Shenzhen Stock Exchange Revises The Appraisal Measures For Information Disclosure Of Listed Companies

Shenzhen Stock Exchange (SZSE) made amendments to the Appraisal Measures for Information Disclosure of Listed Companies (hereinafter referred to as the Appraisal Measures) recently, in a move to improve the quality of information disclosure, propel regulated operations of listed companies, intensify the daily supervision over listed companies, and promote the construction of the market-oriented operation mechanism which rewards the good and fines the bad.

Dating back to its amendments to the Appraisal Measures in November 2011, SZSE put forward for the first time the thought of introducing quantitative appraisal, which combined the rating of daily announcements and objective indicators, and putting in self-evaluation of listed companies. The move aimed at objective appraisal criteria, transparent appraisal process and impartial appraisal results.

In light of the crucial and fundamental role of information disclosure appraisal in the daily supervision over listed companies and in response to the new requirements brought in by changing market situations, SZSE launched the amendment work to the Appraisal Measures once again in December 2012. During this amendment, SZSE had solicited public opinions from listed companies for two times successively, receiving 558 feedbacks in total. The feedbacks were of high value to SZSE and were sorted by categories, thoroughly discussed and adopted.

The major amendments are summarized as follows:

1. Strengthening the appraisal of listed companies’ efforts on Information Disclosure Express Practice. The Information Disclosure Express Pilot Practice was kicked off by SZSE in October 2011 and pushed forward into overall promotion in February 2013. It was designed to enhance information disclosure efficiency and urge market players to perform their due responsibilities. To ensure its smooth implementation, SZSE put forward a newly revised computer system for information disclosure and opened a special zone for online business. The system would prompt business rules for reference and disclosure key points to be abided by, and request listed companies to choose the right categories, input relative business parameters and comply with relevant rules and points. In this way, information disclosure quality could be ensured and errors occurred in trading suspension and resumption or ex-dividend activities could be reduced. Relevant appraisals on this part are added in the amendments.

2. Strengthening the appraisal of listed companies’ performance of obligations in fair disclosure. A new section named “Investor Relations” has been launched on the website of Easy IR since August 2012 for the purpose of regulating listed companies’ activities in investor relations management and giving adequate protection for the fair rights to access to information of minority shareholders. Listed companies are requested to make investor relation activities public on the website of Easy IR in a timely manner, including institutional investor researches, media interviews, roadshows and other activities oriented to specific parties. Relevant appraisals on this part are included in the amendments to ensure listed companies make timely disclosure about such activities.

3. Strengthening the appraisal of listed companies’ fulfillment of commitments made on cash dividend payment. Listed companies’ fulfillment of commitments made on cash dividend payment has been included in the amendment for the purpose of strengthening listed companies’ awareness of investor return as so to urge them to pay cash dividend as they have promised. This part focuses on whether listed companies’ disclosed schemes of profit distribution and bonus shares from capital reserve are consistent with relevant laws and regulations, their profit distribution policies and plans, shareholder long-term return plans and their commitments made.

4. Defining listed companies’ self-evaluation in information disclosure. The revised appraisal measures make clear that listed companies shall declare personally whether their information disclosures are against the 40 objective indicators included in the measures instead of grading their self-evaluation.

5. Adding some appraisal indicators based on regulatory practice. The newly-added indicators are used to evaluate whether listed companies have their imposed risk warning and listing suspension reported and disclosed accurately, have their internal control self-evaluation report compiled and disclosed as stipulated, and have their financial accounting report corrected within prescribed time when material accounting errors or false records are contained in the report and correction is required by regulatory authority.

As introduced by relevant principal from SZSE, information disclosure appraisal results have been applied in systematic innovation and practical regulation in Information Disclosure Express Practice and regulatory risk appraisal. Only those companies with good appraisal results are able to get access to the Express Practice and their market reputation will accordingly be greatly enhanced. For companies with poor appraisal results, SZSE will, centering on their weakness and risks lying in different aspects, adopt pertinent measures to intensify regulation on them. In addition, information disclosure appraisal results serve as an important proof when SZSE issues continuing regulatory opinions in respect of listed companies’ refinancing, equity incentive and restructuring through merger and acquisition in order to reinforce the role of market binding mechanism. It is foreseeable that listed companies’ integrity records and information disclosure appraisal results will tie more closely with the companies’ future development in capital market.