According to the relevant people close to the CSRC, the new securities law and the Filing regulations change the approval of financial advisory institutions to filing. However, considering the actual situation of the market, the guidance stipulates that the securities investment consulting agencies of securities companies with relevant business development experience are temporarily carried out at this stage. Under the premise of implementing the requirements of the securities law, this regulatory arrangement not only actively and steadily promotes the filing work according to the actual needs of the industry and the market, but also takes into account the risk of random release, which is a realistic approach. This practice is conducive to protect the quality of financial advisory institutions, prevent the risk of financial advisory business, improve the quality of listed companies, and safeguard the legitimate rights and interests of investors.
In order to implement the requirements of the new securities law, China Securities Regulatory Commission (CSRC) on July 24, 2020 issued the provisions on the filing management of securities service institutions engaging in securities service business (hereinafter referred to as the Filing provisions), which clarified the basic requirements for the filing of financial advisory institutions for merger and reorganization of listed companies. To further clarify the specific operation process of the filing of financial advisory institutions in the form of guidance this time is not only to implement the new requirements of the Securities Law on the change from examination and approval to filing of securities service institutions such as financial consultants, but also a concrete example of the implementation of the reform of the State Councils release and management services.
In June 2008, China Securities Regulatory Commission (CSRC) issued the measures for the management of financial advisory business of mergers and acquisitions of listed companies (hereinafter referred to as the administrative measures). According to the administrative measures, securities companies, securities investment consulting institutions or other qualified financial consulting institutions with the qualification of financial consultation for merger and reorganization of listed companies approved by the CSRC can provide professional services in the following five aspects: acquisition of listed companies, material assets reorganization, merger, separation and stock repurchase.
In 2018 and 2019, China Securities Regulatory Commission (CSRC) successively issued equity incentive measures and provisions on spin off and listing of listed companies, stipulating that independent financial consultants should be employed for spin off and incentive matters of listed companies. Combined with the above regulatory requirements, the filing provisions and the filing guidelines issued this time further clarify the business scope of financial consultants. That is: the financial consulting business of M & A of listed companies refers to providing transaction valuation, scheme design and other professional services and providing professional opinions for the acquisition, major asset restructuring, merger, division, spin off, share repurchase, incentive matters, etc., which have a significant impact on the equity structure, assets and liabilities, income and profit of listed companies.
According to authoritative statistics, since 2019, there have been more than 200 acquisition transactions of listed companies involving the transfer of control rights in the whole market, of which securities companies act as financial consultants, accounting for nearly 95%; and 112 major asset restructuring transactions are conducted by securities companies as financial consultants. Only a small amount of business, such as equity incentive, which has not been explicitly regulated before, is provided by securities investment consulting institutions, while other institutions have not carried out relevant business.
Dong Dengxin, director of the Institute of Finance and securities of Wuhan University of science and technology, said that the change from approval to filing of financial advisory institutions is the requirement of regulatory authorities to include and bottom line supervision. The filing system is not ready. In the transitional period, qualified institutions can be selected to engage in relevant business by setting conditions. In the long run, the filing system needs to decentralize the market and introduce market-oriented selection machine The system allows all parties to participate in the competition of financial advisory bodies reasonably. At the same time, it is necessary to establish the corresponding post supervision system, increase the deterrent force of supervision through various means such as industry rating standards, credit rating system, blacklist system, administrative punishment, and so on, so that the filing system can be smoothly implemented.
It is understood that at present, there are 134 securities companies, most of which have the qualification of financial advisory business; 83 securities investment consulting agencies, registered in various parts of the country, with the majority in Beijing, Shanghai, Shenzhen and other places. In addition to considering the types of institutional entities, the guidelines also require financial advisory institutions to be honest and trustworthy, to be diligent and responsible, to ensure the authenticity, accuracy and integrity of their opinions; to establish and improve the internal control organization system and internal control system; to develop business prudently according to their own situation; to strictly control project risks; and to improve the overall quality of financial consulting business.
Industry insiders expect that there are more than 100 institutions meeting the requirements, but not too many. On the one hand, there are still some securities companies that have not carried out financial consulting business, and less than a quarter of the current securities investment consulting institutions have carried out equity incentive and share repurchase business; on the other hand, listed companies often choose experienced institutions as financial consultants, whether it is acquisition, major asset restructuring, merger, separation, spin off, equity incentive, share repurchase, etc Some organizations with word-of-mouth and market share will have more advantages.
The above-mentioned relevant persons close to the CSRC pointed out that this regulatory arrangement is based on the implementation of the requirements of the securities law, actively and steadily promote the filing work according to the actual needs of the industry and the market, and also take into account the risk of random release, which is a realistic approach. This practice is conducive to protect the quality of financial advisory institutions, prevent the risk of financial advisory business, improve the quality of listed companies, and safeguard the legitimate rights and interests of investors.
In addition, the reporter also learned that other types of institutions also have the intention to file with the regulatory authorities. In this regard, the filing guidelines make it clear that in the next step, the regulatory authorities will invite the stock exchange, the China Securities Association and other self regulatory organizations to make a full evaluation. At the same time, the guidelines also make it clear that for other types of institutions, suggestions can be made through the contact information attached to the guidelines.
Some market institutions also believe that the securities law has made adjustments to the management mode of financial advisory institutions, and the restrictions on business development agencies of financial advisory business can be appropriately relaxed, and the supervision should be more strict. Some experts also believe that the change of approval and filing of financial advisory institutions is from the perspective of streamlining administration and decentralization of access management. However, the professional nature of financial consulting business is strong, and the requirements for the practice ability of institutions are high. The change does not mean that no conditions can be set, nor does it mean that any institution can do it.
For example, the change from the approval system to the registration system does not mean that there are no conditions and threshold requirements for listed enterprises, and that no enterprise can be listed. The issuers still have to meet the requirements for the issuance and listing of enterprises before they can register for issuance and listing. In fact, since the financial advisory business is related to the quality of listed companies and the vital interests of small and medium-sized investors, the mature capital market generally implements strict supervision. Taking Hong Kong as an example, the SFC requires institutions engaged in financial advisory business of listed companies to hold No. 6 license (i.e. to provide advice on institutional financing). The licensed applicant must have a sound business structure and a good internal monitoring system. Major shareholders, senior executives and relevant business personnel must have corresponding business qualifications, and their paid in capital and working capital shall not be less than 500 HK $million and HK $3 million.