IPO Approval Committee Gains New Members Amid Application Backlog
China’s securities regulator plans to nearly double the number of people on its IPO approval committee, in order to maintain business as usual amid a boom in applications for listings and refinancing.
The China Securities Regulatory Commission (CSRC) announced (link in Chinese) in a Wednesday statement that there will be 20 new appointees to the 21-member committee (link in Chinese), who will join shortly.
Adding people to the committee addresses a practical need, as the committee is relatively small compared to its workload, a source close to the CSRC told Caixin. “There are many IPO projects this year, and the number of refinancing projects has increased sharply since new refinancing regulations were released,” the source said. The previous term’s committee had a headcount of 63, including 21 part-time members.
CSRC data (link in Chinese) show there was a backlog of 156 companies awaiting approval to list on the Shanghai Stock Exchange’s main board and 260 companies eyeing listings on the Shenzhen Stock Exchange’s SME and ChiNext boards as of April 9.
In February, the CSRC revised refinancing rules (link in Chinese) for listed firms, loosening restrictions and sparking a boom in refinancing demand.
The amended Securities Law which came into effect this March scrapped the approval-based IPO system and replaced it with a more market-driven registration-based system, but the registration-based IPO system has not yet been fully implemented and the approval committee will continue its work likely until the transition is complete.
Under the registration-based framework, the CSRC will no longer be responsible for approving companies’ IPO applications, only deciding whether to register their stocks, and stock exchanges will be responsible for reviewing these applications. The revision also loosened profitability criteria for IPO candidates, making it easier for younger tech companies to list, as trialed on Shanghai’s STAR Market, a Nasdaq-style high tech board set up last year.
According to the CSRC statement, 16 of the new appointees come from the securities regulatory system, including from local CSRC branches and the Shanghai and Shenzhen stock exchanges. The remaining four are from four accounting firms. Another source close to the CSRC has told Caixin that appointing members from the regulatory system can help prevent corruption in the approval process.
Timmy Shen contributed to this report.
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