China proposes to put all non-listed public companies under
supervision by setting up a new division under the current
securities watchdog in a move that experts say is critical to
establish a multi-layer capital market.
The proposed division, to be set up under the China Securities
Regulatory Commission (CSRC),
will be responsible for reviewing and supervising non-listed public
companies' stock issuance under the new securities law.
CSRC currently has one public offering supervision division,
which oversees and supervises listed companies and their
offerings.
"The establishment of the proposed second public offering
division is in line with the revised Securities Law, which
stipulates that any public stock offering shall be reviewed by
CSRC," a CSRC official said yesterday.
Under the revised law, which took effect in January, companies
that have issued stocks to more than 200 shareholders will be
counted as public offerings and they will be put under the CSRC's
proposed new supervision department.
It is estimated that there are more than 10,000 such non-listed
public companies. Some view the law revision as a method of
expanding CSRC's regulatory responsibilities and increasing its
power.
In accordance with changes brought about by the revised law the
CSRC is now actively pushing to establish a second public offering
supervision department, CSRC Chairman Shang Fulin was quoted as
saying by China Securities Journal. The chairman did not
give details of when the new division would commence.
Securities Times, a business newspaper, yesterday
reported that the new department would be set up in the first half
of this year but did not identify its sources. Feng Henian, the
current deputy director of CSRC's legal affairs division, who is
rumored to be a candidate to lead the new division, declined to
comment yesterday.?
Experts say the proposed new public offering supervision
division and the idea that all non-listed companies' public stock
offerings will be put under scrutiny?are a welcome move. China
has two stock exchanges -- in Shanghai and Shenzhen -- but demand
for more stock trading centers has always been robust.
"In the past these non-listed companies' stock offerings were
under several regulators' scrutiny and?overlapping always
resulted in confusion," said Li Wei, chief economist with China
Beijing Equity Exchange, where companies, usually with less than
200 shareholders, trade their stocks and equities.
"Under such circumstances it is not surprising that sometimes
the non-listed public companies' stock issues were plagued by
irregularities," said the economist.
"By putting them under one supervisory framework it'll certainly
contribute to the healthy and orderly development of a multi-tier
capital market," she said, noting that it would spur the growth of
other equity exchange activities such as the over-the-counter (OTC)
stock trading system.
A multi-layer capital market will include the main board, small
and medium-sized enterprises exchange, an OTC stock trading system
and equity exchange, Shang said at a work conference earlier this
year.
(China Daily March 9, 2006)