Comprehensive registration system, reform towards the future | objective view, rational participation

On February 17, 2023, the China Securities Regulatory Commission (CSRC) issued the relevant system rules for the full implementation of the stock issuance registration system. There are 165 rules and regulations issued this time, covering the issuance conditions, registration procedures, recommendation and underwriting, major asset restructuring, supervision and law enforcement, investor protection and other aspects. After four years of pilot, the stock issuance registration system has been officially launched in the whole market, accelerating towards the general goal of "building a standardized, transparent, open, dynamic and resilient capital market".

1、 What is the registration system?

The registration system, that is, the registration system of securities issuance in the securities market, is the system for companies to issue securities for listing, which is different from the approval system. Under the registration system, the securities issuance review institution only conducts formal review of the registration documents without making substantive judgments, that is, lowering the listing threshold. Compared with the previous approval system, the process is simpler and more time-consuming.

2、 Why should we carry out the reform of the comprehensive registration system?

1. Give full play to the role of the market and enhance its vitality. The essence of the reform of the registration system is to give the right of choice to the market, strengthen the market constraints and the rule of law constraints. It is a reform that adjusts the relationship between the government and the market, and constantly strengthens the decisive role of the market in the allocation of resources. Looking back, the capital market has gone through many stages, such as quota management, index management, limited price issuance, and substantive approval, which is a solid step forward for China's securities market to move towards the goal of market-oriented issuance and listing. Now the reform of the comprehensive registration system has been officially implemented, marking another landmark step in the direction of marketization of the capital market.

2. Improve the market mechanism and promote institutional innovation. In the past four years of pilot practice, the registration system has made achievements in improving the service function of scientific and technological innovation, promoting key institutional innovations such as trading and delisting, optimizing the multi-level market system, and improving the legal guarantee. Now the reform of the stock issuance registration system has been officially launched, which will further improve the basic system of the capital market.

3. Take the letter as the core and strictly check the audit. "The implementation of the registration system does not mean that the quality requirements will be relaxed and the audit will be more strict." The CSRC said that it will comprehensively use multiple methods such as multi-factor verification, on-site supervision, on-site inspection, complaint reporting verification, supervision and law enforcement to compact the issuer's primary responsibility for information disclosure and the intermediary's "gatekeeper" responsibility. At the same time, we should adhere to the principle of opening the door and conducting the audit. The standards, procedures, contents, processes and results of the audit and registration should all be made public to the public. The operation of public power should be transparent, strictly balanced and subject to social supervision.

3、 What should small and medium-sized investors do in the face of the reform of the registration system?

1. Avoid blind obedience and apply for new shares rationally.

The registration system will be fully implemented. Under the market survival mechanism, the corresponding delisting mechanism will also be gradually improved, which will further increase the investment risk. The delisting of the company's shares is the result of multiple risks such as governance failure, business failure, competition elimination, and business cycle, which is difficult to avoid causing economic losses to investors. Individual investors can no longer blindly buy new shares. They need to carefully identify and rationally apply for new shares.

2. Objectively, risks and opportunities coexist.

With the full implementation of the registration system, growth and innovative enterprises will accelerate their listing and bring investors more diversified investment options. At the same time, due to the market-oriented price formation mechanism under the registration system and the high risk characteristics of innovative enterprises themselves, individual investors should also see the risks under more choices.

3. Strengthen learning and improve financial literacy.

The more brutal market competition and more complex risk factors under the full implementation of the registration system not only require investors to improve their risk awareness, but also put forward higher requirements for the ability of investors to identify investment targets. Individual investors should strengthen the study of financial knowledge, improve the ability of investors to understand, bear and manage risks, and establish the concept of risk investment, rational investment and value investment.