The Audit Commission Urgently Expanded 23 Candidates To Decode: Strengthening The Quality Of Trial Issuance And Promoting Registration System.

Song Wenhui diagram

The eighteenth session of the issuance examination committee is not far from the expiration, but it suddenly needs to expand.

On the evening of December 13th, the SFC announced that the SFC said that in order to ensure the smooth and steady progress of the issuance examination work, improve the quality of the issuance audit work, and strengthen the construction of the issuance examination committee, the SFC is hiring an additional member of the issuance examination committee in accordance with the principles of openness, priority and openness.

A broker who is close to the regulatory level has revealed that this measure is far from the current number of trial companies, but the current shortage of the members of the issuance committee is related.

In twenty-first Century, the economic news reporter found that the SFC issued a public notice of seven days for the 23 candidates to be elected to the issuance examination committee, including 4 from the auditing body, and the other 19 from the securities and futures commission system. In the view of the industry, the addition of the committee will further strengthen the IPO audit and form a strict control over the entry of the listed companies, which will also provide a basis for further paving the way for the registration system reform of the gem and even the main board market.

Strengthening audit efforts

In the industry view, the amendments to the members of the issuance examination committee are still related to the increasing pressure on the issuance of trial work.

"The current IPO progress is still relatively steady, no matter whether some key projects or meeting speed are not affected by the market situation, which shows that regulators have great determination to promote the normalization of IPO." A broker who is close to the regulatory level said, "but due to the expectation of normalization, more and more companies have entered the trial session, which has also increased the workload of the regulatory authorities."

In the eyes of an investment bank, apart from the normalization of IPO, the increase in rights issues, convertible bonds and additional issuance also aggravated the workload of the Commission.

"Convertible bonds, rights issues and other businesses are increasing, while refinancing is also expected to further liberalize, these factors will increase the workload of the issuance examination committee." An investment bank in Shanghai admits.

Wind data statistics show that as of December 16, 2019, the Commission had completed 406 audits, representing an increase of 40.97% over the whole year of 2018, including 270 first out, 119 convertible bonds, 13 rights issue and 4 public offering.

On the one hand, there is a sharp increase in workload, while on the other side some members are absent. Reporter statistics found that in the current eighteen session of the issuance examination committee, some members were unable to participate in the trial work for various reasons, which obviously increased the additional requirements of the Commission.

For example, Guo Xudong, deputy director of the former issue department, has resigned from the securities and Futures Commission since September. Since September, he has been involved in the examination of the company's trial committee. Liu Yunsong, an inspector of the Jiangsu securities regulatory bureau, has not yet participated in the company's audit because of unknown reasons.

According to the sixth paragraph and second paragraph of the regulations issued by the China Securities Regulatory Commission (CSRC), "the 35 members of the issuance examination committee shall be appropriately adjusted according to the actual needs of the work."

This also means that the number of members of the issuance committee is up to 35 in principle. According to this requirement, the number of 14 members of the trial committee can be increased to the maximum of 21 members. However, the number of candidates added to this committee has reached 23.

"In principle, no more than 35 people, but this regulation also gives the SFC the space to adjust according to the needs of the work, so the SFC can also make appropriate changes according to the actual needs of the audit workload." A broker who was close to the regulator said.

In fact, there were more than 35 people in the Commission. In October 2017, after the merger of the motherboard and the trial board of the gem, the number of defaulting members of the "Da Fa" Commission was 63. The appearance of the "Da Fa" also reduced the passing rate at that time, resulting in the "7 over 1", "6 over 1", "3 over 0" and other tragic phenomena.

Some people in the industry believe that the low growth rate of the "Da Fa" from this point of view will also lead to the further expansion of the IPO.

"Before the DFA audit committee, the further refinement of the audit work will obviously play a catalytic role in the strict IPO work review. From the specific operation, more members of the issuance examination committee have also increased the probability of finding more problems, so as to let some publishers of the newspaper release their fluke mentality." The investment bankers in Shanghai said frankly.

Supplementary personnel decoding

From the perspective of the structure of the additional personnel, the whole eighteenth members of the issuance examination committee continued.

According to the publicity documents disclosed by the SFC, 23 new candidate members were added, including 9 from the local securities regulatory bureaus, 10 from Shanghai and Shenzhen exchanges, and 4 from accounting firms.

This means that the number of members from the governing bodies is still more than 80% among the new members, and the members who once came from the securities, insurance, funds and universities did not appear this time.

"The determination of the status of committee members is still related to the actual audit requirements. First of all, the members must be well prepared to participate in the work of the trial committee. Before some of the senior managers of the securities companies are part time members, they are very busy in their official duties and are hard to attend the trial meeting, but the identity of the part-time members is easy to form endorsement for these market institutions." The aforementioned investment bankers close to the regulators said, "there are also some buyers and academics, and the appropriateness of them as members should be observed."

In addition, the proportion of members from the stock exchange will also be further improved, exceeding 40% of the total number of additional candidates. The reporter statistics found that 6 of them were handed over to all 4 people in the Shenzhen Stock Exchange. Among them, Hu Anjin, deputy general manager of the Shanghai Stock Exchange Audit Center, was also among them.

The industry believes that this is related to the implementation of future exchange regulation and paving registration system preparation.

"After the registration system is implemented, the audit will be further advanced to the Shanghai Stock Exchange, so it is also essential to further develop and exercise the auditing ability of the exchange." An investment bank close to the Shenzhen Stock Exchange said, "it will also pave the way for the future registration system reform."

It is worth mentioning that the members from the non SFC system came from the accounting firms, and the members who came from the law firms when the eighteenth members of the Commission were established. The industry believes that this is in line with the current audit trend, and strengthen the financial information related to the letter draping audit requirements.

"Audits tend to pay more attention to the authenticity and rationality of information disclosure, and financial information is an important information for issuers to disclose information." A large four accounting firm said, "more and more issuers are going to be listed, which will inevitably lead to greater financial information audit workload. This may be the reason for more members from the audit institutions."