Full Implementation of Registration-Based IPO Reform
ISSUING AUTHORITIES:
China Securities Regulatory Commission, Shanghai Stock Exchange, Shenzhen Stock Exchange
DATE OF ISSUANCE:
February 17, 2023
On February 17, 2023, comprehensive reform of the registration-based initial public offering (IPO) system was officially launched. On the same day, the China Securities Regulatory Commission (CSRC) promulgated the major rules for the implementation of the registration-based share listing system, including the Measures for the Administration of Initial Public Offering Stock Registration. The Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE) issued their corresponding rules simultaneously (hereinafter collectively referred to as the “New Measures”).
The registration-based IPO system has already been implemented on the tech-focused STAR Market of the SSE, the start-up board ChiNext of the SZSE, and the SME-focused Beijing Stock Exchange. It will now also apply to the main boards in SSE and SZSE.
The New Measures adopt a basic structure of examination conducted by the stock exchanges and registration by the CSRC and further clarify the responsibilities of the stock exchanges and the CSRC:
1. Examination and approval by the stock exchanges: The stock exchange shall be responsible for comprehensively examining and judging whether the enterprises meet the issuance conditions, listing conditions and information disclosure requirements, and shall render examination opinions. Where it is found that the projects under examination involve any major sensitive matters, major circumstances without precedent, major public opinions, or major illegal clues, the stock exchange shall promptly request instructions from and report to the CSRC. The CSRC checks whether the enterprise conforms to national industry classification policies and board positioning.
2. Registration at the CSRC: The CSRC performs registration procedures based on the review opinions of the stock exchange and delivers a decision on whether to approve the issuer's registration application within 20 business days upon receipt of such opinions.
With regard to improving the trading system, under the New Measures, no daily trading limit is set for IPO shares during their first five trading days. However, stocks listed on the main boards are still subject to the 10 percent daily trading limit after the first five days.
The CSRC dismissed concerns that the new system will lower the quality of listed firms, pledging stringent quality control and supervision.
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