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First Batch of Rules on NEEQ Reform is Announced
2019-12-27 A - A +

 

In order to honor the spirit for steadily advancing the NEEQ reform by Central Economic Work Conference, and under the leadership of the Party Committee of the CSRC, NEEQ has formulated and revised a series of business rules after public consultation. On December 27, 2019, the first batch of business rules were issued, which turns the "blueprint" of the comprehensive and deepening reform into full action.

As market tiers, trading and investor suitability are the building blocks for the overall NEEQ Reform, the first batch of business rules are specified in these areas. The rules include: Measures for the Management of Market Tiers of the NEEQ, Stock Trading Rules of the NEEQ and Measures for Managing Investor Suitability of the NEEQ, NEEQ Rules for Transfer by Agreement for Specific Issues and NEEQ Rules for Monitoring Abnormal Transactions, Guideline for Managing Investor Suitability of the NEEQ and NEEQ Guideline for Transfer by Agreement for Specific Issues. Altogether, 30 business rules were developed or revised, in addition to the Measures for the Supervision and Management of Non-listed Public Companies and Measures for Information Disclosure Management of Non-listed Public Companies released by the CSRC on December 20, 2019. NEEQ rules covering public offering, stock offerings to specific investors, management of market tiers, stock trading, investor suitability management, and company supervision.

In the early stage, the NEEQ publicly solicited comments on the six business rules. Having carefully studied the opinions and suggestions put forward by the market, NEEQ revised and perfected the relevant rules in line with higher-level regulations, and taking into consideration of the macroeconomic conditions, industry differences, and the stage of enterprise development. For instance, in the Measures for the Management of Market Tiers of the NEEQ, the return on net assets of Standard 1 for listing on the NEEQ Select is adjusted from 10% in the consultation paper to 8%. At the same time, in order to facilitate the market to accurately understand and apply the rules, the growth rate of operating income of Standard 2 is clarified as "the growth rate of operating income in the most recent year". The Stock Trading Rules of the NEEQ changed the closing call auction for the NEEQ Select companies from 5 minutes to 3 minutes, and unified the time of non-withdrawal order in Base Tier and Innovation tier to 3 minutes.

In addition, the NEEQ released the revised Measures for Managing Investor Suitability of the NEEQ, which mainly adjusts investor suitability management from three aspects. The first is to adjust and improve the asset requirements. On the basis of analyzing and drawing on the experience of domestic and foreign securities markets and fully considering the characteristics and institutional arrangements of enterprises at all tiers of the NEEQ, the NEEQ adjusted and differentiated the suitability standards for investors. After the reform, the standards of investor access to the NEEQ Select, Innovation and Base tier will be 1 million yuan, 1.5 million yuan and 2 million yuan respectively. The second is to adjust the individual investor’s asset standards from financial assets to securities assets. The third is to optimize the continuous management of investors' suitability. In accordance with the Securities and Futures Investors’ Suitability Management Measures of CSRC, the securities companies are required to update the evaluation database in a timely manner based on investor information and their participation in the trading of listed companies’ stocks, and actively adjust the opinion on investor’s suitability. Requirement for the securities company to urge investors to continuously meet the requirements of asset standards is cancelled.

After the above rules are issued and implemented, the listed companies at the base and innovation tiers will be subject to the new trading system. Investors can open trading authority online, and they can trade on the day when authority is opened.

NEEQ is speeding up the reforms by finalizing rules, staffing, revamping IT systems, and reaching out to market. In terms of rules, the four basic business rules for public offering, stock offerings to specified investors, corporate governance and information disclosure have been revised, and they will be issued and implemented together with supporting rules. In terms of organization and personnel, we will further optimize the internal institutions, set up special functional departments with professionals for the review of application for public offering and listing on the NEEQ Select supervision of companies on the NEEQ Select, supervision of services for intermediary institutions, investor services. In terms of technology, we have completed the adjustment of the call auction frequency of the base and the innovation tier, and the transformation of the technical system of the investor's suitability classification. In terms of the market, NEEQ listed companies, investors, securities companies, securities service agencies, local government departments have all paid close attention to this reform, and have actively carried out various preparations. After the rules are promulgated and implemented, the NEEQ will conduct multiple rounds of training and interpretation for various market players. While advancing the implementation of the reform, the NEEQ adheres to the continuous implementation of risk prevention and investor protection, further improves risk prevention and control and response mechanisms, strengthens market supervision, and effectively protects investors' legitimate rights and interests.

The NEEQ reform is an important practice to implement the financial supply-side structural reform and an important part of comprehensively deepening the reform of the capital market, and is conducive to improving the basic system of the NEEQ, enhancing market governance, and filling the gap in the multi-level capital to serve innovative private SMEs. Under the strong leadership of the Party Committee of the CSRC, and in accordance with the goal of "building a well-regulated, transparent, open, dynamic and resilient capital market", the NEEQ is persistent in pursuing reform and development while preventing risks, lives up to the responsibility and acts vigorously to promoting the steady implementation of reform measures, and to ensure that important and good things are done well.