The China Securities Regulatory Commission has issued new guidelines on share reduction to build a solid foundation for long-term market stability – Xinhuanet Client

The China Securities Regulatory Commission publishes new regulations on share reduction

A current article published in the China Securities Journal reported that the China Securities Regulatory Commission has issued new rules aimed at reducing shareholdings to enhance long-term market stability. On May 24, the levy formally launched the “Temporary Measures to Control Shareholder Dilution of Listed Companies” and related supplemental rules.

The new rules, titled “Management Measures to Reduce Bycatch,” address remaining issues related to monitoring stock discounts. Key provisions include pre-disclosure requirements for major shareholders seeking to limit their share holdings, restrictions on the speed at which share holdings can be discounted every three months, and pre-IPO share restrictions. The aim is to regain governance over major shareholders, in particular by limiting how shareholders and de facto administrators are managed, by closing any potential loopholes in the guidelines and by strictly prohibiting any type of “variance discounting” behavior.

Industry insiders consider these rules the strongest new inventory discounting measures in the past. They believe that the issuance of these regulations will reduce the danger of a massive market sell-off and improve the long-term stability of the market.

The important thing about these rules is that they are the first to be introduced within a given type of rule, signaling improvement within the permitted environment and clarifying market expectations. The framework for share discounting is now clear and permanent, with the rules providing the rationale for the needs relating to company shares held by administrators, managers and senior management of listed companies.

The regulations further tighten restrictions on giant shareholder reductions in three classes: prior disclosure obligations for giant shareholders, restrictions on reductions by controlling shareholders and de facto administrators in the secondary market, and restrictions on major shareholders reducing their shares in key, unlawful terms.

As the stock rebate system becomes extremely complete, the aim of the rules is to eliminate any potential loopholes that could allow the practice of ‘circuit discounting’. The measures cover a variety of points, including shareholder ownership, buying and selling strategies, and the various devices used to discount shares.

Experts believe that the announcement of these new rules will bring about constructive changes to the ecology of the A-share market, directing listed companies to focus on the long-term improvement and raising the standards of listed companies. Overall, the principles aim to advertise rational and valuable financing ideas, creating a stable foundation for long-term market stability.

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