The GEM registration system reform has made new progress.

On May 22, the China Securities Regulatory Commission website issued a notice to publicly solicit opinions on the “Special Provisions on the Issuance and Underwriting of Initial Public Offering of Securities on the GEM” (Draft for Comment). This is after the first batch of reform documents issued by the China Securities Regulatory Commission and the Shenzhen Stock Exchange on April 27, the GEM reform rules were issued again.

From the content point of view, there are 25 “Special Provisions”. The GEM issuance, underwriting and copying borrows from the main institutional framework of the Science and Technology Board and optimizes it according to the actual situation.

On the one hand, the rules retain the current direct pricing system of the GEM, but companies that are not yet profitable should not directly set prices. On the other hand, the GEM allows issuers and lead underwriters to require offline investors to pay a certain amount of security deposit; if the online offline investors have a large number of abandoned purchases, they can conduct a secondary placement to offline investors for the abandoned purchases.

The “Special Regulations” also provide special instructions on the issue of new and old staging, and the regulations will only apply in accordance with the “Administrative Measures on the Initial Public Offering of Stocks on the ChiNext (Trial )》 The registered enterprise. Enterprises that have obtained approval in accordance with the relevant provisions of the approval system shall still apply to the original GEM issuance and underwriting system, and the Special Provisions shall not apply.

According to the introduction of the China Securities Regulatory Commission, there are two main ideas for drafting the “Special Regulations”.

First, learn from the experience of the science and technology innovation board, and closely follow the characteristics of the stock sector.

During the pilot registration system of the Science and Technology Board, the market-based inquiry, pricing, and placement systems have achieved positive results, and the market ’s value discovery and resource allocation functions have been played. The Regulation draws on the core institutional arrangements of the Science and Technology Innovation Board and is generally consistent with the Science and Technology Innovation Board on the basic system. At the same time, fully consider the practical complexity of the GEM as a stock sector, make more targeted institutional arrangements in terms of risk control and protection of small and medium investors, and strengthen the market-based restraint mechanism.

The second is to build a basic institutional framework, which is mainly made in principle.

Based on the current issuance underwriting system and the actual situation of the GEM, the “Special Provisions” are designed to do a good job in the overall planning of the sector, enhance the level of effectiveness, strengthen supervision, and Make a good connection for the next step to comprehensively improve the basic system of issuance and underwriting. The “Special Regulations” mainly set principles, establish a framework, and draw an underline.The Exchange stipulates specific indicators and other requirements to improve the system’s inclusiveness and adaptability.


What key rules have copied the science and technology board?

First, limit investors involved in inquiry to fund companies, securities companies, insurance companies, qualified foreign institutional investors, trust companies, finance Seven types of professional institutional investors of companies and private equity managers.

Second, for projects issued with a clear inquiry method, the lead underwriter should provide investment value reports to offline investors.

Third, allow offline investors participating in the inquiry to make up to 3 offers for different placement targets.

Fourth, inquiry pricing refers to the median investor quotes and weighted average of offline investors, as well as the preferential placing institutional investor quotes median and weighted average “Four values”.

Fifth, there is no threshold for strategic placement, clarifying the definition and requirements of strategic investors, and allowing senior employees to participate in strategic placement through the establishment of asset management plans.

Sixth, there is no threshold for setting over-allotment options.

Among them, the exchange is also authorized to formulate specific indicators and other requirements. For example, when the issuer and the lead underwriter determine the issue price, the specific requirements and proportions of the highest quotation are excluded by the exchange. In addition, the initial offline placement ratio will be increased to be consistent with the Science and Technology Board, and the Exchange will determine the online and offline callback ratio based on the actual and estimated conditions of the GEM. Third, follow the science and technology board and other sectors regarding the system of preferential allotment to public funds, social security funds, pension funds, enterprise annuity funds, insurance funds, etc., and the exchange will set the specific ratio of priority allotment. Finally, drawing on the practice of the Science and Technology Innovation Board to require a certain percentage of offline placement shares to set a restricted sales period, the Exchange will specify the specific restricted share ratio.


What regulations are different from the Science and Technology Innovation Board?

The “Special Provisions” optimize individual systems. For example, while drawing on the stipulations of the Science and Technology Board that the issue price exceeds “four values”, the investment risk warning announcement should be issued, and in conjunction with the current GEM system, the issue price exceeds the secondary market price-earnings ratio, and the overseas market price should also be issued.Risk warning announcement. In the future, the China Securities Regulatory Commission will, based on the implementation of the system, revise and improve the underwriting system of the Science and Technology Board accordingly, to achieve the harmonization and unification of the basic systems of various sectors.

In addition, combined with the characteristics of GEM stock reform, the “Special Provisions” have also enhanced the tolerance of institutional arrangements.

First, retain the current direct pricing system of GEM.

According to the introduction of the China Securities Regulatory Commission, considering that the GEM mainly serves growth innovation and entrepreneurial enterprises, there are various types and more small-cap stocks. Direct public offering of IPO projects with a public offering of less than 20 million shares (shares) and no public offering of shares is still allowed. At the same time, it is stipulated that the direct pricing shall not exceed the average price-earnings ratio of the secondary market of listed companies in the same industry and the price of the overseas market, and companies that are not yet profitable shall not directly price to encourage issuers to determine the issue price through market-based inquiry.

The second is to improve the response mechanism under the circumstances of major market changes.

In response to major market changes, due to a large number of abandoned purchases that increase the risk of underwriting, the “Special Provisions” add two standby systems: allowing issuers and lead underwriter The business requires the offline investors to pay a certain amount of security deposit; if the online and offline investors give up a large number of purchases, they can make a secondary placement to the offline investors for the abandoned purchases.