On the 19th of February, 2013, the Shanghai Stock Exchange (SSE) publishes the “SSE Business Guidelines on Direct Channel for Information Disclosure” (the “SSE Guidelines on Direct Channel” for short), and the training and implementation of the SSE’s Direct Channel business for listed companies’ information disclosure begin simultaneously. The person in charge of the SSE answers the questions on the issues concerned.
Q: What is the SSE’s Direct Channel and what is the plan for its implementation?
A: The SSE’s Direct Channel is an information disclosure mechanism through which all the SSE-listed companies may register and upload their documents for information disclosure by themselves and submit them directly to the SSE’s website and other designated medial for release. The SSE’s Direct Channel mechanism has the following two functions: firstly, it realizes the electronization for announcements’ registration and transmission; secondly, it realizes the registration of announcements and direct information disclosure by listed companies themselves, whereby the SSE carries out the aftermath regulation for the announcements made through the SSE’s Direct Channel without prerequisite form examinations.
As for its actual implementation, the promotion process of the SSE’s Direct Channel can be divided into two stages.
The first stage witnessed the launch of the SSE’s electronic system for information disclosure on December 3, 2012, which realized the electronization of the whole operational procedures of announcement registration, submission, examination, feedback, confirmation for publication, online disclosure, and media delivery after the adequate preliminary preparation.
The second stage is marked by the release of the “SSE Guidelines on Direct Channel”. The SSE will launch the training for the SSE’s Direct Channel business in the near future, and it will formally implement the Direct Channel on July 1, 2013.
Q: Where does the significance of the implementation of the SSE’s Direct Channel lie?
A: The implementation of the SSE’s Direct Channel is conducive to further improving the market mechanism, promoting the sense of responsibility of all market participants, and perfecting the credit mechanism and responsibility system of the market. On the one side, the implementation of the SSE’s Direct Channel will strengthen the main position of the listed companies in information disclosure, thus promoting the deepening of the market-oriented operation concept on the part of the listed companies and giving full play to its initiative role in information disclosure; on the other hand, it embodies the concept of “Loosening Supervision While Tightening Regulation” by substantially reducing the prerequisite form examinations, collecting and integrating the existing regulation resources, and putting its working emphasis on the aftermath regulation, thus better protecting the legal rights and interests of investors.
The implementation of the SSE’s Direct Channel can also further improve the efficiency in information disclosure and the operational efficiency of the market. With the development of the information technology and the change in the carriers for information transmission, the requirements on the speed and timeliness in obtaining of information on the part of all the market participants are becoming increasingly higher. As the direct disclosure is based on electronization and aftermath regulation, it is at a position to better meet the requirements on speed and timeliness, and create conditions for the final realization of real-time disclosure, thus enormously improving the overall operational efficiency in the capital market.
The implementation of the SSE’s Direct Channel will further promote the rule of law and openness in the market. With the launch of the SSE’s Direct Channel, the regulation standards and business procedures of the information disclosure of the listed companies at the SSE will be further improved and more easily accessible to the public. All the market participants will have a clearer understanding about the relevant rules, thus ensuring better transparency in the operation of information disclosure and relevant regulation.
Q: It this the best time for the implementation of the Direct Channel?
A: The way of information disclosure for the companies listed at the SSE and the SSE’s regulation mode of information disclosure have been improved step by step, after more than two decades’ development of China’s securities market, and they have suited the overall environment of China’s securities market for all those years, as well as played their due role in the promotion of market fairness and the improvement of the listed companies’ quality, thus laying a solid foundation in terms of the market for the launch of the SSE’s Direct Channel. The launch of the SSE’s Direct Channel this time is based on the SSE’s overall summing-up of regulatory experience in the past, an in-depth research on the existing market conditions, as well as a full reference to the advanced experience on overseas markets, in addition to the considerations of the actual circumstances. It can be said that all of the conditions for its implementation have become matured. There are the following four main aspects:
Firstly, the quality of listed companies’ information disclosure has been constantly improved. So far, the sense of responsibility, the level of internal control, and the quality for outward information disclosure on the part of the listed companies have all been remarkably improved, thus laying a solid foundation for direct information disclosure in terms of market participants.
Secondly, the investors are becoming increasingly mature. As the investment concepts of investors are becoming more rational, and their ability of risk identification more strong, a strong power in terms of the external regulation is ready for direct disclosure.
Thirdly, technical progresses have been made continuously. The SSE’s electronization system of information disclosure officially launched is under sound operation, which provides the technological adequacy for direct disclosure.
Fourthly, the rule system for the regulation on information disclosure has been improved step by step. As rules have become increasingly transparent, requirements better stated according to standard formats, and procedures more accessible to the public, the listed companies can better grasp all the requirements for the regulation on information disclosure, which provides a solid support in terms of mechanism for direct disclosure.
Q: Has the SSE made any preparations or adopted any supporting measures to ensure the smooth implementation of the SSE’s Direct Channel and protect the legal rights and interests of investors?
A: With an aim to ensure the smooth implementation of the SSE’s Direct Channel and to achieve the goal of protecting the legal rights and interest of investors in the implementation above, the SSE has made preparations and conducted the supporting work in the following aspects:
Firstly, it has clarified the application scope for the SSE’s Direct Channel. In principle, the SSE’s Direct Channel is applicable for all the SSE-listed companies, yet, the SSE may adjust the scope of the subjects to which it is applicable according to the quality of the information disclosed and the extent to which standard operations are carried out on the part of the listed companies. Generally speaking, the listed companies may directly disclose about 66% among all of their information to be disclosed. To be responsible to the market and in consideration for the benefit of investors, the SSE will retain its prerequisite form examinations on business operation, and significant issues including merger and reorganization, bankruptcy and restructuring, delisting, and refinancing, to which the Direct Channel is not applicable at present.
Secondly, a safe, stable and hi-efficient technological system is established. The SSE has established and launched the electronized system of information disclosure and propelled the building of the supporting system of the SSE’s internal business management procedures.
Thirdly, it has improved and publicized the standards and procedures for regulation. The SSE has clarified and publicized the business rules of information disclosure, and formulated and released the “SSE Category Index for Announcements on Listed Companies’ Information Disclosure” (the “Category Index for Announcements” for short), the “SSE Guidelines on Format of Listed Companies’ Special Announcements”, the “Business Manual for Listed Companies’ Information Disclosure”, the “FAQs about Information Disclosure”, and the “Operation Guides on Electronized Report for Information Disclosure”.
Fourthly, it has strengthened the aftermath regulatory mechanism. The SSE has recently released the “SSE Detailed Rules (Draft) for Regulatory Measures and Disciplinary Sanctions on Listed Companies”, which has improved the regulatory measures by laying out pertinent measures on punishing all the rule-breaking behaviors possible to occur in the SSE’s Direct Channel business. The SSE will absorb reasonable opinions and suggestions, and amend the draft above before promulgating it. In addition, the SSE will start to establish an objective and impartial appraisal system for information disclosure, and explore and implement the classified regulation, in a bid to impel the listed companies to perform their obligations of information disclosure in compliance with relevant rules and regulations.
Q: Which issues should be noticed in terms of information disclosure by listed companies after the implementation of the SSE’s Direct Channel？
A: After the implementation of the SSE’s Direct Channel, significant changes will be found in the way of information disclosure, as the listed companies will take the initiative to control the procedures for information disclosure as the obligators of information disclosure. Therefore, directorates of the listed companies are required to fully understand this significant change, attach great importance to the relevant work of the SSE’s Direct Channel, fully acquire the relevant rules, and equip the listed companies with necessary professionals as well as software and hardware infrastructures, so as to get well prepared for the SSE’s Direct Channel. The following issues in performing the obligation of information disclosure require special attention:
1. Time for information disclosure. For all the information confirmed to be released before 15:30 by the listed companies, they will be collectively disclosed on the SSE’s website from 15:30 on the very day while information confirmed to be released after 15:30 by the listed companies will be released on the SSE’s website according to the time of the submissions completed by the listed companies.
2. Procedures for information disclosure. When choosing the category for announcements on information disclosure, the listed companies are required to strictly abide by the “Category Index for Announcements”, and any information not belonging to the scope of the SSE’s Direct Channel can not be disclosed through the Direct Channel.
3. The Error correction mechanism for information disclosure. For any mistakes, omissions, and misleading information in the announcements released through the SSE’s Direct Channel, the listed companies are required to publish timely supplementary announcements or modification announcements.
Q: Which aspects should be noticed by investors after the implementation of the SSE’s Direct Channel？
A: After the implementation of the SSE’s Direct Channel, the way for investors to acquire the information disclosed by the listed companies will undergo no change, except that investors can acquire them much earlier than before. The announcements accessible to the Direct Channel are directly disclosed from 15:30 on the very day on the SSE’s website. This will enable investors to acquire relevant information more quickly to facilitate their decision-making.
After the implementation of the SSE’s Direct Channel, the listed companies will take more initiative in the release of their announcements. Investors need to make prudent judgments, and reasonable decisions to prevent investment risks. It is necessary to point out in particular that as the SSE’s Direct Channel realizes the direct disclosure for the listed companies’ announcements, it also poses higher requirements to the listed companies in terms of the sense of responsibility in information disclosure, the adequate understanding of relevant rules, as well as the level of their internal control.
During the beginning period of the implementation of the SSE’s newly launched Direct Channel, some of the listed companies may have not fully acquired all of relevant business rules and procedures, which may entail the increase of the number of supplementary or modification announcements. Thus, the SSE will adopt measures in the following two aspects: firstly, it will strengthen guidance and training to help the listed companies to fully acquire the business procedures of the Direct Channel as soon as possible to realize a smooth transition; secondly, it will put heavier weight on the monitoring part played by the media, keep a real-time track for the suspected issues concerned by the media, and make timely response to heated or sensational issues on the market. Investors may also keep an eye constantly on the quality of the information disclosed by a listed company and take it as an indicator for reference in judging the company’s creditability and governance level.
Q: What regulatory measures will be taken by the SSE in case of possible rule-breaking behaviors in terms of information disclosure?
A: To maintain the order in the securities market and protect the legal rights and interests of investors, the SSE will further strengthen the aftermath regulation, insist on the openness of regulation, make timely responses, as well as enhance its regulatory efficiency after implementation of the Direct Channel business. For possible rule-breaking conducts in information disclosure through the Direct Channel, the SSE will treat them in time after it makes a distinction on the conducts between the mistakes made in the work of the listed companies and their rule-breaking behaviors.
For occasional and slight mistakes which have not caused significant impact on the market, the SSE will urge the listed companies to make timely and serious correction and rectification, in addition to strengthening training and education to avoid repetition of the mistakes of the same kind. For repeated mistakes, and law-breaking and rule-breaking behaviors, as well as the conducts that have caused impact great to a certain extent, the SSE will take regulatory measures or disciplinary sanctions in light of the details of violations.
At the same time, the SSE expects the surveillance on the information disclosure conducts of the listed companies by all means on the part of all the market participants, with an aim to enhance the quality of the listed companies’ information disclosure through concerted efforts.
Q: Will there be any follow-up arrangements after the implementation of the SSE’s Direct Channel?
A: After the implementation of the SSE’s Direct Channel, the channels for the SSE-listed companies’ information disclosure will be in accordance with those of overseas mature markets on the whole. The SSE will consider promoting the work in the following two aspects after the implementation of the SSE’s Direct Channel, with an aim to give a full play to the functions of the SSE’s Direct Channel and enhance the efficiency of information disclosure and market operation:
Firstly, it will further enhance the timeliness of information disclosure, and explore and implement the disclosure of the listed companies’ announcements in the morning, noon, and evening every day, with a final aim to realize real-time disclosure in all trading hours.
Secondly, it will further promote the modification to relevant rules, upgrade the system of information disclosure, and gradually broaden the scope of the announcements accessible to the SSE’s Direct Channel to all the announcements in all categories in light of the market development.
Moreover, the SSE looks forward to the opinions and suggestions from all the market participants, which will help to consistently improve and better all the relevant tasks concerned in the SSE’s Direct Channel business, thus enhancing the quality and efficiency of the listed companies’ information disclosure.