The 30 Billion Market Can'T Buy Intermediaries, Fulfill Their Duties, And The CSRC Resents The "Gatekeeper" Of A Shares

"If the employees of securities intermediary institutions are put on file for investigation for suspected violation of laws and regulations, and the CSRC suspends the examination of administrative license applications, the securities intermediaries are no longer allowed to review the signature items of the employees under investigation. If there are false records, misleading statements or major omissions in the review, the CSRC will deal with them in accordance with the provisions. "

On March 26, the CSRC solicited opinions on Revising the provisions on the procedures for the implementation of administrative licensing, and once again put pressure on IPO sponsors, certified public accountants, lawyers and other intermediary service agencies.

The heavyweight statement at the beginning of the article shows that once the violation of laws and regulations is filed for investigation, the signature service IPO project of illegal personnel of intermediary service agencies will be directly blackmailed, and securities companies and securities service institutions with serious problems in internal control mechanism will lose the right to review the involved projects.

Following the "Regulations on on on-site inspection of IPO enterprises" issued by the CSRC on January 29 to strengthen the supervision over the information disclosure quality of IPO enterprises and the practice quality of intermediary agencies, the whole chain of supervision system including IPO audit and inquiry, self-discipline supervision, on-site inspection and on-site supervision has been increased again.

From the perspective of market reaction, the mainstream view has no change in the expectation of strict audit trend of IPO companies, and is optimistic about a series of measures to "control the entry of listing", but it also triggers the market's worry about strict IPO audit and slowing down the pace of IPO issuance.

Since the beginning of 2021, IPO on-site inspection has been carried out, and a large number of queuing enterprises "coincidentally" withdraw the listing application materials. The "cancellation tide" of IPO batch is causing high attention of many parties in the market.

SFC's acceptance of intermediaries

According to the incomplete statistics of the 21st century economic report, in the first quarter of this year, more than 80 IPO enterprises in the A-share market withdrew their applications and terminated the examination. Most of them applied for the registration system listing on the science and technology innovation board and the growth enterprise market, nearly nine times the number of enterprises withdrawing their applications in the first quarter of last year.

The direct trigger factor of "cancellation tide" is the on-site inspection regulations for first-time enterprises issued in January this year. On January 31, the new issue of the on-site inspection list of information disclosure quality of the first batch of enterprises was announced. In a short period of 10 working days, 16 of the 20 "selected" enterprises withdrew their materials, which caused an uproar in the market.

The phenomenon of high proportion withdrawal of IPO application materials has aroused the attention of the regulatory authorities. At the China Development Forum on March 20, the chairman of the China Securities Regulatory Commission (CSRC) pointed out that "according to the preliminary information, it is not to say how big the problems of these enterprises are, let alone withdraw due to false accounts. One of the important reasons is that the practice quality of many sponsor institutions is not high."

"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. " Yi Huiman thinks that, from the approval system to the registration system, the role of intermediary agencies such as recommendation agencies and accounting firms should be changed from improving the "approval" of issuers to ensuring the "investability" of issuers and providing investors with more valuable targets.

"The increasing tide of IPO withdrawal has something to do with the misunderstanding of the registration system of intermediary agencies. If we rush projects and catch up with the schedule, we can make profits." An investment bank personage responded to the reporter of the 21st century economic report that the pace of listing and issuing under the registration system has been significantly accelerated. Some IPO projects, sponsors and accounting firms believe that under the reform of the registration system, the audit and issuance environment has become more relaxed, and they are eager to apply for projects that have not yet reached the requirements for issuing and listing on the stock market, and even submit applications when the manuscripts of some intermediary agencies are not perfect.

"In 2020, the registration system will be promoted from the science and technology innovation board to the growth enterprise market, the number of IPOs listed will reach a new high, and intermediary agencies will first make a lot of money." Said the investment bank.

2020 is regarded as a bumper year for A-share IPO by the industry. Whether the number of enterprises on the board, the passing rate or the IPO underwriting scale, a number of indicators have reached a new high in the past 10 years.

According to the statistics of the 21st century economic report, thanks to the implementation of the registration system, a total of 396 A-share companies will be listed successfully in 2020, and the total amount of raised funds will exceed 470 billion yuan, and the overall pass rate will be over 95%.

The intermediary agencies, such as sponsor, auditor and accounting firm, have made a lot of money in this "listing feast". In 2020, the total issuance cost of A-share IPO market will exceed 30.7 billion yuan, including 23.234 billion yuan for underwriting and recommendation, 1.835 billion yuan for lawyers, and 3.427 billion yuan for audit and capital verification, all with a year-on-year increase of more than 100%.

According to the research data of Capital State Research Institute, in 2020, the average IPO expenses of an enterprise are 58.7239 million yuan, 4.634 million yuan and 8.6525 million yuan respectively.

Getting the "pass" for listing means high income. Domestic companies are enthusiastic about A-share IPO. Many IPO projects feel that the opportunity of issuing window is rare, and they rush to report the projects. As a result, IPO "barrier lake" phenomenon appears again in the market. Wind data shows that at present, there are more than 400 IPO queuing companies, and more than 2200 enterprises have submitted guidance filing materials and are receiving listing guidance, which is more than half of the total A-share listed companies.

However, this 30 billion "cake" did not bring the diligence and responsibility of intermediary agencies.

Industry insiders revealed that many IPO reporting companies want to take advantage of the registration system "Dongfeng" as soon as possible, but the writing of application materials is mere formality. "Even many enterprises' declaration materials are submitted as" semi-finished products ". They hope to improve the materials in a round of inquiry, and regard the exchange audit as the core quality control of investment banks to control the quality." The investment bank said to the 21st century economic reporter.

From the point of view of listed registered enterprises, most of them are through three rounds of inquiry in the exchange. A large number of registered IPO projects need "toothpaste squeezing" inquiry, so that the application materials can be finally improved, which also makes the Shanghai Stock Exchange and Shenzhen Stock Exchange miserable.

At the beginning of this year, the Shanghai stock exchange directly named Western securities, saying that it still failed to perform its duties after the regulatory authorities reminded it of the quality of its practice. On January 27, the Shanghai Stock Exchange issued a decision on regulatory measures to warn Western securities.

Focusing on the phenomenon of poor performance of duties by intermediary agencies, regulatory authorities began to make frequent statements. Yi Huiman, chairman of the Securities Regulatory Commission, said that he could not "take the old road with new shoes" and would seriously deal with those who "broke through the barrier with illness" and would never be allowed to withdraw. Both Shanghai and Shenzhen stock exchanges said that for the items withdrawn before the on-site inspection, if there are suspected of financial fraud, false statements and other major violations of laws and regulations, the sponsor institutions and issuers shall bear corresponding responsibilities.

Too strict regulation

The sudden change of supervision wind direction makes the intermediary agencies experience a "sharp turn" stimulation. Many intermediary agencies are "crying bitterly", and some have raised objections.

According to reports, some securities companies believe that the current IPO audit basically has no focus to follow, leading to the focus of the "eyebrows and whiskers". Taking gem as an example, the required declaration documents are divided into seven chapters, and the deduction part is not applicable documents. On average, there are about 50 documents of original contracts, compliance certificates, tax returns, etc. If we encounter complex issuers, the workload of preparing declaration documents will be even greater.

Wang Jiyue, a senior investment banker, said publicly that the IPO audit paid too much attention to the compliance and authenticity, leading to almost all the efforts of intermediary agencies on financial verification and shareholder penetration verification. Investors did not care about a large amount of contents of the prospectus, and the readability was getting worse and worse.

According to the guidance No.2 of the guidance on the audit of the issuance and listing of the science and technology innovation board (No.2) - self inspection form of information disclosure and verification requirements of common questions formulated by the Shanghai Stock Exchange on February 1, this self-examination table puts forward a total of 77 questions on the implementation of the audit Q & A of the science and technology innovation board, the answers to some questions about the initial business and the implementation of the common audit questions.

The main contents include two aspects: first, issues related to IPO conditions, such as peer competition with significant adverse effects, major violations of laws and regulations, sustainable operation ability, R & D investment, etc.; second, common information disclosure and verification problems, such as common IPO declaration problems such as customer and supplier audit, selection of comparable companies in the same industry, and prompt and cooperation on major issues Targeted problems summarized in R & D and other audit practices.

"Regulators and exchanges focus on the standardization and accuracy of information disclosure, which is in line with the trend of registration system reform." A researcher from a large securities firm told the reporter of the 21st century economic report that, from the perspective of registered enterprises that have been issued and listed, there is no big change in the chapters of the registration draft of the meeting. It only requires more detailed implementation and verification of the issues concerned in the previous audit.

This does not violate the listing audit rules of "establishing system, non intervention and zero tolerance".

According to the on-the-spot inspection system launched for many years, the SFC scares off a large number of enterprises applying for spot check every time. In April 2020, according to the results of the on-site inspection of 86 first-time enterprises in two batches released by the CSRC, up to 30 have withdrawn their applications for termination of examination.

Pan Helin, executive director of the Digital Economy Research Institute of Central South University of Finance and law, believes that the registration system emphasizes information disclosure as the center. Under the background of comprehensively promoting the registration system, the requirements for the quality of information disclosure of issuers are higher, and the deterrent power of IPO supervision should be strengthened.

Lawyer Bai Pingliang, senior partner of strategic law firm, told 21st century economic news that a large number of IPO companies have withdrawn their applications recently. On the one hand, intermediary agencies have not really possessed the concept, organization and ability to match the registration system; on the other hand, there are also regulatory systems. Although there are systems and concepts of registration system, there are still a large number of audit system jobs in reality In addition, the companies themselves guarantee the listing time of investors and other gambling commitments, resulting in a rush to declare.

According to Bai Pingliang, according to the number and content of the audit feedback and reply, a small number of intermediary agencies have objective problems with the performance quality of IPO enterprises. It is necessary for the service agencies and their staff to improve their service ability and sense of responsibility, work together with the enterprise to formulate appropriate listing plan and schedule, and apply for materials after solving the problems that must be completed“ A report of the "Bo Yibo mentality.

At the same time, lawyer Bai Pingliang suggested that in the future, a negative evaluation mechanism of intermediary services could also be introduced to encourage excellent intermediary agencies to serve more enterprises in the future. It is suggested that the newly revised Securities Law and the criminal law should be strictly implemented in accordance with the law, which will help to improve the quality of enterprises to be listed and the service level and ability of intermediary agencies.

The implementation of the registration system does not mean lowering the listing standards and relaxing the audit requirements. According to lawyer Bai Pingliang, the key to IPO enterprise audit is to help enterprises and intermediaries change from "approval" to "investability" in order to fulfill the responsibilities of enterprises and intermediaries. At the same time, the transparency and compliance of audit standards are also very important. There should be no uncertain factors such as too many window guidance opinions and excessive overweight of audit standards.

Judging from the recent audit speed, passing rate and punishment intensity, the strict trend is the new normal for the management and audit of IPO by the competent authorities in the future.

In the face of IPO "withdrawal tide", the regulatory authorities intend to strengthen the supervision of IPO. According to the daily economic news, at present, the regulatory authorities have made unified arrangements and relevant requirements. In the future, they will solicit opinions from the society, and there may be clear institutional measures in the next stage.

The local securities regulatory bureau, the first gateway to receive materials, has made a statement. Since March this year, Xiamen securities regulatory bureau has put forward a number of requirements for intermediary agencies, including refusing to accept the guidance agency's initiative to release materials after meeting the on-site inspection of the exchange, or problems found during the on-site inspection, otherwise, the sponsor should be treated differently.

Although there has not been a formal document, the reform trend of strong supervision on IPO will not change.

Issuance is still normal

IPO ushered in strict supervision, will have a significant impact on the market, the industry is worried that the pace of issuance may slow down. From the statistical data, in the first quarter of this year, the momentum of IPO issuance of a shares is still unchanged.

According to the statistics of 21st century economic report, more than 110 IPOs were issued in the A-share market in the first quarter of this year. Compared with the fourth quarter of 2020, the number of IPOs increased by more than 10. Compared with the first quarter of 2020, the number of new shares increased by nearly 60. The number of registered new stocks on the science and technology innovation board and the gem significantly exceeded that of other sectors, accounting for A-share IPO market The ratio has exceeded 70%.

This means that the trend of strict supervision on IPO has not affected the IPO issuing rhythm. The strict supervision only removes the enterprises with poor qualification from the IPO team, scares off some "fishy eyed" companies and further improves the quality of listed companies.

Many market participants believe that in view of the power of strict IPO supervision, some issuers and intermediaries choose to take the initiative to withdraw materials, especially for those "sick" enterprises and intermediary agencies with low professional quality.

On January 28, the work meeting of the CSRC in 2021 mentioned the focus of this year's work, clearly mentioned "actively creating conditions for steadily promoting the reform of the whole market registration system", "strengthening the daily supervision of various market entities such as listed companies and intermediary agencies in accordance with the law, and optimizing the market environment". With the implementation of more regulatory systems, IPO may continue to appear a wave of withdrawal.

It can be predicted that the regulatory authorities will maintain "zero tolerance" for illegal activities in the capital market, especially the need to compact the "gatekeeper" responsibility of securities intermediaries in the capital market and prevent the suspected illegal activities of securities intermediaries. However, the trend of promoting the registration system reform and maintaining the new issue Festival will not change.

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