Caixin
Jan 09, 2013 06:52 PM

Regulator to Take Hard Look at Firms Waiting to List

(Beijing) – The securities regulator has ordered an unusually tough review of last year's financials for all IPO candidates in an effort to weed out unqualified applicants and enhance the others' information disclosure.

Reports from the 21st Century Business Herald say the review would be based on a policy the China Securities Regulatory Commission (CSRC) announced in December. It requires all companies waiting for the regulator's approval to go public to examine their financials for 2012 and submit the results before the end of March.

The policy would affect all 882 firms that have filed listing applications with the regulator. The unprecedentedly long waiting line has sparked concerns that the new entrants would drain huge amounts of capital from existing listed companies' shares, further weakening the A-share market.

In a meeting on January 8, CSRC officials also told the representatives from a dozen of brokerage firms that the commission would dispatch at least 15 teams to reexamine the reports of up to 50 randomly selected IPO applicants.

According to 21st Century, the regulator seldom sent workers to examine companies' financial records onsite, and the change has sent a clear signal to the market that CSRC would be strict and thorough with reviews this time.

Administrative and even criminal punishment would be handed to a company, its sponsoring brokerage firm and its auditor if they were found with untrue financial reports, the officials said.

Analysts echoed the regulator in saying that the move would reinforce proper information disclosure by listing applicants and their sponsoring institutions.

The newspaper, citing an anonymous source from a Shenzhen brokerage firm, also said it would force many companies to withdraw their IPO requests. The source predicted that 25 to 30 percent of the applicants could withdraw.

Those companies would drop their IPO applications because they performed too poorly in the past year to meet the listing requirements or they feared that past wrongdoings with their financial reports could come to light this time, the source said.

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