Companies must come clean to fulfill registration system reform

The China Securities Regulatory Commission recently issued guidelines on improving the quality of prospectus information disclosure under the registration system.

Such a prospectus is a declaration that objectively presents the listed companies' business strategy, business structure, financial situation and competition landscape among others. It is an important basis for investors to understand listed companies and make investment decisions.

The reform of the registration system aims at minimizing administrative intervention, giving markets the right of choice, and improving market tolerance. It thus makes it binding on securities issuers to make true, accurate and complete information disclosure, eliminate information uncertainty as much as possible and reduce transaction risks caused by information asymmetry. This is the key to healthy and smooth operation of the capital market.

In China's pilot reform of the registration system in the past few years, the quality of listed companies' prospectus information disclosure has improved, but problems such as low readability, relevance of investment decisions and pertinence of information disclosure still exist.

Under the registration system, regulators will not make substantial stock value judgments, but they should strengthen supervision and greatly increase incompliance costs for enterprises disclosing information carelessly or hiding information about their involvement in fraud.

With the promotion of the registration system in China, the number of new listings is bound to increase, making competition increasingly fierce. Therefore, it becomes the legal responsibility of listed companies to disclose relevant information completely and clearly so as to win investors' confidence.

As gatekeepers, intermediary institutions should also keep pace with the reform of the registration system, strictly and prudently perform their duties, urge listed companies to operate in a standardized manner, be honest and trustworthy, and help investors make rational investment decisions with complete and accurate information disclosure.

Only by strictly controlling the entrance and purifying the market environment with real information can China lay a solid foundation for comprehensively carrying out the registration system.