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Order of China Securities Regulatory
Commission
(No. 37)
The Measures for the Administration of Securities Issuance and
Underwriting, which were deliberated and adopted at the 189th
chairmen's executive meeting of China Securities Regulatory
Commission on September 11th, 2006, are hereby promulgated and shall
come into effect as of September 19th, 2006.
Chairman of China Securities Regulatory Commission Shang Fulin
September 17th, 2006
Measures for the Administration of Securities Issuance and
Underwriting
Chapter I General Provisions
Article 1 For the purpose of regulating securities issuance and
underwriting and protecting the legitimate rights and interests of
investors, these Measures are formulated in accordance with the
Securities Law of the People’s Republic of China and the Company Law
of the People’s Republic of China.
Article 2 These Measures apply to issuers who issue stocks or
convertible corporate bonds (hereinafter collectively referred to as
securities) within the territory of China, securities companies that
underwrite securities within the territory of China, and investors
who subscribe securities issued within the territory of China.
In participating in the issuance of securities, issuers, securities
companies and investors shall abide by other provisions on
securities issuance of China Securities Regulatory Commission
(hereinafter referred to as CSRC) and the business rules of stock
exchanges and securities registration and clearing institutions. In
underwriting securities, securities companies shall also abide by
the relevant provisions on sponsorship system, risk control system
and inner control system of the CSRC.
Article 3 The securities service institutions and personnel that
produce the relevant documents for securities issuance shall
strictly fulfill the legal duties in accordance with generally
recognized business standards and ethical norms of the same
industry, and shall undertake responsibilities for the authenticity,
accuracy and integrity of the documents produced.
Article 4 The CSRC shall supervise and manage the issuance and
underwriting of securities according to law.
Chapter II Inquiry and Price-Fixing
Article 5 As for the initial public offering of a stock, the issuing
price of the stock shall be determined by making an inquiry to the
specified institutional investors (hereinafter referred to as
inquiry objects).
Inquiry objects refer to the securities investment funds management
companies, securities companies, trust and investment companies,
financial companies, insurance institutional companies, and
qualified foreign institutional investors that satisfy the
conditions prescribed in these Measures; and other institutional
investors authorized and approved by the CSRC.
Article 6 An inquiry object and the securities investment products
under its management (hereinafter referred to as object of shares
rationing) shall be registered at Securities Association of China
for record and be subject to the self-discipline management of
Securities Association of China
Article 7 An inquiry object shall satisfy the following conditions:
(1) It is established according to law, and has not been imposed
with any administrative penalty, supervising measure or criminal
penalty by the relevant supervising departments because of any
significant violation of laws or regulations during the latest 12
months;
(2) It may conduct stocks investment according to law;
(3) It has good credit record, and has the institutions and
personnel necessary for independently engaging in securities
investment;
(4) It has sound systems of inner risk evaluation and control which
can be effectively implemented, and its risk control indexes are in
line with the relevant provision; and
(5) Where it has been removed form the list of inquiry objects by
Securities Association of China in accordance with the provisions of
these Measures, 12 months have lapsed since the date of removal.
Article 8 The following institutional investors, as inquiry objects,
shall also satisfy the following conditions in addition to those
prescribed in Article 7:
(1) As for a securities company, it may conduct securities self-run
business and securities assets management business upon approval;
(2) As for a trust and investment company, it shall have been
reregistered at the relevant supervising department for two or more
years, its registered capital shall not be lower than 400 million
yuan, and there is an active record of securities market investments
in the latest 12 months;
(3) As for a financial company, 2 years shall have lapsed since its
establishment, its registered capital shall not be lower than 300
million yuan, and there is an active record of securities market
investments in the latest 12 months.
Article 9 A managing underwriter shall provide an investment value
study report to the inquiry objects when making inquiries. No
issuer, managing underwriter or inquiry object may publicize or
disclose the content of an investment value study report in any
form.
Article 10 An investment value study report shall be independently
written and signed by the research personnel of a underwriter, which
shall not provide an investment value study report written by an
institution other than one of the underwriting syndicate. An
underwriter that produces investment value study report shall
establish perfect quality control system of investment value study
report; the personnel who write the report shall abide by the inner
control system of securities companies.
Article 11 In writing an investment value study report, the
following requirements shall be observed:
(1) Independence, prudence and objectiveness;
(2) The materials quoted shall be authentic, accurate, integrate and
authoritative, and the sources shall be indicated;
(3) The evaluation on the industry of the issuer shall be consistent
and coherent; and
(4) There shall be no false record, misleading statement or major
omission.
Article 12 An investment value study report shall make comprehensive
analysis on the elements that affect the investment value of an
issuer, and shall at least include the following contents:
(1) The classification of the issuer's industry, industrial
policies, comparison between the issuer and the major competitors,
and the issuer's status in the said industry;
(2) Analysis on the issuer’s state of operation and development
prospect;
(3) Analysis on the issuer’s capacity of making profits and
financial conditions;
(4) Analysis on the issuer’s projects invested by raised funds;
(5) Comparison between the investment value of the issuer and that
of the comparable listed companies in the same industry; and
(6) Macro economic trend, stock market trend and other elements that
have important impact on the investment value of the issuer.
An investment value study report shall, on the basis of the
above-mentioned analysis, anticipate the rational investment value
of an issuer’s stock by using the estimating methods as recognized
in the industry.
Article 13 An issuer and its managing underwriter shall make
recommendations and inquiries to the inquiry objects after
publishing the prospectus of an initial public offering stock and
the announcement on issuance, and shall make recommendations to the
public investors via internet.
Inquiry may be divided into initial inquiry and accumulated bidding
inquiry. An issuer and its managing underwriter shall determine the
issuing price span through initial inquiry, and determine the
issuing price within the price span through accumulated bidding
inquiry.
Article 14 Where an initially offered stock is listed on the board
of small and medium-sized enterprises, the issuer and its managing
underwriter may determine the issuing price according to the outcome
of initial inquiry instead of further conducting accumulated bidding
inquiry.
Article 15 An inquiry object may determine by itself whether to
participate in initial inquiry; where an inquiry object applies for
participating in initial inquiry, the managing underwriter may not
refuse without legitimate reasons. An inquiry object that did not
participate in the initial inquiry, or participated in the initial
inquiry but did not make effective quotation, shall not participate
in the accumulated bidding inquiry and offline placement.
Article 16 After the end of initial inquiry, where the number of the
publicly offered shares is smaller than 400 million and the inquiry
objects that provide effective quotations are less than 20, or the
number of the publicly offered shares is larger than 400 million and
the inquiry objects that provide effective quotations are less than
50, the issuer and its managing underwriter may not determine the
issuing price and shall suspend the issuance.
Where an issuer and its managing underwriter resume the issuance
after suspending it, they shall report to the CSRC in a timely
manner.
Article 17 An inquiry object shall make reasonable quotation in
accordance with the principles of independence, objectiveness and
sincerity, may not negotiate on the quotation or lower or raise
prices on purpose.
Article 18 The securities self-run account of a managing underwriter
may not participate in the inquiry, offline placement and online
issuance of the shares issued this time.
An inquiry object that has actual control relationship with the
issuer or its managing underwriter may not participate in the
inquiry and offline placement of the shares issued this time, but
may participate in the online issuance.
Article 19 An issuer and its managing underwriter shall, after
determining the issuing price span and the issuing price,
respectively report them to the CSRC for record and make public
announcements accordingly.
Article 20 An issuer and its managing underwriter may not mislead
investors in the process of recommendation, or disturb the normal
quotation or subscription of any inquiry object, or disclose the
information of the issuer other than such public information as
prospectus; there shall not be any false record, misleading
statement or major omission in the recommendation materials.
Article 21 An inquiry object shall summarize the inquiry situation
of the previous year within one month upon the end of that year, and
make explanations on whether it is in line with the conditions
prescribed in these Measures on a persistent basis and whether it
complies with the requirements on inquiry objects as prescribed in
these Measures. The summary report shall be reported to Securities
Association of China for record.
Article 22 In issuing securities, a listed company may determine the
issuing price by means of inquiry, or by negotiating with its
managing underwriter.
The price-fixing of securities issued by a listed company shall be
in line with the relevant provisions of the CSRC on securities
issuance by listed companies.
Chapter III Securities Offering
Article 23 Where the number of the initially offered shares is more
than 400 million, shares may be rationed to strategic investors. The
issuer shall conclude a ration agreement with strategic investors in
advance and shall report to the CSRC for record.
An issuer and its managing underwriter shall disclose the standards
for selecting strategic investors, the total amount of shares
rationed to strategic investors, the proportion in the shares issued
this time, and restrictions on holding period, etc.
Article 24 A strategic investor may not participate in the initial
inquiry and accumulated bidding inquiry of a stock of initially
public offering, and shall make a promise that the holding period of
the shares rationed to it this time shall not be less than 12
months. The holding period shall be calculated as of the date when
the stock publicly offered this time is listed.
Article 25 An issuer and its managing underwriter shall ration
shares to the inquiry objects that participate in the offline
ration. Where less than 400 million shares are offered publicly, the
quantity for rationing shall not exceed 20% of the total amount of
this issuance; where 400 million or more shares are offered
publicly, the quantity for rationing shall not exceed 50% of the
total amount of this issuance after deducting the amount rationed to
strategic investors. An inquiry object shall make a promise that the
holding period of the shares obtained this time through offline
placement shall not be less than 3 months. The holding period shall
be calculated as of the date when the stock publicly offered this
time is listed.
Where the shares issued this time are rationed to strategic
investors, upon the completion of the issuance, the quantity of the
shares without any restriction on holding period shall not be less
than 25% of the total amount of this issuance.
Article 26 The objects of shares rationing shall be limited to the
following categories:
(1) Securities investment funds raised upon approval;
(2) National social security funds;
(3) Securities self-run accounts of securities companies;
(4) Aggregate asset management plans, established upon approval, of
securities companies;
(5) Securities self-run accounts of trust and investment companies;
(6) Aggregate trust plans established by trust and investment
companies which have performed reporting procedures at the relevant
supervising departments;
(7) Securities self-run accounts of finance companies;
(8) Approved securities investment accounts of insurance companies
or insurance assets management companies;
(9) Securities investment accounts managed by qualified foreign
institutional investors;
(10) Enterprise annuity funds that have been put on record at the
relevant supervision departments;
(11) Other products of securities investment approved by the CSRC.
Article 27 An inquiry object shall respectively appoint capital
accounts and securities accounts for the objects of shares rationing
under its management, which shall be specially used for accumulated
bidding inquiry and offline placement, and shall report the accounts
appointed to the CSRC, Securities Association of China and
securities registration and clearing institutions for record.
Article 28 An object of shares rationing that participates in
accumulated bidding inquiry and offline placement shall pay the
amount for subscription in full amount, where only a securities
account is appointed, the accumulated quantity of subscription shall
not exceed the total amount of shares rationed to inquiry objects
this time.
Article 29 An issuer and its managing underwriter shall determine
the issuing price through accumulated bidding inquiry, where the
aggregate quantity of effective subscription with price above the
issuing price is larger than the quantity of offline placement, all
the effective subscription with price above the issuing price shall
be rationed at the same proportion.
Where an issuing price is determined through initial inquiry, if the
aggregate quantity of offline effective subscription is larger than
the quantity of offline placement, all the effective subscription
shall be rationed at the same proportion.
Article 30 A managing underwriter shall check the registration
situation of inquiry objects and objects of shares rationing. An
inquiry object that falls under any of the following circumstances
may not be rationed with shares:
(1) It does not participate in initial inquiry;
(2) The name and account information of an inquiry object or object
of shares rationing are inconsistent with those registered at
Securities Association of China;
(3) It fails to offer a quotation within prescribed time limit or
appropriate capital for subscription in full amount; or
(4) There is evidence which can prove the existence of such
circumstances as violation of any law or regulation or violation of
the principle of good faith in the process of inquiry.
Article 31 An issuer and its managing underwriter shall conduct
offline placement of shares and online issuance simultaneously.
Where the online issuing price is not yet determined, the investors
participating in the online issuance shall subscribe according to
the upper limit of the price span; if the ultimately determined
issuing price is lower than the upper limit of the price span, the
price difference shall be refunded to the investors.
An investor that participates in online issuance shall observe the
relevant provisions of securities exchanges and securities
registration and clearing institutions.
Article 32 Where a stock of initially public offering reaches
certain scale, the issuer and its managing underwriter shall
establish a claw-back mechanism between offline placement and online
issuance, and adjust the proportion between the two according to the
situation of subscription.
Article 33 As for a listed company, where there is any profit
distribution plan or plan on the conversion of public accumulation
funds into share capital that has not been submitted to the general
meeting of shareholders for voting, or that has been voted and
adopted by the general meeting of shareholders but has yet to be
implemented, the company shall issue securities after such plan is
implemented. Before the relevant plan is implemented, the managing
underwriter may not underwrite the securities issued by the listed
company.
Article 34 Where a listed company rations shares to the original
shareholders, it shall ration shares to the shareholders registered
at the book on the date of record at the same rationing ratio.
Article 35 Where a listed company publicly raises shares from
unspecified objects (i.e. to make additional issuance) or issues
convertible corporate bonds, the managing underwriter may classify
the institutional investors that participate in offline placement,
and set different rationing ratios for different categories, while
the institutional investors that fall within the same category shall
be rationed at the same ratio. The managing underwriter shall
specify the standards for classification in the issuance
announcement.
Where a managing underwriter fails to classify the institutional
investors, it shall establish a claw-back mechanism between offline
placement and online issuance, the rationing ratios of the two shall
be the same with each other after the claw-back。
Article 36 Where a listed company issues additional stocks or
convertible corporate bonds, it may ration all or part shares by
giving priority to the original shareholders, the ratio of priority
ration shall be disclosed in the issuance announcement.
Article 37 Where a listed company makes non-public issuance of
securities, it shall comply with the relevant provisions of the CSRC
on securities issuance by listed companies in choosing issuing
objects and determining the quantities.
Chapter IV Securities Underwriting
Article 38 Before underwriting securities, a securities company
shall report the issuing plan and the underwriting plan to the CSRC.
Article 39 A securities company that underwrites securities shall
adopt the mode of exclusive sales or sales by proxy in accordance
with Article 28 of the Securities Law of the People’s Republic of
China. A listed company that issues stocks non-publicly and does not
adopt the mode of distribution by itself, or that is rationed with
shares, shall adopt the mode of sales by proxy.
Article 40 Where the mode of sales by proxy is adopted in the
issuance of a stock, the disposal measures in case of issuance
failure shall be disclosed in the issuance announcement. If the
issuance is unsuccessful, the managing underwriter shall assist the
issuer in refunding to the stock subscribers according to the
issuing price after adding the bank deposit interest of the same
period.
Article 41 Where a securities issuance shall be underwritten by
underwriting syndicate according to the provisions of laws and
administrative regulations, the underwriters that compose the
underwriting syndicate shall conclude a underwriting syndicate
agreement, the managing underwriter shall be responsible for
organizing the underwriting work.
Where a securities issuance is mainly underwritten by two or more
securities companies on a joint basis, all securities companies that
undertake the post of managing underwriter shall bear the
responsibilities of managing underwriting together and fulfill the
relevant obligations. Where an underwriting syndicate is composed of
three or more underwriters, a deputy-managing underwriter may be set
to assist the managing underwriter in organizing the underwriting
activities.
Article 42 A member of an underwriting syndicate shall conduct
underwriting activities in accordance with the provisions prescribed
in the underwriting syndicate agreement and the underwriting
agreement, and may not conduct any false underwriting.
Article 43 The underwriting syndicate agreement and the underwriting
agreement may be concluded after the issuing price is determined.
Article 44 A managing underwriter shall establish special
departments or institutions to assist the investment bank of the
company and other departments of research, marketing, etc, to
complete such work as information disclosure, recommendation,
book-keeping, price-fixing, ration and capital clearance, etc.
Article 45 A securities company may not, in the process of
underwriting, induce other people to subscribe shares by means of
providing overdraft or kickback or other illegitimate means as
recognized by the CSRC.
Article 46 A listed company, in arranging the suspension and
resuming of listing of certain securities during the period of
securities issuance, shall observe the relevant rules of securities
exchanges.
The managing underwriter shall appropriate and pay the interests on
funds deposited for the purchase of new securities in a timely
manner according to the relevant provisions.
Article 47 After the end of subscription and payment by investors, a
managing underwriter shall employ an accounting firm with the
qualification of the relevant securities business (hereinafter
referred to as accounting firm) to examine and verify the capital
for subscription and produce a report on the verification of
capital; where a stock of initial public offering is issued, it is
necessary to further employ a law firm to witness whether the acts
of inquiry and ration to strategic investors and inquiry objects are
in compliance with laws, administrative regulations and the
provisions of these Measures, and then produce special legal
opinions.
Article 48 Where more than 400 million shares of initially public
offering are issued, the issuer and its managing underwriter may
adopt greenshoe, the exercise of this option shall abide by the
relevant provisions of the CSRC, securities exchanges and securities
registration and clearing institutions.
Article 49 Where a securities is publicly offered, the managing
underwriter shall report the summary report of underwriting to the
CSRC for record within 10 days since the date when the securities is
listed so as to summarize and explain the basic situation during the
issuance period and the performance of the new shares after their
coming into the market, and shall provide the following documents:
(1) Separate edition of the prospectus;
(2) Underwriting agreement and underwriting syndicate agreement;
(3) Opinions of witness by the lawyer (only for the initially public
offering);
(4) Report on the verification of capital produced by the accounting
firm; and
(5) Other documents as required by the CSRC.
Article 50 Where a listed company makes non-public issuance of a
stock, the issuer and its managing underwriter shall file the
following documents with the CSRC upon the accomplishment of the
issuance:
(1) Statement on issuance situation;
(2) Report prepared by the managing underwriter on the compliance of
this issuing process and objects of subscription;
(3) Opinions of witness on the compliance of this issuing process
and objects of subscription presented by the lawyer of the issuer;
(4) Report on the verification of capital produced by the accounting
firm; and
(5) Other documents as required by the CSRC.
Chapter V Information Disclosure
Article 51 An issuer and its managing underwriter shall, in the
process of issuance, prepare the documents of information disclosure
and perform the obligation of information disclosure in accordance
with the procedure, content and format as stipulated by the CSRC.
Article 52 The information disclosed by an issuer and its managing
underwriter in the process of issuance shall be authentic, precise,
and integrate; and there shall be no false record, misleading
statement or major omission.
Article 53 An issuer and its managing underwriter shall publish the
information disclosed in the process of issuance on at least one of
the newspapers and periodicals appointed by the CSRC; and shall, at
the same time, publish such information at the internet website
appointed by the CSRC; and place such information at the premises
appointed by the CSRC for public reference.
Article 54 The letter of intent publicized by an issuer shall be
consistent with the prospectus in terms of content and format,
except that the former does not contain the issuing price and the
amount of capital to be raised, and shall have equal legal biding
force with the prospectus.
Article 55 An issuer and its managing underwriter shall publish the
issuance announcement at the same time when publishing the abstract
of the letter of intent or the prospectus, and shall make detailed
explanation on the issuing plan.
Article 56 Where an issuer and its managing underwriter announce the
issuing pricing and the price-earning ratio, the earnings per share
shall be calculated on the basis of the net profit of the previous
year of the issuance audited by accounting firm before or after
deducting non-routine profits/losses, whichever is smaller, divided
by the total capital stocks.
The issuer that provides profit forecasting shall still complement
the disclosure of the issuing price/earning ratio based thereon. The
earnings per share shall be calculated on the basis of the
forecasted net profit of the previous year of the issuance audited
by accounting firm before or after deducting non-routine
profits/losses, whichever is smaller, divided by the total capital
stocks.
The issuer may also disclose such issuing price index as the
price/book ratio, which can reflect the features of the industry
where the issuer belongs.
Article 57 In case rationing a stock of initially public offering to
strategic investors, the issuer and its managing underwriter shall
disclose the name, subscription quantity, promised holding period
and other information of each strategic investor in the announcement
of the results of offline placement.
Article 58 Where a listed company makes non-public issuance of new
shares, it shall prepare and disclose the statement on issuing
situation.
Article 59 Before the securities issued this time is listed, the
issuer and its managing underwriter shall prepare the documents of
information disclosure and make announcement in accordance with the
requirements of securities exchanges.
Chapter VI Supervision and Punishment
Article 60 Where any issuer, securities company, securities service
institution or inquiry object violates any provision of these
Measures, the CSRC may order it to rectify; as for the directly
responsible person in charge and other persons directly responsible,
the CSRC may take such measures of administrative supervision as
holding supervising talks and determining as inappropriate person,
and register at the record of creditworthiness and publicize the
names.
Article 61 Where any issuer, securities company, securities service
institution, inquiry object or its directly responsible person in
charge violates any law, administrative regulation, or any provision
of these Measures, administrative penalties shall be imposed
thereupon according to law when it is due; where it/he is suspected
of being involved with any crime, it/he shall be transferred to
judicial authorities and its/his criminal liabilities shall be
investigated.
Article 62 Where a securities company falls under any of the
following circumstances, in addition to undertaking the legal
responsibilities stipulated in the Securities Law, it may not
participate in the underwriting of securities within 36 months since
the date of being confirmed by the CSRC:
(1) Underwriting unapproved securities;
(2) In the process of underwriting, conducting advertisements or
other activities of publicity and recommendation that are false or
may mislead investors; or inducing other people to purchase shares
by illicit means; or
(3) There is false record, misleading statement or major omission in
the information disclosed in the process of underwriting.
Article 63 Where a securities company falls under any of the
following circumstances, in addition to undertaking the legal
responsibilities stipulated in the Securities Law, it may not
participate in the underwriting of securities within 12 months since
the date of being confirmed by the CSRC:
(1) Leaking information on securities issuance in advance;
(2) Canvassing underwriting business by means of unfair competition;
(3) Failing to disclosing information as required in the process of
underwriting;
(4) The actual operation in the process of underwriting is
inconsistent with the issuing plan submitted to the CSRC; or
(5) Writing or publishing the study report on investment value by
violating the relevant violations.
Article 64 Where an issuer and its managing underwriter provide, by
violating the relevant provisions, any financial subsidy or
compensation to the investors that participate in subscription, the
CSRC may order it to rectify; where the circumstance is serious, it
may give admonition or impose fines.
Article 65 Where an inquiry object falls under any of the following
circumstances, Securities Association of China shall remove it from
the list of inquiry objects:
(1) It does not satisfy the conditions prescribed in these Measures
any longer;
(2) Three or more supervising talks have been held within the latest
12 months because of its violation of the relevant supervising
requirements; or
(3) Failing to submit annual summary report on time.
Chapter VII Supplementary Provisions
Article 66 The term “online issuance” refers to the issuance of
securities through the technical systems of securities exchanges.
The term “offline placement” refers to the securities issuance
organized and carried out by the managing underwriters instead of
through the technical systems of securities exchanges.
Article 67 The issuance and underwriting of other securities of
listed companies shall be conducted with reference to these
Measures.
Article 68 These Measures shall come into force as of September
19th, 2006. The Regulations on the Management of Stock Underwriting
by Securities Institutions (No.18 [1996] of China Securities
Regulatory Committee), the Notice on Banning the Improper Behaviors
in Stock Issuance (No.21 [1996] of China Securities Regulatory
Commission), the Notice on Firmly Preventing Such Behaviors as
Overdraft in Stock Issuance (No.169 [1996] of China Securities
Regulatory Commission), the Notice on Forbidding Securities
Institutions from Purchasing their Own Underwriting Stocks (No.4
[1997] of China Securities Regulatory Commission), the Notice on
Strengthening the Supervising Work over Stock Underwriting Business
of Securities Institutions (No.54 [1999] of China Securities
Regulatory Commission), the Notice on the Relevant Issues Concerning
the Stocks Ration of Legal Persons (No.121 [1999] of China
Securities Regulatory Commission), the Notice on the Relevant Issues
Concerning the Arrangements of Stocks Listing (No.86 [2000] of the
China Securities Regulatory Commission), the Supplementary Notice on
the Supervising Work over Stock Underwriting Business of Securities
Institutions (No.199 [2000] of China Securities Regulatory
Commission), the Notice on Companies that Issue New Shares Conduct
Introduction and Recommendation through Internet (No.12 [2001] of
China Securities Regulatory Commission) and the Notice on Several
Issues Concerning the Trial Implementation of the Price Inquiry
System for Initial Public Offerings (No. 162 [2004] of China
Securities Regulatory Commission) shall be abolished simultaneously.
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