Pi Haizhou: Let the sponsoring agency be diligent and conscientious, and it is indispensable to strike hard

At the end of last week (October 15), the CSRC issued 12 investment bank fines in one go, including 9 in the administrative supervision category and 3 in the self-regulatory category, involving a total of 19 insurance agents/financial advisers from 7 securities companies. The last time investment bank fines were issued in batches was on August 6, and a total of 7 securities companies and 14 insurance agents were fined.

The CSRC has issued fines to investment banks in batches, which shows that the management attaches great importance to the investment banking business. The investment banking business is also a sponsorship business, which is related to the quality of IPO companies, and is responsible for guarding the "entrance gate" for the A-share market. If the sponsoring institution is conscientious, it will reduce the possibility of some junk companies and problem companies mixing into the A-share market. On the contrary, if the sponsoring institution cannot be diligent and conscientious, then some problem companies will be mixed into the A-share market, which is not only difficult to ensure the quality of the IPO company, but also damages the interests of investors and shakes investors' confidence in the capital market. Therefore, in order to maintain the "entrance gate" of the A-share market, it is necessary for the sponsoring institution to be diligent and conscientious. To do this, of course, it is inseparable from the high attention of the management, which is the prerequisite.

Of course, the CSRC has issued fines to investment banks in batches, which also reflects the problems in the sponsorship business of securities companies. For example, the securities companies that were held accountable this time involved 7 securities companies and 19 insurance agents and financial advisers, of which 5 insurance agents of Haitong Securities were held accountable, Pacific Securities received 2 consecutive insurance penalties, and the rest were named citic securities, Guohai Securities, Huatai United Securities, Guangfa Securities and Changjiang Securities. Among the fines issued on August 6, 7 brokers and 14 insurance agents were also fined. This shows the extensiveness of problems in the sponsorship business of securities companies. It is precisely because there are many problems that the CSRC can issue a batch of fines. If there is no problem, how can you issue a batch ticket?

So, why are there various problems in the investment banking business or the sponsorship business of securities companies? Of course, the reasons for this are manifold, but they contain at least two such points, which are worthy of attention.

First, the sponsorship business is busy. On the one hand, many domestic enterprises have an urgent willingness to go public, which can be confirmed by the queue of IPO companies over the years. With the pilot registration system of the Science and Technology Innovation Board and the ChiNext Board, the willingness of some IPO companies to list is even more urgent. In this way, it is not difficult to imagine the busyness of the brokerage sponsorship business. On the other hand, with the normalization of IPOs, the number of new listed companies is also increasing every year, such as the number of A-share IPOs last year reached 395, the number of IPOs in the first three quarters of this year reached 373, and the number of IPOs this year will increase significantly compared with last year. The activity of IPOs has further stimulated the willingness of enterprises to go public, and the sponsorship business of securities companies has become busier.

Because of the busy sponsorship business, some sponsors are less conscientious. Some of the problems existing in IPO companies, and Baodai is also turning a blind eye. At the same time, because of the lack of diligence, some problems were not even discovered. Not only that, but some Baodai can't even write a prospectus. For example, since September, 3 sci-tech innovation board reporting companies, Nameng Song Intelligent and Yonyou Automobile, have been required by the Shanghai Stock Exchange to rewrite some chapters of the prospectus in the first round of inquiries. Even the prospectus has been returned for rewriting, which is indeed a very "face-punching" thing, let alone due diligence.

Second, the penalties imposed on the sponsoring institutions are generally light and not enough to produce deterrent power, so that the sponsoring institutions do not take the relevant penalties too seriously in the process of sponsorship. For example, the CSRC issued a total of 12 fines for 19 insurance agents and financial advisers of the 7 securities companies that were punished this time, of which 9 were issued warning letters, 2 were regulatory warnings, and 1 was a notification of criticism. There are no particularly severe penalties, not only no penalties for "suspension or revocation of sponsorship business licenses", no penalties for "disqualification of sponsors", and even penalties for fines. Such a penalty is obviously a lack of deterrent for the sponsoring institution. This is also an important reason for the continuous problems of brokerage sponsorship business.

Therefore, for the sponsoring institution to be diligent and conscientious and effectively grasp the "entrance gate" of the A-share market and the capital market, it is necessary to increase the punishment for the sponsoring institution's dereliction of duty and violations of laws and regulations, especially when it comes to violations of laws and regulations. In fact, on this issue, the new Securities Law still makes clear provisions. For example, Article 182 of the Securities Law stipulates that if a sponsor issues a letter of sponsorship with false records, misleading statements or major omissions, or fails to perform other statutory duties, it shall be ordered to make corrections, give a warning, confiscate the business income, and impose a fine of not less than one time but not more than ten times the business income;

There is no doubt that the new Securities Law still has enough deterrent power for sponsors. Among them, the fine of up to ten times the business income, as well as the "simultaneous suspension or revocation of the sponsorship business license", are lethal to the sponsoring institution, especially the latter, which can be called a "killer skill", which is enough to make the sponsoring institution diligent and conscientious and disciplined. Therefore, heavy blows and strict law enforcement are a real problem that needs to be faced in the next step to strengthen the supervision of investment banking business.

Editor-in-charge: Anqi Liu | Review: Li Zhen | Director: Wan Junwei