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Disclosure Standards Improved for Listed Companies

China's two stock exchanges released revised regulations for listings during the weekend, imposing new requirements for already-listed companies as well as for new applicants.

The rules, amended from the 2002 version and effective from December 10, govern such areas as disclosure, obligations of board members, senior executives and sponsors, and risk warning and delisting procedures, according to sources with the Shanghai and Shenzhen stock exchanges.

The exchanges adjusted their rules to accord with regulations issued by the China Securities Regulatory Commission (CSRC) over the past two years.

For example, the new rules clarify the information disclosure requirements for listed firms, especially disclosure pertaining to major transactions or affiliated trade. They also specify conditions under which listed companies may apply to withhold disclosure to protect their lawful interests.

Vagueness or inconsistencies that existed in the previous regulations offered some companies excuses to evade disclosure. Some, through misunderstanding, revealed information that could have been kept confidential.

Also under the new rules, board members, directors and top management are legally committed to fulfill their duties.

Zheng Jing, securities representative at Beijing-based CITIC Securities, said the amended regulations were needed because the market has changed substantially since they were initially implemented two years ago. The new rules are more detailed and easier to follow, she said Monday.

Each company will have to adjust their disclosure and other practices according to the new rules, based on their own conditions and obligations, she said.

The exchanges are obliged to amend the rules and improve the level of supervision as the stock market reform intensifies, said Yin Guohong, an analyst with China Securities Co.

With a more mature regulatory system, it is natural that the stock exchanges take over more daily supervision functions from the CSRC, Yin stated.

China's securities regulators have implemented a number of reforms to improve the stock issuing system and increase market transparency and efficiency over the past two years.

Earlier this year, the CSRC introduced the sponsor system for companies planning to float shares. The move was made to enhance the responsibility of investment banks in choosing qualified listing applicants and block poor performers from the bourses.

It also drafted a new pricing system for initial public offerings to give investors more say in deciding IPO prices. That draft is still under discussion.

(China Daily November 30, 2004)

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