New IPO regulations under scrutiny
- Source: The Global Times
- [07:49 May 25 2009]
- Comments
An investor watches stock trading at a securities company in Haikou Friday. Photo: Image China
By Zhao Qian
Draft rules have been issued in a move to reform the system for initial public offerings of shares (IPOs), indicating that the unofficial moratorium on new share listings that started in September may end soon.
China Securities Regulatory Commission (CSRC) is calling for public opinion on the draft reforms up until June 5 and will let IPOs resume after the reforms have been finalized, said a CSRC spokesperson Friday.
The draft rules include reforms that disallow the common practice of setting shares at low levels to facilitate dramatic surges on the first day of listing.
Access for individual investors will also be improved.
The rules state that initial price offerings from investors to buy newly released shares must be adhered to.
The rules diminish administrative guidance in setting up IPO prices and form a more market-oriented price-setting mechanism, CSRC stated.
“Via keeping the opening price true, the price gap between the primary market and secondary market will be smaller,” Dong Shaopeng, deputy editor-in-chief of Securities Daily was quoted by ifeng.com as saying.
However, Ma Guangyuan, a lawyer, was quoted by the Oriental Morning Post as saying, “the CSRC didn’t give any specific measures to resolve the false quoting issue.”
There is no corresponding discipline mechanism to respond to false quoting by a collaboration of some lead underwriters and institutional investors, Ma said.
Access to IPOs by individual investors is also a major part of the proposed regulations.
According to the draft, all investors will be allowed to buy shares either online or offline. At present, large institutional investors can subscribe to shares using both systems, while individual investors can only use an offline system.
Ye Tan, an economic commentator, was quoted by china-orient.com as saying, that “over-speculation by the institutional investors will be curbed under the draft provision.”
The subscription process will be appropriately slanted toward small-and medium-sized investors interested in subscribing to the shares, CSRC stated.
Risks for investors will also be highlighted if the draft was adopted, according to the regulator.
Setting up a market-oriented pricing system, fair opportunity for individual investors and preventing over-speculation in the secondary market have been discussed on public forums such as the Tianya community BBS since the IPOs were suspended last September.
In January, CSRC Chairman Shang Fulin vowed to reform the mechanism for IPOs at an annual national work conference on securities and futures. Shang announced that the regulatory commission would give priority to a market-oriented system and IPO issuance reforms.