Obstacles remain to IPO registration

The China Securities Regulatory Commission (CSRC) has several obstacles to overcome as it works to revamp requirements to list on the Chinese mainland stock exchanges.

The CSRC said at the end of last year that it intends to replace the current IPO system, which requires listing companies to go through a lengthy regulatory approval procedure, with a simplified registration process that would allow the market to sort out which companies are worth investing in. The commission plans to unveil the details by the end of this year, the regulator's spokesman Zhang Xiaojun told the media Friday.

There are three things regulators need to do to provide some protection for investors under the planned registration system.

First, they need to create a system to ensure that investors can obtain factual information about the companies prior to their IPOs. Without quality information, investors will not be able to accurately price a company's stock once it goes public.

Second, the CSRC must also crack down hard on individuals and companies who commit securities fraud and insider trading. In the past, the CSRC has generally kept punishments light.

Third, market regulators have to make it easier for investors to get compensated for securities fraud. For example, there is currently no way for investors to file class action lawsuits in China. As it stands, the current compensation system makes it difficult for investors to protect their own interests.