SSE Amends, Optimizes Rules on Disciplinary Sanction, Review & Hearing

11 Oct 2019

Recently, the Shanghai Stock Exchange (SSE) has amended the “SSE Implementation Methods on Review” (the Review Methods for short), the “SSE Implementation Methods on Disciplinary Sanction and Regulatory Measures” (the Disciplinary Sanction Methods for short) and the “SSE Detailed Rules on Implementation for Hearing of Self-regulatory Management” (the Hearing Rules), which shall come into force after being released on October 11, 2019.

The system of disciplinary sanction, review and hearing, a fundamental system of the stock exchange’s self-regulatory management, plays a major role in punishing and deterring violations in the securities market, standardizing the self-regulatory management work, and protecting legitimate rights and interest of regulated objects. In recent years, with the continuously strengthened frontline regulatory function of the exchange, more severe disciplinary sanctions and regulatory measures have been imposed on market violations, and cases about hearing and review have obviously increased. Meanwhile, in the systems related to launching the SSE STAR Market and piloting the registration-based IPO System, the configuration of obligations and the claim responsibility system for market participants, including issuers and intermediaries, have been further cemented, the types of relevant disciplinary sanctions and regulatory measures have been enriched, and the implementation procedures have been consummated.

The SSE synchronously amends three fundamental systems. First, fundamentally systematical guarantee is provided for the implementation of relevant self-regulatory management measures according to the regulatory requirements for launching the SSE STAR Market and piloting the registration-based IPO System. Second, the coverage of the internal remedy procedure is expanded, with a sufficient argument space given to regulated objects, in a bid to effectively protect the procedure and the entity’s right. Third, relevant procedures and regulations are improved according to practices, so as to further improve the operation efficiency and procedural fairness of relevant systems.

The main amendment contents of the above three business rules are as follows:

First, the self-regulatory management measures and procedures of launching the SSE STAR Market and piloting the registration-based IPO System are optimized. Connecting with the examination rules on issuance and listing on the SSE STAR Market, the disciplinary sanction of temporarily not accepting documents from issuers, intermediaries and relevant personnel is added, which is also included into the hearing and review scope; domestic representatives of information disclosure, holders of depository receipt (DR) and others are covered by the regulation.

Second, the application scope of the review and hearing procedures is expanded. Apart from relevant disciplinary sanctions of the SSE STAR Market, the review and hearing scope will cover the decision on imposing compulsory stock delisting for any major violation, that on disapproval of initiatively terminating listing, that on disciplinary sanction of charging punitive liquidated damage, so that the regulated objects’ legitimate rights and interest are fully protected.

Third, relevant procedural arrangements for disciplinary sanction, review and hearing are optimized. According to the actual progress in the self-regulation work, the procedural arrangements for the number of the examination committee members of disciplinary sanction and review, the meeting agenda and the handling time-limit are adjusted and optimized; it is specified that influential regulation measures may be reported by the SSE regulation department to the disciplinary sanction committee for examination, so as to elevate its authority and credibility; the electric delivery way is added for relevant self-regulation documents to improve the delivery efficiency; specific procedures and regulations for accepting hearing and submitting argument opinions are perfected.

After releasing and implementing the Review Methods, the Disciplinary Sanction Methods and the Hearing Rules, the SSE will strictly implement them in the self-regulatory management work, punish any violations in the securities market according to regulations, ensure the promotion of major innovation business projects including launching the SSE STAR Market and piloting the registration-based IPO System, and propel the sound and steady growth of the capital market.