead to systemic risk.

How to realize the rational return of stock price?

Second, the structure of investors and the behavior of investors need to be adjusted.

The biggest feature of China's stock market is retail investors. From the data of the securities registration center, by the end of 2015, the number of investors in the stock market is about 99 million 100 thousand, of which 72.6% of investors are less than 100 thousand yuan, and 21.6% of investors from 100 thousand to 500 thousand yuan, that is, 94.2% investors are less than 500 thousand yuan, which is a typical market dominated by small retail investors.

Retail investors like to chase up and down, resulting in a strong market speculation and big fluctuations in stock prices.

The behavior of institutional investors is more rational than that of individual investors, especially for the pricing of new shares.

Only when institutional investors dominate, the pricing of new shares can go forward in a rational direction.

The core idea of registration system is to hand over the dominant power of new share pricing to the market. If investors in the market are dominated by retail investors, the result is likely to be a conspiracy of a few institutional investors and listed companies to deceive retail investors, and retail investors will become the sacrifices of the new system.

Third, we must have a sound protection mechanism for investors' interests.

Under the registration system, the IPO of enterprises will be handed over to the market by the SFC. It is necessary to improve the protection mechanism of investors' interests so that investors can take measures to safeguard their legitimate rights. When a listed company or other participants have irregularities, investors can use these channels to recover justice for their losses.

In December 27, 2013, the general office of the State Council issued opinions on Further Strengthening the protection of the legitimate rights and interests of small and medium investors in the capital market (the "nine new countries"), which provided a full range of rights and interests protection for small and medium-sized investors from the following aspects: improving the appropriateness system of investors, optimizing returns, protecting the right to know of small investors, improving the voting mechanism of small and medium investors, establishing a diversified dispute resolution mechanism, and improving the compensation mechanism.

Recently, the Shanghai Stock Exchange issued the guidelines for the contents and format of the notice of stock listing, detailed rules for the implementation of the listing of securities on the Shanghai Stock Exchange, and guidelines for the issuance and listing of securities business (revised in 2013).

According to the new regulation, the issuer and its controlling shareholder should make public commitments in the notice of listing. There are false records, misleading statements or major omissions in the prospectus issued by the issuer. When deciding whether the issuer meets the requirements of issuing and listing in accordance with the law, the issuer will repurchase all the new shares of the initial public offering according to law, and the controlling shareholder of the issuer will repurchase the original restricted shares that have been pferred.

The issuer should clearly repurchase the specific measures and prices.

At the same time, according to the regulations, if the sponsors and other securities service institutions produce and issue documents for the issuer's initial public offerings,

If losses are caused to investors, compensation will be made according to law.

The legal system for protecting the rights of small and medium investors in China's capital market is being gradually integrated. Compared with the previous approval system, the demand for listed companies is even higher. This is obviously a severe constraint on the listed companies.

The protection system of stock investment interests has been introduced, but it still takes time and practice to test whether the system can really play a role.

From the above analysis, we can see that the current conditions for implementing the stock issuance registration system are not yet available. Regulators should make this point clear to the market so as not to cause unnecessary shocks and panic to the market.

However, a series of system construction can be carried out to create favorable conditions for the implementation of registration system and the healthy development of the stock market.

First, strengthen Securities Enforcement.

In essence, it is a credit economy. The key factor in the development of stock market is to maintain market credit with legal authority, so that offenders can get timely punishment.

It is no exaggeration to say that the efficiency of the judiciary determines the prosperity of the stock market.

The essence of registration system is information disclosure as the core and desalination of administrative examination and approval. If there is no close cooperation between the judicial system and the fake punishment and the necessary awe of the counterfeiters, the rashly implementation of registration system is equivalent to providing open and lawful deception opportunities for fraudsters.

Second, we should improve the governance structure of listed companies and strengthen the trust responsibilities of directors.

In many cases, are listed companies short of money? Do they need equity financing? People outside the company are hard to make judgments, but directors of professionals should understand.

Therefore, the most direct means to curb listed companies' malicious money is to implement the trust responsibility of all directors and their compensation system.

If a listed company has been idle for a long time after the large amount of capital has been invested, or the original planned investment project does not have the investment conditions at all, it can at least support the listed companies at that time.

The directors are incompetent and have not fully fulfilled the trust obligations of all shareholders.

Under such circumstances, the securities regulatory authorities should allow or encourage investors in the securities market to investigate the trustee liability of these incompetent directors through legitimate channels, so that those directors who participate in the refinancing scheme will bear the corresponding economic compensation liability.

As long as all directors can take personal responsibility for unreasonable money collection behavior, many listed companies will greatly weaken their money drive.

Third, we should vigorously develop institutional investors.

Institutional investors dominate the stock market to make the pricing more rational, which is one of the necessary conditions for the implementation of the stock issue registration system.

Since the third Plenary Session of the 18th CPC Central Committee, the entry threshold of the asset management industry has been significantly reduced. Under the impetus of interest rate liberalization, institutional investors are expected to develop rapidly, which is beneficial to the development of the stock market.