Regulator seeks to calm IPO jitters as reform proceeds

The China Securities Regulatory Commission on Friday dispelled market concerns over a delay in the registration-based initial public offering system and stressed its determination to move forward with reform of new-share listings.

"Promoting the reform of a registration-based IPO system was an objective put forward at the Third Plenary Session of the 18th Communist Party of China Central Committee. It is also a vital breakthrough in the transformation of the regulation of the Chinese capital market," said Deng Ge, a commission spokesman.

Deng said the commission is working with related departments and actively studying and demonstrating problems that appear in the process of carrying out reforms of the public listing system.

"Revision of the Securities Law is the premise behind the implementation of the registration-based IPO system," said Deng.

The commission has submitted the first draft of an amendment of the Securities Law to the Financial and Economic Affairs Committee of the National People's Congress. Experts were due to discuss the development of the IPO registration system on Friday, said Liu Junhai, a law professor at Renmin University of China, on Thursday.

According to a reform plan on new share listings released on Nov 30 by the commission, it would only be responsible for examining applicants' qualifications, leaving investors and the markets to make their own judgments about a company's value and the risks involved in buying its shares.

The pricing of new shares has become more market-oriented in that issuers and underwriters can negotiate offering prices according to Chinese law. Pricing information must be released in a statement.

But problems have appeared such as that involving Chinese drug maker Jiangsu Aosaikang Pharmaceutical Co Ltd. On Jan 9 it announced plans to issue 55.466 million shares at 72.99 yuan ($12.07) per share, with 78.6 percent of the shares to be transferred from existing shareholders.

The IPO of Aosaikang, together with a further five, was halted after the commission introduced a regulation on the pricing and issuance of new shares on Jan 12.

On Jan 15, the commission started field investigations targeted at 13 principal underwriters and 44 book-building participants of recent initial public offerings. That process has now ended.

The commission may also introduce a settlement system to better compensate investors who suffer losses caused by illegal practices such as insider trading or making false statements, said Xiao Gang, its chairman, in an article published on Wednesday.

"During the period of transition, the commission will fully implement the reform plan on new listings and make the whole process of IPO examination and approval public," said Deng.

"A registration-based IPO system cannot be accomplished in one action. Government interference is necessary when the mechanism is not complete," said Hong Hao, managing director and chief strategist at BOCOM International Holdings Co Ltd.

Hong told China Daily the reform plan on new share listings will encourage more institutional investors to buy, which is good for the market. New-share pricing after the Aosaikang case is low, a situation which should be improved, he added.

The spokesman also said on Friday the commission will submit relevant evidence and cooperate with the investigation to review whether its recent rules on insider trading should be repealed.

"The China Securities Regulatory Commission reached the rules based on facts and we respect supervision from the court," said Deng.

Beijing First Intermediate People's Court accepted on Tuesday the case in which Yang Jianbo, former general manager of the strategy department of Everbright Securities Co Ltd, filed a suit against the commission, contesting the punishment he received.

"It's Yang's right to seek legal proceedings and it's the commission's obligation to maintain strict supervision," said Deng.

Dai Tian contributed to this story.

caixiao@chinadaily.com.cn