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Stock bourses check firms' compliance with guidelines

(Shanghai Daily)
Updated: 2007-06-20 12:59

China's two stock bourses are checking public firms' compliance with regulatory internal-control guidelines in a bid to strengthen overall corporate governance, industry sources said yesterday.

The program, which started late last week, requires listed firms to conduct a self examination and complete a questionnaire on internal-control systems, according to people familiar with the situation.

Companies are expected to respond to the two exchanges by the end of this week under a program initiated by the China Securities Regulatory Commission early this month, sources said. Opinions and suggestions in the survey will be considered by the regulator in drafting rules in the future, according to them.

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"The CSRC hopes to conduct a thorough research into the current situation of listed firms' internal risk management and to have a clear picture of existing problems," said a Shenzhen-based brokerage source. "The regulator also asks us to provide suggestions on regulations to help it improve oversight."

The questionnaire covers several aspects including how a firm maps out responsibilities of internal controls among departments, whether a company receives professional guidance and how information technology system works to curb risks, according to the sources.

Other elements include measures to weed out insider trading, how a firm's internal auditing system works and how an incentive program acts to beef up management performance, the sources said.

China's stock watchdog and its two exchanges in Shanghai and Shenzhen have unveiled a myriad of rules this year to order listed companies to bolster internal management.

Among them, listed firms are banned from using stock-sale proceeds to invest in securities and they have also to protect price-sensitive information to help curb market manipulation.

"The CSRC is set to draft more rules this year to help listed firms move in line with international operational standards," said a second source based in Shanghai.

"Its aim is to make mainland-listed companies set up sound internal-control arrangement in a year or two."

The CSRC in March began a campaign to combat insider dealings and rigging of stock prices and has punished several wrongdoers for financial misconduct.