In order to urge the sponsoring institutions to perform their duties diligently and conscientiously, take the responsibility for verifying and checking the sponsoring projects and improve the quality of information disclosure of the public offerings on the SSE Star Market, recently, the Shanghai Stock Exchange (SSE) launched the on-site supervision of the sponsoring business for the market. The first round of supervision involves two sponsor institutions, and the SSE will send inspectors to the locations of the sponsor institutions.
The on-site supervision is conducted after two rounds of inquiries for review of two applying companies have been launched. In the earlier process of inquiries for review, the relevant issuers and sponsor institutions were not explicit enough in disclosing important issues such as the business model and the core technology and its cutting-edge degree, and failed to provide adequate evidence for the business rationality of the transactions with major clients, the matching of the contract payment amount and the services and the consistency of the time point for confirming the income with the companies in the same industry, as well as the opinions offered by the sponsor institutions. Through accessing materials, evidence checks, interviews with relevant individuals and other means, the on-site supervision will focus on learning about the problems existing in the information disclosure for the relevant applying projects by the sponsor institutions, checking whether the inspections were effective, and requiring the sponsor institutions to make corresponding explanations or conduct supplementary verifications; in addition, the on-site supervision will check the sponsor institutions’ fulfillment of the responsibility for due diligence, compliance of the internal procedures, quality of the sponsoring work, etc.
Mainly by raising and answering questions, the SSE will urge the issuers and the sponsor institutions to improve the contents of information disclosure in the review for issuance and listing. The corresponding on-site supervision of the sponsor institutions is a supplement to the inquiry-based review in the pilot registration-based IPO system, mainly out of the practical considerations such as tightening the responsibility of the sponsor institutions for inspection and improving the quality and efficiency of the review for issuance and listing.
It is clearly required in the “Implementation Opinions on Launching the SSE Star Market and Piloting the Registration-based IPO System on the SSE” and related supporting rules that in the review for the pilot registration-based IPO system, we must fully leverage the role of the intermediaries in verification and inspection; as the main intermediaries, the sponsor institutions must be honest and trustworthy, and diligent and responsible, fully grasp the issuer's operation situation and risks, and conduct comprehensive inspection and verification of the issuer's application documents and information disclosure materials. Since the applications of the companies for listing on the SSE Star Market were accepted on March 18, a total of 35 sponsor institutions have submitted applications of 127 companies. With pressing time and heavy tasks, most sponsor institutions were able to perform their duties diligently according to the requirements of business rules and practice standards. However, there were also some sponsor institutions that failed to make effective efforts in conducting the due diligence, preparing the prospectus and other documents, and replying to the inquiries, etc. and the factors directly affected the issuer's information disclosure quality, and the efficiency and effectiveness of the review work.
Conducting on-site supervision of the sponsor institutions is an attempt made by the SSE to better perform review duties and give more effective play to the review function on the basis of the guidelines for launching the SSE Star Market and piloting the registration-based IPO system and the actual demands. From the perspective of the purpose and mode of implementation, the on-site supervision will be carried out by adhering to the problem-oriented approach and focusing on the sponsor institutions on the basis of the developments in the inquiries for review, which will be different from the usual all-around on-site inspection of the issuers. This round of on-site supervision is expected to be completed in about two weeks, and the time will be included in the time of the SSE’s inquiries for review, but will not be contained in the time of the issuer's reply. At the same time, the on-site supervision will not affect the advancement of the review process, which does not need to be suspended. The SSE will handle the problems found in the on-site supervision according to the rules, which will also be included in the evaluation of the quality of the sponsor institutions’ practice.