Today, the Shanghai Stock Exchange (SSE) officially issued the SSE Guidelines No.2 on the Application of Self-Regulation Rules for Listed Companies on SSE STAR Market - Voluntary Information Disclosure (the Guidelines for short). Regarding the background and purposes of the Guidelines, an SSE official in charge of the relevant businesses has answered related questions.
Q1: Can you brief us on the background and purposes of issuing the guidelines for voluntary information disclosure?
A: Voluntary information disclosure is an important part for the listed companies to fulfill their obligations of continuous information disclosure. It is also a necessary and effective supplement to the statutory information disclosure. Experience of domestic and international capital markets suggests that the information voluntarily disclosed by listed companies on strategic planning, earnings forecasts, internal governance, environmental protection, social responsibility and human resources has become important reference for investors to evaluate a company and make investment decisions. The Guidelines for voluntary information disclosure have been issued mainly out of considerations in the following three aspects.
First of all, the Guidelines are issued to implement the new Securities Law. The new Securities Law clearly stipulates that in addition to the information that needs to be disclosed according to the law, information disclosure obligors may voluntarily disclose the information that will have an impact on investors' value judgments and investment decisions on condition that the information voluntarily disclosed do not conflict with the information disclosed in accordance with the law and the obligor does not mislead investors. To adapt to the new Securities Law, the CSRC department-level regulations and the Exchange's business rules have clarified the requirements in principle for voluntary information disclosure. To implement the requirements of the new Securities Law, the Guidelines further enrich and refine the general principles and specific requirements for the voluntary information disclosure by the listed companies on the SSE STAR Market (the “STAR companies” for short), offer examples and interpretations based on market practices, and provide relevant guidance and regulatory suggestions for the STAR companies to carry out voluntary information disclosure.
Secondly, the Guidelines are issued to improve the effectiveness of information disclosure by SSE STAR Market listed companies. In developing the SSE STAR Market, one important task is to build a more targeted information disclosure system and improve the effectiveness of information disclosure. Since the opening of the market, a number of companies that epitomize the development direction of the new economy and own the "key and core technology" have been listed on the SSE STAR Market. Since these companies are different from traditional companies in terms of internal governance, profit models, product forms, R&D activities, etc. their strength in sci-tech innovation, growth and value should be presented in more aspects. As a result, the voluntary information disclosure has been put into more use. In terms of quantity, the number of voluntary disclosure announcements made by the STAR companies has accounted for about 20% of the total announcements; in terms of types, in addition to the regular types of information for voluntary disclosure, the STAR companies have taken the initiative to disclose information on industry movements, R&D progress, operation data, business cooperation, etc.; in terms of forms, the information has been disclosed in annual reports and temporary announcements; from the perspective of effectiveness, the voluntarily disclosed information has enhanced the pertinence of information disclosure and deepened the investors' knowledge and understanding of the STAR companies. The Guidelines are introduced to adapt to the changing trend. They will urge the STAR companies to proactively implement voluntary information disclosure and provide investors with more targeted and effective information for decision making.
Thirdly, the Guidelines are issued to prevent misconducts in voluntary disclosure. In recent years, there have been cases of misconducts in voluntary information disclosure that have misled investors, causing fluctuations in stock trading and drawing market attention. Another important aim for the issuance of the Guidelines is to sum up the regulatory experience in voluntary information disclosure, clarify the general requirements and specific principles for voluntary information disclosure through principle explanations and case demonstrations, and guide the companies in setting up corresponding internal systems of voluntary information disclosure and making good use of the system of voluntary information disclosure, so as to prevent the misconducts and ensure that the goals and value of voluntary information disclosure are realized.
Q2: The Guidelines are rich in content. Can you brief us on what specific requirements the Guidelines makes for voluntary information disclosure?
A: The Guidelines follow the principles established by the new Securities Law. They focus on regulating voluntary information disclosure in the following four aspects.
First of all, the scope of voluntary information disclosure must be clearly identified. Voluntary disclosure does not mean arbitrary disclosure. The scope of voluntary disclosure must be well understood. In terms of purpose, voluntary disclosure should serve the needs of investors in decision making, and it is not appropriate to disclose the information that is not related to investors’ decision-making; in terms of content, the disclosure should be based on certain objective facts or have basic conditions for implementation; in terms of types of information, the disclosure should include information about strategy, financial condition, forecast, R&D, business, industry, social responsibility and other common types of information.
Secondly, it follows the basic requirements for voluntary information disclosure. The general requirement is that the disclosed information should neither conflict with the information disclosed in accordance with the law nor mislead investors. Specifically, it is most important to ensure that the information disclosed is true, accurate, and complete, with no false records or misleading statements. Moreover, the information should be as concise and investor-friendly as possible, and we should strive to replace professional terminology with plain and easy-to-understand language, and use diagrams to aid presentation when necessary. In addition, attention should also be paid to maintaining necessary consistency and continuity. In principle, the matters of the same type should be disclosed continuously, and important developments of the same event should also be disclosed in a timely manner. Information disclosure should not be selective, nor should negative information be held back.
Thirdly, attention is paid to the main points of the announcements of common voluntary information disclosure. In order to facilitate the STAR companies' preparation of announcements for voluntary information disclosure, the Guidelines specifically list the common matters for information disclosure and the key points of announcements. The matters not only cover traditionally common types such as strategic planning, profit forecasting and social responsibility, but also involve the elements representing the characteristics of the STAR companies such as industry information, research and development progress, operational data, financial data under non-IFRS rules, and communication letters from the chairman to investors. The STAR companies can refer to the Guidelines when disclosing annual reports and preparing interim reports as needed.
Fourthly, the types of announcements to be marked as “voluntary disclosure” are specified. The Guidelines require that when using interim reports for voluntary information disclosure, the STAR companies should mark "voluntary disclosure" in the title of the announcement to help investors realize and understand that the information is disclosed voluntarily by the STAR companies.
Q3: In addition to the requirements and content for voluntary information disclosure, the Guidelines also specifically stipulate the internal decision-making procedures of the STAR companies for voluntary information disclosure. Can you brief us on the key points?
A: Sound, efficient and clear internal decision-making procedures provide the basic guarantee for the implementation of the rules for voluntary information disclosure. The Guidelines put forward corresponding requirements in this regard, mainly including three key points.
First of all, the Guidelines emphasize the implementation of the responsibilities of key personnel. The Guidelines properly allocates the responsibilities, assign the responsibilities for voluntary information disclosure to individuals, and emphasizes the responsibility of the chairman of a STAR company as the first person responsible for decision making and the responsibility of the board secretary as the specific person responsible for execution. In addition, it is stipulated that other senior executives should bear corresponding responsibilities within their respective areas of competence.
Secondly, the Guidelines emphasize the establishment of unified standards. The STAR companies are much different from each other in business models, governance structures, core technologies and product characteristics, with varied contents and types of the information to be disclosed voluntarily. Accordingly, the Guidelines requires the companies to clarify the scope of matters and the standards for the voluntary information disclosure based on their own characteristics, and ensure that they follow unified disclosure standards. For example, biopharmaceutical companies can include the phased progress in drug research and development in the scope of voluntary disclosure of information; the companies that implement equity incentives can definitively disclose financial data under non-IFRS rules and other matters in their annual reports.
Thirdly, the Guidelines emphasize the necessary requirements for confidentiality. The voluntarily disclosed information may have an impact on stock trading. In order to ensure fair access to information by investors, the Guidelines specifically require the STAR companies to set up necessary measures for confidentiality and fulfill corresponding obligations for information management in accordance with the law.
Q4: In recent years, in the information disclosure by the listed companies, there has been the misconduct of “newsjacking” through the voluntary information disclosure, and the CSRC and the exchanges dealt with such improper behavior in a timely manner. Can you brief us on the specific requirements in the Guidelines in this regard?
A: Preventing improper behavior in voluntary disclosure is an important aim of introducing the Guidelines. A small number of voluntary disclosures that are improperly related to hot topics in the market, also commonly known in the market as "newsjacking" announcements, tend to disturb investors' rational decision-making, cause abnormal fluctuations in stock trading, and even breed violations such as insider trading and market manipulation. Therefore, they must be strictly regulated. To this end, the Guidelines include a special section to put forward clear requirements.
First of all, whether it is necessary to make such announcements should be evaluated carefully. The Guidelines require that the STAR companies should avoid disclosing information related to the hot topics in the market that does not have a significant impact on the company. In particular, voluntary disclosure should not be used to improperly associate with the hot topics in the market, deliberately exaggerate the impact of the disclosed matters on the company's production, operation, research and development, sales, future development, etc., or mislead investors into overestimating the investment value of the company's stocks.
Secondly, information should be disclosed fully and completely. Regarding the information related to the hot topics in the market that it is indeed necessary to disclose, the Guidelines especially emphasize that the information should not mislead investors, and further specifies the requirements for disclosure according to the different types of the hot topics in the market related to the disclosed matters. For example, if the disclosed matter involves a hot-topic technology, the STAR company should explain in the announcement whether the technology it holds is the same as such technology, the degree of relevance to its main business, whether the technology has matured, whether there are uncertainties in research and development, and whether the company is in actual possession of the relevant technology, etc.
Thirdly, explanations and clarifications should be provided in a timely manner. The Guidelines require STAR companies to pay close attention to public media reports and market rumors about the companies. If there are the circumstances where hot concepts are inappropriately associated with the company, which may have a significant impact on investors' decision-making or the trading of the company's stocks, it is necessary for the company to provide clarifications in a timely manner.
It should be specially pointed out that the SSE will continue to strictly supervise “newsjacking” behavior that proactively take advantage of the hot topics in the market, especially violations abusing voluntary information disclosure to commit information-based market manipulation, and will crack down on the misconduct so long as it appears, so as to effectively maintain the market order for information disclosure on the SSE STAR Market.
Q5: We have noticed that quite a few examples and explanations are added in the newly issued Guidelines, compared with the previously announced rules. Can you brief us on the considerations for adding the contents to the rules?
A: It is an important goal for the SSE in developing the SSE STAR Market to continuously make the self-regulatory rules more readable and investor-friendly, and help market participants understand, master and use the rules. Explorations and trials have been made in the Guidelines in this regard.
First of all, the institutional logic has been clarified. Understanding the institutional logic is a prerequisite for the market entities to master and accurately use rules. To this end, the Guidelines, while making relevant regulatory requirements, explains in detail the background and reasons for determining the scope of voluntary information disclosure and the basic requirements, so that the users can better understand the goals and considerations for making the rules and thus more effectively grasp the relevant requirements in the Guidelines. For example, with regard to the requirement that the necessary consistency and continuity should be maintained in voluntary disclosure, the Guidelines not only explain the reasons for making the requirement, but also further account for the in-depth content of the requirement, with illustrations provided on the basis of the actual scenarios for application.
Secondly, operational examples are offered. In the formulation of the Guidelines, a relatively large amount of content was used to explain in detail the common matters and the key points of the announcements for voluntary information disclosure. For each type of common announcements, the "instructions" are provided for the preparation of the announcements, including the purposes of the announcement, the content to be considered for disclosure, and examples. The STAR companies can compile and disclose announcements by following the guidance.
Thirdly, flexible standards are adopted. Compared with compulsory disclosure, voluntary disclosure is richer and more diverse in content. Overly rigid requirements may not only fail to adapt to the flexibility of voluntary disclosure, but also bring about redundant information. Therefore, the Guidelines adopt a relatively flexible rather than mandatory form in regulation. Based on the summarized experience and the consensus, the Guidelines put forward principled requirements, lists the factors that need to be considered, and uses suggestions and reminders to guide the STAR companies in fully excising their right to determine the information disclosure according to their own characteristics and providing investors with more effective information.
Q6: In addition to statutory information disclosure and voluntary information disclosure, what issues should the listed companies pay attention to when releasing information through other channels?
A: In addition to statutory information disclosure and voluntary information disclosure, the STAR companies may also release other information through press conferences, media interviews, company websites, online We-Media and other channels. For this type of information, the Guidelines also make relevant requirements intensively.
Regarding the SSE e-interactive platform: first, the Guidelines encourage the STAR companies to communicate with investors through the SSE e-interactive platform, but they should not release the information that should be disclosed in accordance with the law on the platform, nor should they conduct voluntary information disclosure through the SSE e-interaction; second, the STAR companies should refer to the basic requirements for voluntary information disclosure in the Guidelines when replying to investors' questions or proactively releasing information on the platform, and pay particular attention to the authenticity and completeness of the information released to avoid misleading investors. Third, it is suggested that the STAR companies should reply to investors’ questions during non-trading hours to avoid abnormal fluctuations in stock trading caused by falsely reading and spreading information during the trading hours.
Regarding receiving research and surveys by analysts and institutions, the STAR companies can regularly receive research and surveys conducted by analysts and institutional in accordance with the overall plan for investor relations management. The Guidelines specifically emphasize that to ensure fairness of information disclosure, companies should avoid providing undisclosed material information for analysts and research institutions. If analysts or research institutions learn about relevant material information during the process of research and survey, the company shall disclose it immediately.
Regarding self-determined release of information, the Guidelines clarify that the STAR companies can release promotion and advertising information that is not within the scope of continuous information disclosure on the company's website or other media, but they should avoid misleading investors. In addition, according to the relevant provisions in the Rules for Listing Stocks on the SSE STAR Market, the STAR companies can publish the information that should be disclosed during non-trading hours through press conferences, media interviews, company websites, online We-Media and other means, but should disclose relevant announcements before the beginning of the next trading session.