Stock market Illustration: VCG

Securities Association of China (SAC) recently drafted a decision on revising the investor management rules for initial public offerings (IPOs) and began to solicit opinions from Thursday. The new rules will take effect on October 1, and the existing rules will be repealed at the same time, said SAC.

Securities industry observers said that the new rules raise the threshold for institutional investors to participate in IPO subscriptions, require backdating verification and may lead to higher accountability.

The revision involves 30 articles, of which 22 are revised, six are added and two are deleted, according to documents released by the SAC. This new provision requires that institutional investors shall set risk performance assessment indicators for IPOs.

Analysts said that such new rules represent a thorough implementation of the deployment of the "the State Council's Nine-Point Guideline," a sweeping guideline to strengthen regulation, tackle risks and promote high-quality development of the capital market released on April 12.

Overall, the focus of the revision is to optimize the registration conditions, do a good job with the new share market value allocation system of the sci-tech innovation board, also known as the STAR market, and strengthen the adequacy of investor management and behavior management, according to SAC documents.

Specifically, the amendment decision strengthens the professional requirements of offline investors, a Beijing-based securities industry practitioner told the Global Times on Thursday, on the condition of anonymity.

Offline investors are participants with professional pricing research ability and play an important role in price discovery in the primary IPO market. Their inquiry and subscription behaviors have a significant impact on the IPO, which is related to the vital interests of issuers and other investors as well as the success or failure of the IPO. 

"Offline investors should conduct in-depth research on the IPO issuer, make professional value judgment and effectively exert the responsibilities of market entities," said the anonymous practitioner.

The revised decision also strengthened the protection and management of investors' information and related data. It is made clear that no organization or individual shall disclose investors' information and related data without authorization.

On April 12, China released "the State Council's Nine-Point Guideline" - only the third guideline of its kind - specifically for the development of the capital market. The previous two guidelines were issued in 2004 and 2014.

"This is great news for the market, which will reduce risks and set a positive direction for the medium- and long-term," Ade Chen, general manager at Guangzhou-based Fund Investment, told the Global Times, noting that investor protection was a key theme of the guideline. 

Global Times