CSRC publishes draft rules promoting “honest” investment banking


The draft rules require investment banking intermediaries to tighten risk control and strictly prohibit the use of below-market prices to gain business.

China Securities Regulatory Commission (CSRC) released draft rules to strengthen oversight of investment banking activities by securities companies, accounting firms, law firms and other intermediaries .

In view of the implementation of the registration system for new stock quotes and the rapid development of the market, the role of investment banking intermediaries has grown in importance, the CSRC said.

The changes aim to promote “honest” investment banking activities and strengthen control and risk prevention mechanisms, the regulator said.

The scope of the rules includes all types of intermediaries and investment banking activities – including issuance and subscription of securities, mergers and acquisitions of listed companies, securitization of assets and ‘other activities with investment banking characteristics.

The rules strengthen the requirements for governance, internal control, financial management and incentive systems, and strictly prohibit the creation of wealth in violation of laws and regulations, including with regard to unannounced equity participation or suddenly, “ghost shareholders” and illegal shareholder behavior.

Intermediaries are also required to strengthen their management of inside and unpublished information, establish and improve their systems for registering and managing “insiders” and improving separate mechanisms for reporting. information.

The rules also require intermediaries to increase their awareness of fair competition, prohibiting them from offering perks that are priced below industry standards to win contracts.

Third party employment systems should also be standardized, in particular to clarify qualification requirements and the selection process. The use of third parties to transfer benefits to gain business is strictly prohibited.

The changes also strengthen the sanction of investment banking intermediaries for illegal activities. However, intermediaries who proactively identify, report and address issues related to corruption, bribery and similar illegal behavior will face lighter penalties, the CSRC said.

The draft regulation, available here, are open for comments until October 24, 2021.


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