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The China Securities Regulatory Commission will make public the once-secret identities of members serving on the all-powerful issue review committee in a bid to make the listing process more transparent and accountable.
The committee, which decides whether companies can list shares on the stock market, will also be downsized to 25 members from 80, according to new rules issued by the Chinese securities regulator. The changes took effect Thursday.
"The move aims to improve transparency and step up public supervision of the committee," said the securities regulator in a statement.
Five out of the 25 committee members come from the securities regulator, including the chief lawyer and accountant, and the rest 20 are from the outside, such as auditing and law firms.
The Chinese securities regulator formed the committee four years ago. But problems often cropped up as the majority of the members of the over-extending committee came from outside the securities regulator, having little time to concentrate on the job.
That often led to members voting on a company's application to list without proper time to research the matter, according to investment bankers familiar with the committee.
There was also concern about company officials trying to illegally contact committee members to persuade them to allow the company to list.
That problem was well illustrated by the case of Chengdu Hongguang Industrial Co Ltd, which listed in Shanghai in 1997.
The company, which has now been renamed Chengdu Fortune Science and Technology Co Ltd, gained notoriety after it reported a full-year loss only 10 months after its debut on the stock market.
The company was later found to have fudged its books by reporting a net profit of 54 million yuan (US$6.51 million) rather than a loss of 103 million yuan for 1996.
The reform of the committee will help to improve efficiency and ensure fair play in stock listings, said analyst Dai Ming of Dagong International Credit Rating Co Ltd.
"The reform will make it much more difficult for company officials to reach illegal deals with committee members, as things are open to the public and exposed to more public supervisions," he said. "And that will diminish the possibility that companies list shares on the stock market by fiddling the financial figures."
The new rules stipulate that companies seeking to list shares need to get five yes votes from seven members that are selected from the 25-member committee for each review.
(Shanghai Daily December 12, 2003)
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