IPO Rigid Anti-Corruption Securities Regulatory System, No Matter How Many Shares They Hold, Need To "Wear Through To The End"

Kong Xiang, former assistant director and deputy director of the Comprehensive Research Institute of Shenzhen Stock Exchange and full-time member of the third and fourth gem development and Examination Committee of China Securities Regulatory Commission (CSRC), is still subject to penetrating verification by the sponsor, although he only holds 107 shares of Guangzhou Lingwei Technology Co., Ltd. (hereinafter referred to as "Lingwei technology").

Recently, Lingwei technology, which plans to be listed on the Shenzhen Stock Exchange's gem, disclosed its reply to the letter on the implementation of the Audit Center's opinions. It is mentioned that the sponsor and lawyer of the company's listing have carried out a comprehensive and in-depth examination on the shares of the employees who have left the Securities Regulatory Commission System in accordance with the requirements of the guidelines for the application of regulatory rules - No. 2 of the issuance category.

The results show that Kong Xiang, a former employee of the CSRC system, indirectly held 107 shares of Lingwei technology through a partnership enterprise, accounting for 0.0001% of the company's total share capital.

It is worth mentioning that in June 2021, the audit center of the Shanghai Stock Exchange's innovation board and the listing audit center of the Shenzhen Stock Exchange issued the notice on further standardizing shareholder penetration verification (hereinafter referred to as the verification notice). It is clear that if the number of shares directly or indirectly held by the issuer is less than 100000 shares or the shareholding ratio is less than 0.01%, it can be regarded as holding less shares, and the relevant shareholders may not conduct penetration verification.

"The case of shareholder penetration verification of Lingwei technology IPO is very representative, which shows that, no matter how low the shareholding ratio is, penetrating verification should be carried out for those who leave the securities regulatory system to buy shares, and will not be exempted because the shareholding is less than 0.01%." There are senior investment banks in Beijing said.

On May 28, this year, China Securities Regulatory Commission (CSRC) issued the guidelines on the supervision of stock taking behavior of employees leaving the system (hereinafter referred to as the guidelines), which has been formally implemented since June 1. Visual China

Details of shareholder penetration check first exposed

As an enterprise engaged in the research and development and transformation of new nano silica materials, Lingwei technology's initial public offering of no more than 27.12 million shares, accounting for 25.00% of the total share capital after the issuance. According to the prospectus, Lingwei technology plans to raise 481205600 yuan, which will be used for projects such as annual output of 20000 tons of ultra-fine silica aerogel products, headquarters and R & D center construction.

As of July 16 this year, the initial application of Lingwei technology has been approved by the GEM Listing Committee and will be listed on the Shenzhen Stock Exchange gem. The small disturbance of the staff leaving the Securities Regulatory Commission among the shareholders did not cause trouble to the listing of the company.

In fact, at present, it is not uncommon to check the situation of improper share taking by the staff of the CSRC of the company to be listed.

On May 28, this year, China Securities Regulatory Commission (CSRC) issued the guidelines on the supervision of stock taking behavior of employees leaving the system (hereinafter referred to as the guidelines), which has been formally implemented since June 1. According to the relevant requirements, the staff leaving the CSRC system who seek investment opportunities by taking advantage of the influence of their original positions, transfer of interests in the process of entering shares, taking shares during the prohibition period of shares, taking shares as unqualified shareholders, illegal and illegal sources of funds, etc., are considered as improper shares. The intermediary institution shall conduct a comprehensive check on whether the shareholders of the enterprises to be listed have improper shares. If the shares are not properly invested, they shall be cleaned up in time.

After the promulgation of the guidelines, some companies to be listed, such as Huahai Qingke, Yayi metal, Yitong seal and Biao auto, have received regulatory inquiries and asked to check the possible staff leaving the CSRC system among the shareholders.

However, in the content of Lingwei technology's reply to the Audit Center's opinion implementation letter, it disclosed for the first time the full set of verification procedures of the sponsor institutions and lawyers for the improper purchase of shares by the staff leaving the CSRC system.

From the content of the reply, the sponsor and the lawyer consulted the industrial and commercial registration data, shareholder contribution certificate, capital verification report of Lingwei technology's shareholders' previous capital increase, as well as the industrial and commercial registration data, equity transfer agreement, payment certificate and other settlement certificates of all previous equity transfer.

For the natural person shareholders of Lingwei technology, the sponsor agency and lawyers have consulted their ID cards, questionnaires, investment certificates and commitment letters issued. Institutional shareholders penetrate into natural persons, government departments or listed companies. The identity cards of natural person shareholders involved in the ownership structure, business license and articles of association / partnership agreement of institutional shareholders are also included in the verification.

After a series of checks, the sponsor and lawyers found that Kong Xiang, a quitter of the CSRC system, indirectly held 107 shares of Lingwei technology through Lingyu cornerstone, with a shareholding ratio of only 0.0001%.

According to the available information, Kong Xiang is indeed one of the staff leaving the post in the CSRC system. Since 2000, Kong Xiang started his career in Shenzhen Stock Exchange. He once served as a researcher, assistant director and deputy director of the Comprehensive Research Institute of Shenzhen Stock Exchange, and later served as deputy director and director of venture enterprise training center of Shenzhen Stock Exchange. It is worth mentioning that Kong Xiang was also a full-time member of the third and fourth gem development and Examination Committee of the CSRC from 2012 to 2013, and his identity is sensitive.

0.01% shareholding line is not applicable to the verification of resigned personnel

In addition to the details of initial public IPO shareholder penetration verification, only 0.0001% of indirect natural person shareholders have been verified, which also has a demonstrative role in the IPO market.

The 21st century economic report reporter previously reported that in June this year, the audit center of the Shanghai Stock Exchange's science and technology innovation board and the listing audit center of the Shenzhen Stock Exchange issued the notice on further standardizing shareholder penetration verification. It is clear that if the number of shares directly or indirectly held by the issuer is less than 100000 shares or the shareholding ratio is less than 0.01%, it can be regarded as holding less shares, and the relevant shareholders may not conduct penetration verification.

Prior to the issuance of the relevant notice, the regulatory authorities did not explicitly stipulate that shareholders holding less than a certain proportion of shares could not conduct shareholder penetration verification by the sponsor and the issuer. Therefore, in the view of industry insiders, the release of relevant rules, that is, from the institutional level, clarifies the verification scale of IPO shareholders' penetration check on the proportion of shareholders' shareholding, which will further reduce the pressure on the companies to be listed and sponsor institutions.

However, according to the "guidelines" issued by the CSRC, the investment bank recommendation institutions should conduct a comprehensive check on the situation of the staff leaving the Securities Regulatory Commission system. This has also caused a certain controversy in the investment industry. Including the relevant responsible persons of the investment banking business of domestic leading securities companies, a number of investment bank sponsors have told the reporter of the 21st century economic report that the adaptation of the two rules in terms of shareholder penetration ratio is not clear.

The verification of 0.0001% indirect natural person shareholders of Lingwei technology ended the above dispute with an example.

"Don't argue in the future. The staff leaving the CSRC system, whether they hold less than 100000 shares or less than 0.01% shares, have to go through the inspection." There are domestic small and medium-sized securities investment banks related responsible person said.

Prior to this, the relevant person in charge of the Shanghai and Shenzhen Stock Exchange also disclosed that "in the process of examination and registration, the regulatory authorities will always adhere to the knife edge inward and strict supervision. If it is found that the system's employees who leave the company take shares in the enterprises to be listed, regardless of the number of shares and the proportion, they will carry out the audit and review work in accordance with the relevant provisions to prevent the improper participation of resigned personnel."

However, the relevant person in charge of the Shanghai and Shenzhen Stock Exchange also said that if the shares are small and there is no illegal "wealth making" situation, the intermediary agencies may not go through the verification after giving their opinions in a practical and realistic way, so as to correct the negative tendencies of the intermediary agencies in the implementation of the rules, such as exemption and simplification.

"Ordinary shareholders can comply with a certain proportion of exemption from verification. The staff leaving the CSRC are easy to trigger corruption and profit transfer. The penetration of relevant shareholders has nothing to do with the proportion of verification, which is to check to the end." The above senior investment banks in Beijing also said.