Perfecting the Information Disclosure Supervision Rules System and Continuously Improving the Market Operation Quality

date: 2017-11-2

Recently, Shenzhen Stock Exchange (‘SZSE’) promulgated two sets of guidelines on information disclosure of retail and express service sectors, and revised two sets of memorandum on information disclosure business including the Memorandum on Name Change of Listed Companies and the Memorandum on Investment Cooperation between Listed Companies and Professional Investment Institutions, which are new measures of SZSE on continuously perfecting the information disclosure system, consolidating the information disclosure supervision system for multi-layer capital market and effectively improving the market operation quality.

Capital market is a rule-oriented market, its business rules are not only the code of conduct for market players, but also the cornerstone for maintaining the stability of the market. Since the beginning of this year, SZSE has actively responded to new problems and situations in the market, insisted on taking information disclosure supervision as the core and investors’ demand as the orientation, continuously perfected the supervision rules system for listed companies with the Rules Governing the Listing of Stocks in Shenzhen Stock Exchange as the core, the Guidelines on Standardized Operation of Listed Companies and the Guidelines on Information Disclosure of Different Sectors as the main trunk, and the Memorandum on Information Disclosure of Shenzhen Stock Exchange as the supplement, actively played all-round supervisory functions in accordance with laws, actually taken the responsibility for front-line supervision, firmly held the bottom line for prevention from systemic financial risks, continuously improved the market operation quality and promoted the healthy development of multi-layer capital market in Shenzhen stock market.

 

Continuously perfecting the information disclosure rules system

Since the pilot implementation of industry supervision in 2011, SZSE has been searching for and summarizing the operation rules and risk features of different sectors. By taking into account the characteristics of SZSE listed companies, SZSE has promulgated two sets of guidelines on information disclosure of emerging sectors and high-profile traditional sectors respectively. As for listed companies on ChiNext board, such information disclosure guidelines were issued one after another in ten emerging sectors including broadcasting, films and television, medicals and biomedical products, photovoltaic industry chain, energy-saving and environmental protection services, online gaming, online videos, E-commerce, Internet marketing, LED industry chain and  medical instruments sectors. As for listed companies on main board and SME board, such information disclosure guidelines were issued in seven traditional sectors including husbandry and aquaculture, solid mineral resources, real estate, seed and planting, construction machinery, decoration and civil engineering construction sectors.

Basing on the operation characteristics of listed companies in retail and express service sectors, and the contrast between periodic reports and interim reports, financial information and non-financial information, industry characteristics and corporate business, the two sets of guidelines on information disclosure of retail and express service sectors stipulate the information disclosure obligations of listed companies to improve the effectiveness and pertinence of information disclosure of listed companies in these two sectors.

As for the features of diversified business form and scattered stores for listed companies in retail sector, the Guidelines on Information Disclosure of Retail Sector has made clear requirements for information disclosure of such listed companies. On one hand, it requires listed companies to disclose the information regarding the business mode, business form and relevant changes of stores. On the other hand, it reinforces the requirements for disclosing stores’ operating situation, encourages listed companies to disclose the name, address, opening date, contractual area, investment amount, main product category, business form, business mode and property ownership of new stores.

At present, express services sector is growing rapidly, listed companies in this sector are featured by diversification in business mode, great affection from transportation network and high importance in safe operation, therefore, the Guidelines on Information Disclosure of Express Service Sector has made detailed requirements for information disclosure of such companies. Firstly, it requires listed companies to disclose the monthly operating revenue from express services, so as to facilitate investors to better know their development situation. Secondly, as for the difference between direct sales or franchise, it requires listed companies to disclose information of important franchisees. Thirdly, in order to facilitate investors to better understand the express service network of listed companies, it requires listed companies to disclose the detailed information of express service network nodes, transportation network nodes and main means of transportation. Fourthly, it requires listed companies to do well relevant warning for special risk in express service sector, especially the safe operation risk.

SZSE adhered to the principle of ‘formulating regulations via soliciting public opinions’ in the formulation of the above guidelines, it solicited opinions from listed companies twice, invited industry analysts from securities companies to participate in the formulation of the guidelines, actively listened to the opinions and suggestions of listed companies and market research agencies, discussed on the feedback opinions one by one, and fully adopted reasonable modification suggestions. In addition, SZSE released a questionnaire via its official website, with nearly 1,400 investors participating in the survey. The questionnaire results show that nearly 90% of investors believe that the introduction of the guidelines facilitates investors to understand relevant financial situation of listed companies and make investment decisions.

Two sets of memorandum on information disclose business are also revised. As for some listed companies’ speculation in their stocks by changing their names under the situation of no changes in their main business, SZSE revised the Memorandum on Name Change of Listed Companies, so as to perfect the procedure for name change of listed companies to further regulate their behaviors of name change, and improve relevant requirements for implementing the memorandum. Meanwhile, in order to encourage listed companies to fulfill their social responsibilities and serve the national poverty alleviation strategy, SZSE revised the Memorandum on Investment Cooperation between Listed Companies and Professional Investment Institutions, so as to encourage listed companies to set up or participate in market-oriented industrial investment funds and poverty alleviation funds in poor areas.

 

Actually improving the market operation quality by multiple measures

In order to further promote the comprehensive and strict supervision by laws and actually display the front-line supervision function, in recent years, SZSE has been constantly perfecting its business rules system construction, building a business rules system with clear contents, distinct hierarchy, unified form and adaptation to multi-level business development, and consolidating the foundation of front-line supervision system. So far, there are 168 effective business rules, covering different market players and different types of business. Distinguished by business categories, there are 69 rules for listed company category, 60 rules for members and transactions category, 27 rules for fixed income category, 6 rules for fund category and 6 rules for comprehensive category. Distinguished by enforcement levels, there are 9 rules, 23 detailed rules, 53 guidelines and 81 other regulations.

In terms of supervision of listed companies, SZSE has gradually formed the supervision rules system with the Rules Governing the Listing of Stocks in Shenzhen Stock Exchange as the core, the Guidelines on Standardized Operation of Listed Companies and the Guidelines on Information Disclosure of Different Sectors as the main trunk, and the Memorandum on Information Disclosure of Shenzhen Stock Exchange as the supplement. At present, SZSE has 69 rules for listed companies, 44 memorandums on information disclosure and 19 business guidelines.

Relevant officer of SZSE said that SZSE has insisted on the problem-oriented principal, looked for loopholes and addressed weak links, and formulated and revised over ten supervision rules for listed companies regarding shareholding reduction, filing on record for independent directors and information disclosure on different sectors since 2017. Meanwhile, it has further deepened the comprehensive supervision with the ‘get-to-the-root’ manner to enhance the effectiveness of front-line supervision. From January to September of 2017, SZSE has issued over 2900 inquiry letters to listed companies and relevant parties in terms of merger and acquisition, external investment, standardized operation and change in equities of listed companies, with a substantial increase on the year-on-year basis.

In addition to continuous improvement of the rules system, SZSE has constantly reinforced the implementation of such rules and seriously dealt with all the violations in the market, so as to enhance the pertinence and effectiveness of supervision and purify the market ecology. As of last weekend, SZSE has made a total of 77 written decisions on disciplinary punishment, covering such types of violations as information disclosure violation, standardized operation violation, securities trading violation and other violations. 39 times of disciplinary punishment are made for listed companies, including 15 times of public censure (7, 5 and 3 times for companies listed on the main board, SME board and ChiNext board respectively) and 24 times of criticism in a circulated notice (9, 12 and 3 times for companies listed on the main board, SME board and ChiNext board respectively), and involving 347 person-times (120 person-times of public censure and 227 person-times of criticism in a public notice).

Relevant officer of SZSE said that SZSE will continue to study and implement the spirit of the 19th National Congress of the Communist Party of China and the National Conference on Financial Work, deepen the comprehensive and strict supervision by laws and strive to improve the front-line supervision ability according to the unified deployment of China Securities Regulatory Commission, urge listed companies to continuously enhance the pertinence and effectiveness of information disclosure via rules construction and active guidance, strengthen their responsibility consciousness for information disclosure, protect the legal rights and interests of investors, improve the market operation quality and put the prevention and mitigation of systemic risks in a more prominent position, so as to better serve the real economy and national development strategy.