The FINANCIAL -- Shenzhen Stock Exchange has recently released Memorandum on Trading Suspension and Resumption for Listed Companies (the Memorandum) which is formulated on the basis of regulatory practices and in response to recent emerging market situations.
The Memorandum aims to further regulate trading suspension and resumption of shares of listed companies, maintain market efficiency and safeguard the right to trade, the right to know and other legitimate rights and interests of investors, according to Shenzhen Stock Exchange.
According to a person in charge from Shenzhen Stock Exchange, the Memorandum clarifies the responsibilities and obligations of listed companies in safeguarding investors’ rights to trade and to know, adhering to the principle focusing on information disclosure, proper alignment of authority and accountability and enhanced supervision. The Memorandum requires that listed companies keep information confidential and conduct phased information disclosure in order to maintain trading continuity. Listed companies in question are also required to make prudent judgment on the duration of proposed trading suspensions. Given the situation in practice where a listed company may have difficulties in conducting phased information disclosure in a timely manner, thus necessitating an application for trading suspension, the Memorandum requires that the company take effective measures to prevent extended suspension and abuses that infringe on investors' rights to trade and to know. If listed companies abuse trading suspension or unreasonably extend suspension duration in violation of this Memorandum, the Exchange shall notify the market of the relevant situation through public announcements or other means and resume trading of the shares of the companies in question. Against listed companies that abuse trading suspensions, disclose false, inaccurate or incomplete information or violate relevant public commitments, the Exchange may take regulatory measures or disciplinary actions. Serious cases will be submitted to China Securities Regulatory Commission and its local offices for investigation in a timely manner.
The Memorandum sets standards for the business of trading suspension and resumption and enhances regulation in this regard in the following five aspects: clarifying the maximum duration of suspension pending on major events, enhancing investors’ supervision on long-term suspensions, refining requirements for information disclosure on suspension and resumption, strengthening restraints on suspension and enhancing the role of intermediaries. For instance, the Memorandum provides that the duration of suspension shall not exceed 10 trading days for such events as purchases or sales of assets, external investment, planned transfer of controlling right by related parties, and non-public equity offering not intended to fund major asset purchases. Duration of suspension shall not exceed one month for fund raising for major asset purchase through non-public equity offer. Duration of suspension shall not exceed three months for major asset restructuring. If the duration of suspension is expected to exceed three months, a shareholders’ general meeting shall be convened to review the proposal for suspension to continue. For companies whose shares are in long-term suspension, intermediaries such as sponsor agencies and financial advisory institutions shall verify the progress of early-stage planning and issue professional opinions.
In the development process of the Memorandum, Shenzhen Stock Exchange conducted two rounds of public consultation with its listed companies, of which 133 provided feedback. Shenzhen Stock Exchange had thorough deliberation on the feedback and made revisions by fully absorbing sound suggestions. The introduction of the Memorandum is a result of active engagement by market participants, full absorption of investors’ opinions and joint research in cooperation with listed companies. It is also an important measure of Shenzhen Stock Exchange to stabilize, repair and develop the market. It is reported that 162 listed companies in long-term share suspension submitted, according to the Memorandum, to shareholders’ general meetings proposals for deliberation on continuation of shares suspension, specifying content of the related plans, expected date of trading resumption and further plans. Two companies have terminated plans on projects causing trading suspension and resumed trading smoothly after shareholders’ general meetings rejected motions in question.
According to the person in charge from Shenzhen Stock Exchange the Memorandum will take effect on the date of release. Shenzhen Stock Exchange will continue to condense best regulatory practices and improve regulatory effectiveness. Shenzhen Stock Exchange will also hold pertinent training programs to help listed companies better understand and implement relevant rules. Shenzhen Stock Exchange will exert its full effort in earnestly maintaining efficient market transactions, safeguarding investors’ rights to know and to trade, and promoting the quality of information disclosure and compliance of listed companies.