Measures for Administration of Securities Issuance and Underwriting (17/04/2007)
1. What does the law entail?
The Measures consist of seven chapters, including 68 articles in total. The Measures
contain detailed provisions on price inquiry and price fixing, issuance, underwriting,
information disclosure, and penalties for breach of the rules.
2. How does it affect the price inquiry system?
The Measures improve on the price inquiry system. The Measures provide that, for IPO stocks on the Small Enterprise Board, the issuer and the managing underwriter may, based on the result of the initial price inquiry, determine the issuing price. It is no longer compulsory that all issuers go through two stages, the stage of initial price inquiry and the stage of cumulative bidding price inquiry, to determine the issuance price.
3. How does it affect price offering and subscription?
The Measures also strengthen the regulation of the price offering and subscription of the entities inquired, providing that all the entities inquired can at their own discretion determine whether to respond to the initial price inquiry, and the managing underwriter shall not refuse the response of any entity inquired, but only the entities inquired who respond to the initial price inquiry may participate in the offline subscription; and that if the entities inquired who respond to the initial price inquiry are less than 20, or in the event that the stocks to be offered are more than 400,000,000, or the entities inquired who respond to the initial price inquiry are less than 50, the issuer shall not fix the price and the issuance shall be suspended.
4. What else is contained in the measures?
Moreover, the Measures integrate and improve on the previously issued regulatory documents on underwriting by securities companies and are based on the new conditions and new requirements after the comprehensive rectification of securities companies, e.g., adopting the “Green Shoe” system (“Over Allotment Option”). The Measures provide that the offline placement to the institutional investors and the online subscription of the public shall be simultaneously undertaken, and the offline placement and the online subscription shall be allocable to each other. Finally, the Measures strengthen the regulation and supervision of the activities of issuers, securities companies, securities services agencies, and investors involved in securities issuance, and set out some penalties for violations of laws, regulations, and these Measures, including “Recorded in the Archives and Published”, and “Suspension of the License for the Relevant Business.”