CSRC tightens ChiNext rules

Regulator aiming to provide more security for investors in start-ups

BEIJING - The China Securities Regulatory Commission (CSRC) on Friday revised the rules for information disclosure by companies listed on the ChiNext, the country's start-up board. The move aims to strengthen regulation of the nascent market for start-ups and better protect investors' interests when buying into high-risk companies.

Listed companies on the Shenzhen-based bourse are required to disclose non-financial information, including their key business performance indicators, research and development budgets, core advantages and potential internal and external risks, according to the revised rules.

The regulator also asked all ChiNext-listed companies to disclose their dividend policies and dividend records for the last three years. Companies are also required to set up a system to register individuals who have access to privileged information that could influence stock prices.

The revision is aimed at encouraging listed companies to make reasonable payouts to shareholders and at tackling insider trading and market manipulation, said a CSRC official.

Analysts said that the revised rules will enable investors to obtain more information about ChiNext-listed companies because investing in them often involves a higher risk than buying into those listed on the main board of the exchanges.

"Regulation of start-up companies should be tougher than for the ones listed on the main board as these companies are usually from the emerging industries and deal with new technology or new business models," said Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology.

"The revised rules will help highlight the risks of investing in these start-up companies and enable both institutional and retail investors to gain deeper knowledge about them," Dong said.

China launched the ChiNext, which is similar to the Nasdaq in New York, in 2009 in a bid to allow the country's start-up companies to gain access to capital and encourage private-equity funds and venture capitalists to back start-ups with high potential.

However, the board has been criticized for excessive speculation and unreasonably high price-to-earnings ratios. The sharp fluctuations in stock prices on the board have also sparked investor concerns about insider trading and market manipulation.

Dong said the revised rules will help improve corporate behavior and the maturity of the market for start-ups when it comes to information disclosure.

China Daily

(China Daily 01/07/2012 page9)