The objective of the “Notice of Expanding Announcement Scope of SSE Direct Channel for Information Disclosure” (the Notice), released on April 24 by the Shanghai Stock Exchange (SSE), is to boost the in-process and aftermath regulation on the information disclosure of listed companies.
According to the Notice, the SSE has adjusted 58 Class-2 prior-examination announcement categories under 14 Class-1 announcement categories to aftermath-regulation announcements, involving holding shareholders’ meeting on its own accord by the board of supervisors or shareholders, clarification or explanation on abnormal fluctuations, shareholding increase or decrease, letter of equity change and acquisition, refinancing and significant asset reorganization, bankruptcy and reorganization, and risk alert, etc.
It is learned from an SSE source that based on enough prior appraisal on the market tolerance and the need of controlling business operation risk, 54 categories of announcements involving no business operation sheet completely and 4 categories of announcements with low requirement for timeliness of business operation sheet have been included into the Direct Channel for Information Disclosure. According to simulated calculation on the announcements disclosed by SSE-listed companies in 2014, after the expansion, the proportion of commonly used announcements under the Direct Channel in the SSE market will amount to 92% from 85%, which is expected to exert a major positive influence on listed companies’ improving efficiency and timeliness of information disclosure.
The SSE source is quoted as saying that the expansion is based on these considerations as follows:
1. The steady operation of the SSE Direct Channel for Information Disclosure launched 2 years ago provides a mature condition on the whole for expanding the announcement scope. Since its launch in July 2013, the SSE Direct Channel system has undergone gradual optimization, with its basic functions perfected as well. In addition, most listed companies can operate the SSE Direct Channel system to upload and disclose all categories of prior-regulation and aftermath-regulation announcements, and 85% of announcements go through the SSE Direct Channel, winning high praises from all the market participants.
2. The expansion will help fuel the transformation of self-regulation on listed companies’ information disclosure. The SSE has continuously fueled the transformation from prior regulation to in-process and aftermath regulation by taking information disclosure as a center, which is one of its key work items in recent years. The expansion will cement listed companies’ awareness of person of primary responsibility for information disclosure, strengthen their activeness and effectiveness in fulfilling the information disclosure obligation so as to fundamentally change the “nanny” role of regulators in their information disclosure regulation for further transfer to in-process and aftermath regulation.
Noticeably, many market practitioners say that in light of the current market, the expansion posed higher requirements for listed companies in terms of awareness of main body, responsibility and compliance. Listed companies need to further enhance their ability of standardized operation of information disclosure and improve relevant supporting systems including the system of internal information disclosure management.
For example, a listed company is obliged for prompt response and clarification in case sensitive information about stock prices, such as rumor of significant asset reorganization, is revealed in the market. Should an explanation or clarification announcement released through the SSE Direct Channel be not clear enough, when investors are apt to be further misled, the second clarification or even multi-clarifications are needed. Thus, a listed company should ensure the effectiveness of announcements by positively responding to the market rumors for clarification of the questions raised by the market.
For another example, according to the “Notice of Regulating Information Disclosure of Listed Companies and Acts of All Parties Concerned” released by the China Securities Regulatory Commission (CSRC) in 2007 and relevant SSE business rules, when a stock price’s trading limit reaches the standard of abnormal fluctuation, a listed company should verify whether the company, its controlling shareholder and actual controller are involved in any sensitive issues of stock price possibly leading to stock price fluctuations, such as significant asset reorganization and refinancing; otherwise, it should promise that it will not plan such issues in the next 3 months. In practice, a few listed companies might carelessly verify conditions, omit relevant promise in announcements, launch relevant significant issue though the promise period does not expire, and even mislead small and medium-sized investors by adopting vague expression in the announcements going through the SSE Direct Channel.
The SSE source adds that for the possible problems that might appear after the abovementioned expansion, pertinent regulatory measures will be taken. Aftermath regulation will be immediately imposed on clarification announcements and abnormal fluctuation ones. Quick response measures, including regulatory inquiry, will be taken strictly for unclear clarification and unfulfilled relevant promises, and the listed company concerned will be required to lose no time for complementary disclosure. If a listed company abuses the SSE Direct Channel to disclosure announcements or randomly disclose announcements, self-regulatory means including suspension of qualification for using the SSE Direct Channel, criticism notice and public condemnation will be timely imposed, and aftermath regulation and punishment will be reinforced accordingly.
In another development, as one of the major supporting items for the adjustment to and optimization of the management system of listed companies’ information disclosure, the SSE will soon implement a multi-time-interval disclosure system to rationalize the efficiency of listed companies’ information disclosure.