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CSRC intensifies monitoring efforts over IPOs


16:54, January 28, 2013

BEIJING, Jan. 28 (Xinhua) -- China's securities regulator has begun to act on violations that occurred during initial public offerings (IPOs) last year, with more sponsors being penalized for dereliction of duty.

Since September 2012, the China Securities Regulatory Commission (CSRC) has sent eight warning letters to six brokerage firms that failed to disclose information in a timely manner after their newly-listed clients reported profit plunges, Monday's China Securities Journal reported.

Three letters were sent to CITIC Securities, Guosen Securities and Everbright Securities in January, the report said.

According to relevant regulations, the CSRC can impose punishments on sponsors and issuers if listed companies post year-on-year profit declines of 50 percent or greater in the same year that their shares became available for trading on the stock market.

The penalties range from a 3-to-12-month ban on sponsors and issuers' IPO business to the revocation of sponsorship qualifications.

The brokerages involved may be downgraded and their investor protection fund will be increased significantly. The fund is compulsory for all Chinese securities brokerages.

The cost of the fund normally varies between 0.5 percent and 5 percent of the company's annual revenues.

The intensified monitoring efforts are intended to punish sponsors who spice up companies' financial performance to facilitate the process of going public, which may result in a marked profit slump in their annual reports after an IPO is issued.

As of Jan. 24, 27 newly-listed companies had trimmed their profit forecasts, with five companies expecting profits to decrease by more than 50 percent.

China's stock market experienced major turbulence last year. The benchmark Shanghai Composite Index dipped to 1,959.77 points on Dec. 3, the lowest reading since 2009.

The poor market has dented the confidence of smaller investors, who attributed their losses to excessive IPOs that allowed companies to maliciously take money from the market.

The investors have urged authorities to improve the way new stocks are issued and establish a delisting mechanism.

In response, the CSRC has slowed the pace of IPO reviews and rolled out a string of measures to strengthen supervision and crack down on illegal activity.

On Jan. 8, it launched special checks for last year's financial statements issued by listed companies that are subject to IPO reviews in order to "reinforce the authenticity, accuracy, completeness and timeliness" of information disclosures and crack down on related violations.

The Shanghai Composite Index climbed 1.63 percent to 2,328.71 points during Monday's morning trading session.


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