Economist Song Qinghui: The supervision of listed companies' information disclosure will become more and more stringent

In the context of the implementation of the comprehensive registration system, the regulator continues to maintain a high-pressure posture on information disclosure violations and violations, and at the same time, the requirements for information disclosure are more detailed and the quality requirements for information disclosure are also more stringent. At the same time, based on the comprehensive judgment of relevant cases in the past, it is expected that the violation of information disclosure will continue to be the focus of regulatory crackdown in the next five years.

Famous economist Song Qinghui

Recently, I have heard that the actual controllers and chairmen of many listed companies have had accidents one after another, such as some have been detained in custody and some have been arrested, and a considerable number of them have been confirmed in the information disclosure of relevant listed companies recently. However, there are also some listed companies whose actual controllers and chairmen have not disclosed information in a timely manner for many days, and it was not until the "East Window Incident" that the majority of investors were aware of the letter of concern from the regulator. This move is undoubtedly tantamount to putting investors in a huge risk vortex. For example, recently, the chairman of Asia Potassium International was filed for failure to disclose in a timely manner, which attracted market attention and quickly received a letter of concern issued by the Shenzhen Stock Exchange, requiring it to explain whether there were major matters that failed to fulfill information disclosure obligations in a timely manner. After the news broke that night, the company's stock price fluctuated the next day and closed with a large decline.

In recent years, the regulator has strictly investigated information disclosure violations and regulations, showing a "zero tolerance" attitude. As early as March 2017, at the 7th North Bund Wealth and Culture Forum, Wu Qing, then chairman of the Shanghai Stock Exchange, said that the Shanghai Stock Exchange should carry out a thorough information disclosure supervision, curb and prevent unfair capital market behavior, and use the regulatory method of breaking the casserole to the end, find out the "big flicker" and "small flicker", and promote the realization of fairness and justice through open and transparent information disclosure. The author observes that since Wu Qing assumed the post of chairman of the CSRC on February 7, 2024, the efforts to crack down on violations of laws and regulations in the information disclosure of listed companies have been strengthened again. According to the data, since the beginning of this year, nearly 20 listed companies have been investigated by the China Securities Regulatory Commission, mainly due to suspected violations of information disclosure laws and regulations.

According to some past cases, a considerable number of listed companies investigated for suspected violations of information disclosure laws and regulations were involved in financial fraud, and the remaining part involved fraudulent issuance. If it is found that the fraudulent issuance occurred at the IPO stage, it will also involve compensation to investors.

In the context of the implementation of the comprehensive registration system, the regulator continues to maintain a high-pressure posture on information disclosure violations and violations, and at the same time, the requirements for information disclosure are more detailed and the quality requirements for information disclosure are also more stringent. At the same time, based on the comprehensive judgment of relevant cases in the past, it is expected that the non-compliance of information disclosure will continue to be the focus of regulatory crackdown in the next five years, and the following three major trends are increasingly presented.

First, the amount of regulatory functions will increase significantly, and the information disclosure requirements for listed companies will be higher. Since last year, the number of listed companies receiving regulatory letters has hit a new high, highlighting that under the comprehensive registration system, the general direction of supervision by the regulator is more prominent and information disclosure is the core. Regulatory letters issued by listed companies are mainly divided into several categories, such as letters of concern, letters of inquiry, warning letters, and regulatory letters, which are mainly based on the severity of the incidents involved in the listed companies. Among them, the letter of concern is the weakest, which mainly indicates that the regulator is concerned about a certain event of the listed company, and only plays the role of prompting and supervising; the nature of the letter of inquiry is mixed, because the exchange needs the listed company to give a detailed explanation of the relevant situation, and will require the listed company to reply before the specified date, and the listed company may expose some unknown circumstances to investors when replying; the warning letter is to determine that the listed company is suspected of violating the rules, but it will not issue an administrative penalty letter, and the listed company still has the opportunity to rectify within a time limit; the nature of the regulatory letter is relatively serious, indicating that the listed company does have violations, which is an administrative warning。

Generally speaking, the regulator issues a regulatory letter to a listed company, which means that the company has violated the provisions of relevant laws and regulations. Once the relevant listed company receives a warning letter or regulatory letter, investors should analyze the specific content of the letter in detail to accurately judge its negative relationship to the company's stock price. Investors are advised to understand the differences between the above regulatory letters in detail and fully grasp the investment risks.

Second, in the face of supervision, all large and small listed companies are equal, and the "Big Mac" with a market value of 100 billion yuan will also receive more attention. In recent years, the China Securities Regulatory Commission has highly implemented the spirit of the Central Economic Work Conference, and is further implementing the requirements for equal treatment of state-owned enterprises and private enterprises in terms of information disclosure, continuous supervision, and market access. According to the data, last year, a total of 1,647 listed companies received regulatory letters, a new high in the past five years, including many large companies with a market value of 100 billion yuan, which fully reflects the regulatory principle that in the face of regulatory rules, large and small companies are equal.

A few days ago, Shaanxi Aerospace High-tech Co., Ltd. (hereinafter referred to as "Aerospace Power"), a listed company of central enterprises, received a penalty decision issued by the China Securities Regulatory Commission for suspected violations of information disclosure laws and regulations. The company was fined a total of 11.8 million yuan for inflating revenue of 3.8 billion yuan in five years, and Guo Xinfeng, the main decision-maker and general manager of the company at the time, was banned from the securities market for 10 years. In addition, two former executives of Aerospace Power who participated in the private network communication case have been imprisoned and punished for accepting bribes in the trade business. At present, some investors have filed civil lawsuits with the Xi'an Intermediate People's Court, and the company may face huge claims.

Third, if a listed company violates the rules of information disclosure, intermediaries such as investment banking, auditing, and evaluation may not escape punishment. Under the comprehensive registration system, intermediaries such as investment banks, auditors, and appraisals play the role of "gatekeepers" of the capital market, and their responsibilities are more important than before, and they are also facing increasingly stringent supervision.

In February this year, the New Year's "No. 1 Fine" issued by the China Securities Regulatory Commission showed that Ruihua Certified Public Accountants (hereinafter referred to as "Ruihua") and related responsible personnel were mainly involved, and Ruihua was fined 17.83 million yuan. It can be seen that under the comprehensive registration system, the issuer, as the first person responsible for information disclosure, is naturally not criticized, but intermediaries, as the "gatekeepers" of the capital market, also need to make timely reviews and judgments on the authenticity, accuracy and completeness of corporate information disclosure. Otherwise, it will face penetrating supervision and full-chain accountability from the regulatory level. Only by taking such strong regulatory measures can we effectively force intermediaries to urge listed companies to comply with information disclosure and fight the "tough battle" of information disclosure.

The author is Song Qinghui, a well-known economist, and the author of "China's Resilience".

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