In accordance with the Administrative Regulations on Securities Issuance and Underwriting, the Opinions of the CSRC on Furthering the Reform of the New Share Issuance System (hereinafter referred to as the Opinions) and the Interim Provisions on the Public Sale of Shares by the Shareholders of Companies in Initial Public Offerings, the China Securities Depository and Clearing Co., Ltd (hereinafter referred to as the CSDC), the Shanghai Stock Exchange and the Shenzhen Stock Exchange have jointly formulated and issued Implementation Rules for Online Subscription according to Market Value and Offline Issuance of New Stocks in the Shanghai and Shenzhen Markets (hereinafter referred to as Online Subscription Rules and Offline Issuance Rules, respectively).
I. Requirements for subscribing according to market value shall be imposed to protect the legal rights and interests of the investors.
The Online Subscription Rules were prepared in accordance with the Opinions, which ruled that investors are entitled to participate in online subscription only when they hold a certain amount of non-restricted shares, and that online allotment shall take full consideration of both the market value of the non-restricted shares held by the subscribing investors and the value of their subscription. Protection of the interests of the investors, especially the small- and medium-sized investors, was given special attention in the design of the rules and the processes. Specific measures include:
1. The threshold for participation by investors in online subscriptions was carefully considered. In response to feedbacks gathered from previous market surveys, the Opinions stipulated that investors are entitled to participate in online subscriptions only when they hold a certain amount of non-restricted shares. Based on estimation and analysis, the market value threshold was set at RMB 10 thousand in the Online Subscription Rules, in order to ensure that most of the shareholding investors in the Shanghai and Shenzhen markets have the necessary subscription qualifications.
2. Market value calculations and subscription participation are managed based on individual investors. This can prevent individual investors from exceeding their subscription limit by splitting the market value they hold into several securities accounts and subscribing to the same new share through several accounts.
3. The market value in the credit securities account is included in the calculation. Because credit transactions are active on the market, some investors may have a high market value in their credit accounts. If the market value in the credit account is included in the calculation of the market value held by the investor, the subscription demands of the investors can be better satisfied.
4. The amount that an investor subscribes shall not exceed the subscription limit corresponding to the market value that is held in his/her account. The online subscription limit is calculated based on the market value that is held by the investor according to the established rules. The amount of the subscription by the investor shall not exceed the subscription limit corresponding to the market value that is held.
5. Investors shall enjoy great convenience and timeliness in inquiring about the market value they hold and their subscription limit. To help the investors stay informed about their subscription limits, the investors may entrust their securities custodian companies with the ability to inquire about their market value or subscription limit.
II. The reform opinions shall be implemented to rationalize the new share pricing.
To ensure that all market participants fulfill their duties and to further improve the marketization of new share pricing, several instructions are provided in the Opinions. According to the Opinions, the Offline Issuance Rules shall implement the principle of autonomous allotment by the issuer and the lead underwriter and shall impose the operating requirement that the lead underwriter firstly remove the highest quotation from the total subscriptions.
The Offline Issuance Rules also emphasized the rights and duties of the lead underwriter to independently manage the information about the allottee for the offline investors. Lead underwriters can independently manage the profile of the investors meeting the quotation conditions, launch offline issuance, inquire about offline quotation data, remove the relevant invalid quotations, inquire about subscription records and carry out autonomous allotment through the electronic platform for offline subscription of the Shanghai Stock Exchange and the electronic platform for offline issuance of the Shenzhen Stock Exchange (hereinafter referred to as the offline issuance platforms).
In addition, according to revisions of the Administrative Regulations on Securities Issuance and Underwriting, it is stipulated in the Offline Issuance Rules that investors can complete registrations and filings related to the offline issuance platforms through the lead underwriter and participate in offline issuance, with no need to file with the Securities Association of China again. The requirement for the lead underwriter to report the investor quotations and the issuance pricing process to the CSRC has also been deleted from the Offline Issuance Rules.
To facilitate their participation in the new share offline issuance in the Shanghai and Shenzhen markets, the investors that have not obtained CA certificates for logging into the offline issuance platforms shall apply for CA certificates through the lead underwriters according to the CA certification application processes established by the Shanghai Stock Exchange and the Shenzhen Stock Exchange. Investors with existing CA certificates may continue to use them.
The participants, including the issuer, the underwriter and the investors, can access the official websites of the Shanghai Stock Exchange, the Shenzhen Stock Exchange and CSDC to obtain details about the rules, notices and handling processes concerning offline issuance and online subscription.