Pi Haizhou: Tens of billions of private equity online inquiry violations are punished Under the network inquiry can not have money to be willful

Pi Hai Chau | Cube everyone talks columnist

On October 29, according to the website of the Shanghai Stock Exchange, due to irregularities in the process of Shanghai Jia Keng Asset Management Co., Ltd. (hereinafter referred to as "Jia Keng Asset") participating in the online inquiry process of participating in the initial public offering of shares on the Science and Technology Innovation Board, the Shanghai Stock Exchange decided to give a regulatory warning to the company and take regulatory talks. As a result, Jia Keng Assets became the first company to be punished for violations of offline inquiry after the implementation of a series of new rules for issuing underwriting under the registration system on September 18. According to the data of the private placement network, Jia Keng Asset was established in 2015 and has a management scale of more than 10 billion yuan.

According to the Decision on Giving Regulatory Warnings and Adopting Regulatory Talks to Shanghai Jia ken asset management co., LTD. issued by the Shanghai Stock Exchange, there were two major violations of jia ken assets. First, the inquiry decision-making process is not standardized, and there are deficiencies in relevant internal controls. Second, the internal research report is a formality, which cannot be reflected in the rational quotation on the basis of sufficient research. The company's internal research report recommendation range and final quotation are determined by the person in charge of the new stock inquiry based on the quotation software suggestions, and the inquiry decision-making process is not standardized.

There is a lack of objective research support for the report's recommended intervals. The final quotation failed to reflect a sufficient and prudent research process, and the pricing basis on file for reference did not fully support the company's final quotation results.

The regulatory warning and regulatory talk on Jia Keng Assets are the regulatory measures taken by the Shanghai Stock Exchange based on the results of the recent fourth round of special on-site inspections of investors under the Science and Technology Innovation Board. A series of new regulations on issuance and underwriting under the registration system, which were officially implemented on September 18 this year, are important to strengthen the supervision of quotation behavior, further clarify the requirements for offline investors to participate in the quotation of new shares, and include possible violations in the scope of self-discipline supervision. In order to implement this provision, from October 12 to 15, 2021, the Shanghai Stock Exchange deployed and carried out the fourth round of special on-site inspections of investors under the science and technology innovation board, strengthening the deterrence of quotation supervision, and guiding and supervising offline investors to participate in the underwriting activities of new stock issuance. It is also based on the results of this on-site inspection that a penalty decision was made for jia ken assets to be warned and talked about.

Regulatory measures against Jia Ken assets are necessary. Although in the view of some investors, as long as institutional investors meet the relevant threshold requirements, it is their right to participate in the new offline, and how to play new and at what price is new, this is also the freedom of institutional investors. And the institutional offer is high, will be removed from the highest offer and then lose the opportunity to play new, and the offer is low, the same can not be selected to play the new range, the same can not participate in the new. Therefore, the market mechanism has already punished the wayward quotation behavior of institutional investors to a certain extent, so that there is no need for the regulatory authorities to punish the offline inquiry behavior of institutional investors.

This view is patently false. Although the wayward quotation behavior of institutional investors in the offline inquiry, the market mechanism itself will have a certain binding function and disciplinary effect on them, but this does not replace the significance of the regulatory authorities to supervise it. First of all, the punishment made by the regulatory authorities represents the importance that the regulatory authorities attach to relevant matters. The attention of the regulatory authorities usually sends a positive signal to the market, which in turn arouses the attention of the market. If regulators don't pay attention to it, the market itself will not pay attention to it either.

Secondly, through the punishment of the relevant parties by the regulatory authorities, it has aroused the attention of the relevant parties. For example, the regulatory measures taken by the Shanghai Stock Exchange against Jia Keng Assets also hope that the company can pay attention to its own problems in the offline inquiry process. In fact, the regulatory measures taken by the SSE against Jia Keng Assets are still relatively cautious. In the third round of on-site inspections conducted in July this year, the agency was publicly notified by the Shanghai Stock Exchange for violations of the inquiry decision. It is precisely for this reason that when the fourth round of on-site inspections found that the agency still had irregularities, it increased the supervision of the agency. Regulatory talks, in particular, require face-to-face talk about issues, so it's impossible for the agency not to take the issue seriously.

Third, the regulatory authorities punish the violations of the offline inquiry institutions, which is actually a protection for the inquiry institutions and investors. After all, the violation of the inquiry link, in the case of not constituting a major violation of the law, the punishment of the regulatory authorities is usually relatively mild, and the heaviest punishment is to cancel the qualification for inquiry and not participate in the offline new. Therefore, the penalties imposed by the regulatory authorities are mainly based on the protection of investors, and it is also conducive to the gradual development of inquiry institutions towards standardization. For example, the inquiry decision-making process is not standardized, and the relevant internal controls are missing. This is absolutely impermissible for a compliant investment institution, and this move has a significant hidden risk of investment failure. The regulatory authorities can help the inquiry institution to eliminate such hidden dangers, which is obviously conducive to the normative development of the inquiry institution itself, and it is also the protection of the interests of investors.

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