Measure could help speed up IPO process: experts
A draft amendment to the Securities Law of the People's Republic of China was submitted to the Standing Committee of the National People's Congress for consideration on Monday, the Xinhua News Agency reported.
The amendment calls for the replacement of the current examination and approval-based system for IPOs with a registration-based system.
It would mean that the Public Offering Review Committee of the China Securities Regulatory Commission (CSRC), which is currently in charge of IPO reviews in China, would be dissolved, according to Xinhua.
The Securities Law was first implemented on July 1, 1999. This is the second time a revision to the law has been submitted for approval, the previous revision having come in 2005.
The new revision comes at a time of surging performance by the mainland stock exchanges. The markets fell back on Monday after a six-week rise, but the trading volume in the Shanghai and Shenzhen markets still hit an unprecedented 1.8 trillion yuan ($290 billion).
Zhang Yugui, dean of the School of Economics and Finance at the Shanghai International Studies University, told the Global Times Monday that the new Securities Law is one of a series of reform measures in the wake of the Third Plenary Session of the 18th Communist Party of China Central Committee held in November 2013.
"A better price discovery mechanism could be established once the law comes into effect," said Zhang.
Liu Chunyan, an associate professor of law with Shanghai-based Tongji University, told the Global Times on Monday that the new Securities Law, once in effect, would improve the efficiency of the current IPO review process.
"Currently, the IPO review process is relatively slow because the review committee is short of hands. Three years ago, statistics from the CSRC showed that nearly 500 enterprises were waiting to gain approval to go public. It showed that Chinese companies' IPO requirements cannot be fully satisfied by the existing IPO review mechanism," said Liu.
Liu also commented that the development level of the Shanghai and Shenzhen stock exchanges is still low, compared to international standards.
"The two stock markets in China should have a more mature model. Otherwise, the effects of the new Securities Law would be limited," said Liu.
Liu stated that the CSRC should intensify post-IPO surveillance and introduce more severe penalties for illegal practices.
"The new Securities Law should give investors more rights to take legal action in cases of fraud," said Liu.
Zhang Xin, an analyst at Guotai Junan Securities, told the Global Times Monday that the new IPO review process would make it easier for the government to supervise the stock market.
"Sometimes it's hard for the CSRC to hand down a punishment to a listed company if the CSRC has participated in the company's IPO review process," said Zhang.
The new amendment would also allow securities industry employees in China to buy and sell shares, something they are currently barred from doing. But they would have to declare the details of their securities accounts, as well as the accounts of their spouses, and make the details of any of their transactions known to the public within three days.
Liu said that a less restrictive mechanism could lower the risk of illegal practices. But he also cautioned that regulatory measures should be taken to prevent securities employees from abusing their rights.
The new Securities Law is expected to take effect next year, the Securities Daily reported Monday.
