Comment Investor Protection Is The Key To The Stability Of Gem Registration System

Pan Helin, executive director of Digital Economy Research Institute, Central South University of Finance and law

After nearly four months of efforts, gem reform and pilot registration system are ready. On August 24, the first batch of 18 initial enterprises of gem registration system were listed on the stock exchange. For the purpose of this reform, the person in charge of the relevant departments of the CSRC said that it would focus on solving two problems. The first is to expand the pilot registration system on the basis of the science and technology innovation board, so as to accumulate experience for the implementation of the registration system in the stock sector, as a preparation for the reform of the whole market registration system; the second is to enhance the inclusiveness of innovative and entrepreneurial enterprises and highlight the characteristics of the board.

The pilot registration system of gem is of great significance to China's capital market, mainly because of its special status. As we all know, China's capital market has a multi-layer structure, in which the main board market is the most concerned. There is no doubt that the main board market is the main place for a country or region to issue, list and trade securities. But the main board market threshold is high, most of the listed enterprises are large and mature enterprises, so it is difficult to take into account the financing needs of other enterprises. In particular, some high growth SMEs and high-tech enterprises, in order to meet the financing needs of these enterprises, there is the GEM market. Therefore, the gem is of great significance to the high growth of small and medium-sized enterprises and high-tech enterprises. In addition, the establishment of the science and technology innovation board has well met the needs of high-tech enterprises to be listed on the stock market, and alleviated the embarrassment of high-quality enterprises piling up for overseas listing.

The pilot registration system will produce several direct results. First of all, it will further expand the scale of direct financing in the market. The pilot registration system means that the threshold of listing will be greatly reduced, and the financing function of capital market will be strengthened, so as to better support the real economy. In particular, affected by the epidemic situation, the financing pressure of small and medium-sized enterprises has been increasing. It is of great significance to broaden their financing channels for the stable development of enterprises. Secondly, the pilot registration system and relaxation of the price limit will improve the market investment ecology. After the pilot registration system of gem, the proportion of price limit is relaxed to 20%, and there is no limit on the first five days of IPO, which can improve the liquidity of gem from the aspects of investor structure and income. However, the degree of participation of individual investors will gradually increase. Second, the amplification of earnings volatility provides traders with a more adequate source of profits, which is conducive to activating the market. Of course, the relaxation of price limit will lead to more market volatility, but in the long run, stock prices will eventually return to rationality. Thirdly, system optimization will help the market survive the fittest, improve the quality of GEM listed enterprises and promote economic development.

It is worth mentioning that both the science and technology innovation board and the growth enterprise market are pilot registration system, which is a substantial good for the financing of technology companies. Because most of the technology companies do not meet the traditional bank credit standards, the capital market is an important way, sometimes even the only way, of financing technology companies. In the future, gem will better serve the start-up technology companies and help the rise of China's science and technology industry through capital financing support.

There is a slight difference in positioning between gem and sci tech innovation board, which requires dislocation competition. In the future, the science and Technology Innovation Board will be more suitable for large-scale innovative technology enterprises, while the gem will be suitable for start-up and small-scale technology enterprises. Of course, the positioning formed by these dislocation competition is not absolute.

For the whole market environment, the gem pilot registration system is also of great significance. After the pilot registration system, the regulatory focus will shift from pre listing to post listing, and the future delisting system, class action system and other supporting systems will be accelerated. In the future, it is necessary to promote the registration system in A-share as a whole, which will make the whole market change rapidly from the emerging capital market to the mature capital market. On this basis, the market efficiency will be greatly improved, which means that the allocation of resources will be more reasonable and effective, and the market survival mechanism will be more stable.

However, with the popularity of the registration system, the listing audit process will be cancelled, and in the short term, fraudulent issuance will increase. Therefore, after the event supervision should be strengthened to form a set of feasible punishment system, so as to make the company dare not make fraud when listing.

In the European and American stock markets, market regulation comes from a variety of games, such as whistleblower rewards, class action lawsuits by law firms, and short sellers such as muddy water. European and American capital market regulation ultimately needs litigation to achieve compensation. Therefore, the power to curb counterfeiting in European and American stock markets mainly comes from the market itself. Some market entities will make use of enterprises to make profits.

At present, China's stock market is still mainly supervised by the CSRC, which is difficult to manage and has a large management radius. Therefore, it is very important to establish a feasible punishment system after listing. This is also the market needs to see a line of defense after the implementation of the registration system.

The author believes that the gem should lower the threshold, so that start-ups can be more smoothly financed. At the same time, it is necessary to improve the supervision mechanism after the gem listing, so as to make the supervision more powerful, so as to protect the rights and interests of investors and enhance the confidence of investors. Only two aspects are done well, gem can better serve the real economy.

The key of the registration system is to protect investors. It is suggested that the regulatory authorities should further strengthen the investor protection system and make it the "moat" and "ballast stone" of China's capital market registration system.

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