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On March 29, Shenzhen Stock Exchange (SZSE) held the signing ceremony of Agreements on the Listing of Securities (2018 Revision), signally the official start of work on signing the new agreements. This is another major move of SZSE to implement the newly amended Measures on the Administration of Stock Exchange (the “Measures”) for perfecting institutional weak spots and strengthening comprehensive strict law-based regulation. The chairmen, general managers and executives of Vanke A, China Merchants Shekou, ZTE, SF Holding, Guosen Securities, Luxshare Precision, Han’s Laser, BGI Genomics, Kangtai Biological and Sunwoda participated in the ceremony. General Manager Wang Jianjun of SZSE attended the meeting.
In 1991, SZSE signed with Shenzhen Baoan the first listing agreement. Since then, five revisions have been made based on market development and regulatory practice to follow the changes in regulatory mechanisms and systems of capital market, which indicates SZSE’s efforts on perfecting its regulatory function and means and exerts positive effects on developing a contract culture in the market. The day January 1, 2018 marked the official implementation of the amended Measures. As an important regulatory institution for the capital market, the Measures features a series of system adjustments made by centering on consolidating the CPC leadership over an exchange, improving the exchange’s internal governance structure and reinforcing the exchange’s front-line regulatory function. In particular, Article 58 of the Measures states that exchanges shall sign a listing agreement with the listing applicants and specify the parties’ rights and obligations, field inspection and punitive default penalties therein. The stipulations enrich the regulatory “tool kit” of exchanges and arm the front-line supervision with “teeth”. In order to do well in the front-line supervision under a new situation, improve weak links and prevent risks, SZSE starts the revision of listing agreements by taking the opportunity of implementing the Measures. During the revision, SZSE convened special sessions to widely solicit opinions and appeals on the to-be-amended from professional lawyers and listing units’ representatives and respond to the issues of concern for improvements.
Following the basic idea of “adapting to new requirements and addressing old issues”, the revision, which features more complete content and more aligned format, is full optimization of the old version. Primarily, the revision covers the following three aspects:
Firstly, strengthening frontline regulation as per the new requirements in the Measures. First, diversifying regulatory measures. It is specified that the stock exchange may conduct on-site inspections of listed companies, and relevant inspection measures are stipulated. In case of default by listed companies on the agreements, SZSE may take disciplinary measures such as sending advice letters to relevant authorities and charging punitive penalty besides making public criticism and denunciation. Second, major authorities of the exchange are specified, including suspension and resumption of trading, risk warning, decisions on the suspension, resumption or termination of listing, to cover the entire regulatory chain. Third, providing more solid grounds for information disclosure and disciplinary regulation. Listed companies are clearly required to behave in an honest and trustworthy manner, standardize operation, and perform information disclosure and other related obligations. Listed companies are primarily responsible for information disclosure and should ensure the authenticity, accuracy, completeness, timeliness, and fairness of the information.
Secondly, upholding the spirit of contract to reinforce self-discipline. First, clarifying the obligations and service functions of the stock exchange. SZSE and listed companies are required to jointly abide by relevant laws and regulations and business rules and duly perform their functions. In addition to self- regulation, SZSE provides facilities, consulting, training and other services for securities offering, listing and trading, suspension and resumption of trading, as well as corporate information disclosure, M&As and restructuring of listed companies. Second, clarifying internal remedy mechanism so as to improve fairness and transparency of self-regulation. The agreement provides that SZSE shall establish a self-regulatory internal remedy system to guarantee listed companies’ right to file for hearing and review of SZSE’s major decisions on self-disciplinary regulation. To facilitate internal relief, streamline implementation procedures, and strengthen protection of listed companies and other parties concerned, SZSE also revised the Rules on Hearing Procedure and the Rules on the Work of the Appeals Review Committee, which will come out soon. Third, revising dispute resolution clauses and giving listed companies certain rights to choose. The original listing agreement provides for arbitration. In order to protect the legitimate rights and interests of listed companies, the amendment provides two alternatives, namely filing to court of competent jurisdiction or file for arbitration. Listed companies are allowed to choose their preferred channel.
Thirdly, improving flexibility of the agreement. First, embodying the concept of “principle regulation”. In order to effectively prevent and control market risks, SZSE is authorized to enforce disciplinary oversight on listed companies provided that such measures are conducted to safeguard public interests, restore market order and protect investors’ legitimate rights and interests. Second, simplifying the terms on listing fees. Listed companies are theoretically required to pay listing fees in full and on time upon notice in accordance with the fees and charges standard attached to the agreement to facilitate SZSE’s adjustment of charging standards or methods in accordance with market status and allow for more space for classified supervision. Third, streamlining the terms on the transfer arrangement for delisted shares. Theoretically, a stock, as required, shall be transferred in relevant trading platforms after delisting, which term shall remain valid when the agreement is terminated.
At the meeting, Wang Jianjun quoted:
When the fundamentals are well planted, the Way will grow; when the roots are firmly planted, the tree will prosper”.
The Listing Agreement functions as the institutional foundation and origin of rights for self-disciplinary supervision in that it stipulates the rights and obligations of the exchange and listed companies and shall be strictly abided by as basic code of conduct. As cornerstone of the capital market and source of value investment, listed companies should abide by the rules and regulations, honor their commitments, safeguard legitimate rights and interests of small and medium investors, and provide steadfast support to the real economy so as to realize quality growth. As a market organizer and operator and a self-disciplined regulator, SZSE, following the guidance of Xin Jinping Thought on Socialism with Chinese Characteristics for a New Era, will maintain an open, fair and square market order as ever, intensify transparency construction, and constantly consolidate frontline supervision with a rule-of-law mindset. Moreover, SZSE will support listed companies in pursuing better and stronger development by leveraging the capital market and advance hand-in-hand with more quality enterprises to endeavor for building a world leading innovation capital formation center, drive the construction of capital market power and contribute more with practical actions to the quality development of China.
Wang expressed that to ensure implementation of the Measures to the letter and speed up the formation of a rule system featuring complete institutions, scientific norms and efficient operation, SZSE, apart from amending the listing agreement, has made it a benchmark article by article to systematically reorganize other regulations and rules in need of adjustments and develop a work plan for improving weak institutional links, thus pushing forward relevant work steadily.