Securities Issuance and Underwriting Administration
1. Purpose
China Securities Regulatory Commission (CSRC) formulates the Administrative Provisions on Securities Issuance and Underwriting (hereinafter referred to as the “Provisions”) in accordance with the Securities Law of the People’s Republic of China, the Company Law of the People’s Republic of China and other relevant rules.
2. Scope of Application
The Provisions mainly apply to enterprises issuing and publicly offering securities in China and the underwriters thereof.
3. Definition
1). “Securities Trading Enterprise” shall refer to the securities company, futures company, and the securities department of a bank approved by the China Securities Regulatory Commission (CSRC).
2). “Securities Underwriting Institution” shall refer to the securities company, futures company and the securities department of a bank approved by the China Securities Regulatory Commission (CSRC) that engages in securities underwriting activities.
3). “Prospectus” shall refer to the disclosure documents or other written materials concerning the offering target, offering demand, payment of considerations, issue, allotment, listing and trading and other relevant information about the issuer and its securities, including the documents filed with the registration cost and the documents issued to investors.
4. Procedures for Issuance and Underwriting of Securities
1. Enterprises issuing and publicly offering securities shall submit applications for the issuance and underwriting of securities to the CSRC in accordance with the provisions of law and regulation.
2. The CSRC may entrust its local offices to issue the preliminary approvals on behalf of the CSRC.
3. Enterprises issuing and publicly offering securities that have obtained the CSRC’s preliminary approvals shall make public announcements through news media designated by the CSRC before applying for formal registration.
4. Enterprises issuing and publicly offering securities that have obtained the CSRC’s warm-up approvals shall provide the information and documents required by the CSRC and issued documents (offer circular) with investment alert.
5. Enterprises issuing and publicly offering securities shall, in accordance with the provisions of the CSRC, open a custodian account with the designated securities trading enterprise and deposit the offering target or the payment of consideration in the account, and provide the custody receipt.
6. The offering target or payment of considerations deposited in the custodian account shall not be extracted prior to the securities listing.
7. Enterprises issuing and publicly offering securities shall, in accordance with the CSRC’s provisions, select the underwriter prior to the securities issuance registration.
8. The terms of underwriting shall include the pricing method, underwriting commission and other issues agreed upon between the issuer and the underwriter.
5. Underwriting Method
1. Allotment Underwriting: The underwriter shall purchase in the market at the starting price on the allotment date. It is the market-oriented underwriting method used to transfer the securities from the issuers door to the retail investors.
2. Global Underwriting: The underwriter shall directly purchase the securities from the issuer at the agreed price and then resell the securities to different investors at different prices.
3. Best Efforts Underwriting: The underwriter shall make all reasonable efforts to distribute and resell the securities; the success or failure of the underwriting shall not be tied to the underwriters performance.
6. Administration on Issuance of Securities
1. The CSRC shall review the application for the issuance of securities and only those successfully reviewed shall be allowed to be listed.
2. Enterprises issuing and publicly offering and their controlling shareholders, actual controllers and their connected persons shall faithfully and truthfully disclose the information to the investors and shall not make any false statement, misleading representations or material omissions.
3. Enterprises that issue and publicly offer securities shall, within certain period after the listing of the securities, set up special accounts with the designated securities trading enterprise for the payment of consideration or the allotment target, and keep the accounts open until after the completion of the listing of the securities.
4. Securities underwriting institutions shall actively investigate and verify the issuers information and documents, follow the securities laws, accurate and timely inform their clients concerning the investment risks and liabilities, follow the underwriting agreement, sincere and fair arrange the underwriting of the securities, and press forward the underwriting and distribution process.
5. Enterprises issuing and publicly offering securities shall fulfill their responsibilities of disclosure in accordance with the Regulations on Continuous Disclosure of Information about Enterprises Issuing and Publicly Offering Securities and shall, through news media designated by the CSRC, make public announcements, inform investors and respond to investors’ inquiries.
6. Enterprises issuing and publicly offering securities shall timely query and obtain the credit data of their controlling shareholders and actual controllers from China Bond, and disclose such information to the public in due form.
7. Enterprises issuing and publicly offering securities shall enter into the structure of registration system and use the system effectively; they shall conduct quality management on their documents submitted to the CSRC and shall check the quality of the prospectus and other documents issued to the public.
7. Limitations
1. The issuer and its controlling shareholders, actual controllers and their connected persons shall not proceed with stock pledging activities in the period of securities issuance and underwriting, or until the completion of the listing of the securities.
2. The controlling shareholders, actual controllers and their connected persons of the enterprise that issues and publicly offers securities shall not engage in short sale activities until the completion of the listing of the securities.
3. In the period of securities issuance and underwriting, the issuer shall not carry out the shareholding restructuring and follow-on offering activities, or other activities that will change the motivation or other conditions of securities issuance and underwriting.
8. Penalties
If the issuer, its controlling shareholders, actual controllers and their connected persons violate the provisions of the Provisions by committing fraud, they shall be subject to civil liabilities, penalties or criminal liabilities under the law.
In conclusion, the above-mentioned Provisions aim to standardize the process of securities issuance and underwriting, in order to keep the market order fair and protect the investors’ interests.
