The Reform Of Registration System Has Been Steadily Pushed Forward

"We will prepare more sufficient conditions for reform and push this major reform to a smooth conclusion." On the reform of the registration system, Mr. Yi Huiman, chairman of the China Securities Regulatory Commission, said in his keynote speech at the round table meeting of the China Development Forum recently held.

The registration system reform is undoubtedly a new round of "bull nose" project to comprehensively deepen the capital market reform. Since the establishment of the science and technology innovation board and the pilot registration system in 2019, the IPO threshold of traditional A-shares, such as performance loss, red chip structure, vie structure and differentiated voting rights, has been broken through and no longer becomes an obstacle on the way for enterprises to go public. With the reform of the registration system as the traction, the CSRC has also adjusted the refinancing and merger and reorganization policies, further optimized the transaction settlement and reduction system, and issued and implemented new delisting regulations.

However, while the reform continues to go deep, it also exposes many market concerns. In the face of on-the-spot inspection, the listed companies withdraw their IPO application materials frequently, and the IPO queue also begins to appear congestion. The market discussion on the registration system audit and credit rating has not yet reached a conclusion.

"Chairman Yi responded to the controversial topic in the IPO market recently. It is expected that the comprehensive registration system reform in China will still be in a stable promotion period before the problems exposed at present are properly solved." There are senior investment banks in Beijing said.

Do not allow IPO to "withdraw"

According to wind data, since the beginning of 2021, the IPO path of 77 enterprises has been terminated, and the vast majority of enterprises voluntarily withdraw their listing application materials. Among them, 92% of the enterprises to be listed under the registration system, 43 are from the gem and 28 are from the science and technology innovation board.

In the view of securities investment banks, the main reason for the relevant enterprises to withdraw their listing application materials is the tightening of on-site inspection and supervision. "At present, there is no problem with on-site inspection." A large domestic securities firm investment bank personnel said.

On January 29, China Securities Regulatory Commission (CSRC) officially issued the regulations on on on-site inspection of initial enterprises. From the content point of view, the new regulations specify the basic requirements, standards, procedures and follow-up work of the first-episode enterprises' on-site inspection, and also provides rules for the on-site inspection work previously classified as window guidance. Subsequently, China Securities Regulatory Commission (CSRC) quickly released the latest round of spot checks on information disclosure quality of first-time enterprises, and a total of 20 enterprises "won the lottery". Among them, 16 enterprises have taken the initiative to withdraw the application materials, with a withdrawal rate of 80%.

As for the phenomenon of withdrawing the application materials at a high proportion in the IPO market, Yi Huiman said bluntly, "it's not to say how big the problems of these enterprises are, let alone because of the false account withdrawal. One of the important reasons is that the practice quality of many sponsor institutions is not high." From the current situation, many intermediary agencies have not really possessed the concept, organization and ability to match the registration system, and are still "wearing new shoes and taking the old road".

"Why do enterprises and intermediary organizations start to consider withdrawing materials as soon as they encounter on-site inspection? On the one hand, the quality and working papers of enterprises can not stand the test, and on the other hand, the existing system has reserved space for the withdrawal of materials." The senior investment bankers pointed out. According to the regulations on on on site inspection of first batch enterprises, the supervision will no longer conduct on-site inspection for enterprises that withdraw their applications within 10 working days after being informed of on-site inspection.

"From the perspective of securities investment banks, withdrawing the application materials of the issuer only means that the project can not be listed in the short term. If the project is reworked, revised and re declared, the sponsor and underwriting fee can still be charged. But in case the problem is found out, leading to a warning letter issued by the regulatory authorities or more serious consequences, at least one year's bonus of an individual will be gone. " Said the investment bank personnel of the above-mentioned large securities companies.

However, from the perspective of recent regulatory statements, the phenomenon of IPO material "withdrawn" may become a past style.

Yi Huiman clearly pointed out that the "sick" IPO companies will be seriously dealt with, and will never be "withdrawn.". Recently, some local securities regulatory bureaus also said at the conference on supervision and guidance that they would not accept the initiative of the guidance institutions to spread materials after the on-site inspection of the exchange, or problems were found in the on-site inspection of the exchange. Otherwise, the relevant recommendation agencies should be treated differently.

In addition, according to the personnel of the investment banks of the above-mentioned large-scale securities companies, the exchange also expressed its concern about the withdrawal materials of IPO projects to the securities investment banks. "In some typical cases, the exchange said it would conduct on-site inspection even if the materials were withdrawn."

"Better prepare the conditions for reform"

In addition to responding to the phenomenon of withdrawing application materials at a high proportion in the IPO market, Yi Huiman also pointed out that from the approval system to the registration system, the roles of intermediary agencies such as recommendation agencies and accounting firms have changed greatly.

"In the past, the primary goal was to improve the" approval "of an issuer's listing, that is, to obtain approval; now it should be to ensure the" investability "of issuers, that is, to provide investors with more valuable targets, which requires more" gatekeepers. " Yi Hui is full of weight.

However, in the view of industry insiders, it is still necessary to optimize the IPO audit mechanism for intermediaries to shift from "approval" to "investability".

"Approval is the primary work of IPO, and almost zero income can not be approved. Of course, approval is the first priority." Wang Jiyue, a senior investment bank personage, points out that the current A-share market is also short of IPO failure cases. "There is no issuance pressure, and investors do not pay for the investability. Why invest in the cost to increase the investability in the issuance process?"

In addition, in Wang Jiyue's view, the current IPO audit pays too much attention to the authenticity of compliance, leading to investment banks and other intermediary agencies to invest a lot of energy in financial verification and shareholder penetration verification. Investors are not concerned about a large number of contents of the prospectus, and the readability of the prospectus needs to be improved. "Audit does not focus on investability, investors do not pay attention to the prospectus, so it is unrealistic for intermediary institutions to put investability first."

Therefore, Wang Jiyue believes that for the profit-making intermediary agencies, the shift from "approval" to "investment" can not rely on its spontaneous motivation. The supervision should increase the "investability" audit index in the listing audit link, speed up the construction of new stock issuance marketization, and force investors to pay attention to the investability of enterprises to be listed. Finally, the accountability mechanism should be implemented, and the intermediary agencies with problems in practice quality should be punished strictly, and the authenticity and compliance pre audit should be transferred to the internal self-discipline of intermediary agencies.

"The regulation now proposes the registration system, which in no way means relaxing the audit requirements. However, for investment bank personnel, the audit requirements need to be further clarified. Now, "failure to perform due diligence" has become a universal means of punishing investment banks. " In the view of the above senior investment banks, the audit scale of new shares under the registration system needs to be further run in.

As Yi Huiman said, the reform of the registration system is a new thing. "The connotation and extension of the registration system still need to be further discussed by all parties in the market, so as to eliminate the false and retain the true, enhance the consensus, and ensure the stability of the reform." While the Fifth Plenary Session of the 19th Central Committee of the Communist Party of China and the central economic work conference as well as the outline of the 14th five year plan that have just been deliberated and adopted, all parties in the market need to create more sufficient conditions for the reform and finally promote the smooth implementation of this major reform.

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