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Author: Lawyer Chen Chaoming
Author: Lawyer Guo Shihao
Author: Lawyer Guo Shihao
From: Lawyer of Gudu Equity Lawyer Team
Unit: Lawyer of Beijing Yingke (Shenzhen) Law Firm
Full text 4253 words, reading requires 10 Minute
On December 28, 2019, the Standing Committee of the National People's Congress passed the "Securities Law of the People's Republic of China (Revised Edition in 2019)" (hereinafter referred to as the "Securities Law"), and it was officially implemented on March 1, 2020. The new Securities Law fully implements the registration system, changing the requirement that the issuance of stocks should be "sustainable profitability" to "sustainable operation ability", abolishing the issuance review committee system; significantly increasing the cost of violations, and adding a special chapter on information disclosure and investor protection.
Under this background, higher requirements are put forward for the underwriting and underwriting of securities companies. Brokerage lawyers came into being and will play a huge role.
No.1
Securities lawyers under the registration system
(I) Changes under the registration system
1. Cancel the issuance review committee system
On the basis of summarizing the experience of the Shanghai Stock Exchange in establishing the Science and Technology Innovation Board and piloting the registration system, the securities issuance system has been systematically modified and improved, the issuance review committee system was abolished, and the Securities Law was adjusted in accordance with the basic positioning of comprehensively implementing the registration system. While fully implementing the securities issuance registration system, the new Securities Law also authorizes the State Council to stipulate the specific scope and implementation steps of the securities issuance registration system, leaving necessary legal space for the relevant sectors and securities varieties to implement the registration system step by step.
2. Strengthen information disclosure
The Securities Law has added ten new articles in Chapter 5, and puts forward complete requirements for the information disclosure of listed companies under the registration system, including the standards of information disclosure (the information disclosed by the information disclosure obligor shall be true, accurate, complete, concise and clear, and easy to understand, and shall not contain false records, misleading statements or major omissions), the content of information disclosure (regular reports, major events), and the synchronization of information disclosure (if securities are publicly issued and traded at the same time at home and abroad, the information disclosed by the information disclosure obligor shall be disclosed at the same time; the information disclosed by the information disclosure obligor shall be disclosed to all investors at the same time and shall not be disclosed to any unit or individual in advance).
3. Adding investor protection chapter
New Securities Law sets up a special chapter to stipulate the investor protection system, and has made many highlights. It includes distinguishing between ordinary investors and professional investors, and making targeted arrangements for the protection of investors' rights; establishing a solicitation system for the exercise of shareholder rights of listed companies; stipulating the bondholder meeting and bond trustee manager system; establishing a compulsory mediation system for disputes between ordinary investors and securities companies; and improving the cash dividend system for listed companies. It is particularly worth noting that in order to adapt to the needs of the reform of the securities issuance registration system, the new Securities Law explores a securities civil litigation system that adapts to my country's national conditions, and stipulates that investor protection institutions can act as representatives of litigation and file civil damage compensation lawsuits for victims in accordance with the litigation principle of "exclusive withdrawal" and "implemented joining".
4. Strengthen the main responsibility of the sponsor and underwriting agency
stipulates that securities companies shall not allow others to directly participate in centralized securities transactions in their names; explicitly ensure that the presumption of fault and joint compensation liability for the victim investors when the referee, underwriting securities companies and their directly responsible personnel fail to perform their duties; increase the range of illegal penalties for securities service institutions to fail to fulfill their diligence and duty, from the original fine of up to five times of business income to ten times, if the circumstances are serious, they will be suspended or prohibited from engaging in securities service business.
(II) Necessity of securities lawyers
1. With the implementation of the new "Securities Law" on March 1, 2020, the securities issuance registration system has been fully implemented in the form of legislation.Under the registration system, the responsibilities of intermediary institutions, especially sponsor and underwriting institutions, have been strengthened, and under the "principle of presumption of fault", the penalties for illegal and irregular behaviors have been greatly increased. Against this background, it is particularly important for securities firms to hire securities firm lawyers to participate in domestic IPO projects and be responsible for the overall process of the sponsor and underwriting institutions' overall IPO projects.
2. Domestic IPO projects, since the responsibility of the sponsor and underwriting institutions for the overall project has been strengthened, the employment of securities lawyers can also form a relationship of checks and balances, mutual supervision and mutual supplement with the issuer's lawyers, better prevent project risks and securities companies' own risks, and change the situation of grasping legal risks in domestic IPO projects.
3. On April 28, 2012, the China Securities Regulatory Commission issued the "Guiding Opinions on Further Deepening the Reform of the New Stock Issuance System" (China Securities Regulatory Commission Announcement [2012] No. 10)", advocating and encouraging qualified law firms to write prospectuses, and also encouraging securities lawyers to actively participate in the drafting and verification of prospectuses.
No.2
Domestic IPO project Main work content of securities lawyers
(I)Overall work content
Overall work content
(Structural diagram of securities lawyers work content)
(II)Key work content of securities lawyers
Retrieve the listing and issuance projects of the Shanghai Stock Exchange Science and Technology Innovation Board, and there have been a large number of cases of hiring securities lawyers. There is even the same listing project, and two securities companies are hired ( SMIC Integrated Circuit Manufacturing Co., Ltd. Science and Technology Innovation Board Listing Project, sponsor/lead underwriter lawyer: Beijing Deheng Law Firm, Shanghai Fangda Law Firm), securities lawyers are playing an increasingly important role, and their core tasks include the following:
1, due diligence work
Due diligence is a necessary procedure to determine whether a project meets the application conditions, discover and clear up legal obstacles to IPO in the enterprise, which can improve the success rate and shorten the project time. Although the project is generally on the eve of the application when the brokerage lawyers are involved, the brokerage lawyers can still improve the unfinished matters in the early stage in accordance with the brokerage’s underwriting requirements, draft a memorandum on solving legal issues or review the memorandums drafted by the brokerage and issuer’s lawyers and put forward professional opinions to avoid the omission of important matters, resulting in the delay or even failure of the project application.
2. Participate in coordination and communication meetings
Brokerage lawyers can express professional opinions and assist in solving corporate problems by participating in coordination meetings between brokerage firms, issuer lawyers and other intermediary institutions. In addition, relevant legal and regulatory basis and cases can be provided in the communication process between securities companies and relevant regulatory agencies (including but not limited to the China Securities Regulatory Commission, the China Securities Regulatory Bureau, the State Administration for Taxation, the State Administration for Industry and Commerce, relevant departments of the issuer's local government, and stock exchanges, etc.) to achieve the purpose of solving the problem.
3, prospectus writing
In combination with the requirements of the "Regulations on the Registration Management of the Initial Public Offering of Stocks on the Science and Technology Innovation Board (Trial)" and "Corporate Information Disclosure Content and Format Guidelines for the Public Offering of Securities No. 41 - Prospectus of Company of Science and Technology Innovation Board" (China Securities Regulatory Commission Announcement [2019] No. 6), "Shanghai Stock Exchange Science and Technology Innovation Board Stock Listing Rules (2019 Revised)" and other rules, participate in the writing of the prospectus, especially the relevant legal chapters, communicate with other intermediary institutions, review the prospectus from the perspectives of legal compliance, information disclosure, etc. and make suggestions.
4, prospectus verification
In accordance with the requirements of the China Securities Regulatory Commission's "Guidelines for Working Drafts for Securities Issuance and Listing" and its attachment "Instructions and Examples of Prospectus Verification Methods", securities lawyers should assist the sponsor institution in verifying the prospectus and establish an index relationship between the verification documents and the working draft in accordance with the requirements of the guidelines.
5, Working Paper Collection and Organization
Securities lawyers collect and organize legal working papers involved in the prospectus in accordance with the "Guidelines for Working Papers for Securities Issuance and Listing" and its attachments "Catalogue of Working Papers for Securities Issuance and Listing" and other rules and requirements of the core relevant systems of the sponsor institution. When collecting and organizing the draft, the integrity of the draft must be ensured.
6. Before applying for the
project, the company must pass the tutoring and acceptance of the local CSRC. Securities lawyers need to assist in the preparation of training documents for the counseling stage, and assist in drafting, revising, and reviewing relevant contents of the legal aspects in the counseling documents submitted to the local securities regulatory bureau, including but not limited to counseling application reports, counseling work reports, counseling acceptance reports and other documents.
7, material declaration
Securities lawyers should assist the sponsor and underwriting institutions in reviewing and producing relevant application documents, such as the sponsor work report, issuance of sponsorship and underwriting letter, listing documents, etc., in accordance with the rules and requirements of the "Guidelines for the Information Disclosure Content and Format of Companies for Public Issuance of Securities and Exchanges," and other rules and requirements.
8, feedback reply
In the feedback stage of the exchange and the CSRC, securities lawyers need to conduct special legal research, regulations and case searches on legal-related issues in the feedback issues, participate in the intermediary agency coordination meeting, discuss replies ideas, conduct supplementary verification, issue supplementary due diligence lists and collect draft materials; cooperate with the issuer's lawyers to draft and modify replies to legal-related issues in the feedback issues in the exchange and the CSRC.
No.3
Brotherline lawyer work outlook
June 27, 2018, the China Securities Regulatory Commission issued the "Opinions on Strengthening the Risk Prevention and Control of Securities Companies in Employing Third Parties and Other Integrity in Investment Banking Business", which put forward requirements for the behavior of securities companies to hire third parties in investment banking business. It actually clarified that securities companies should hire securities firm lawyers with their own funds, establish and improve internal control mechanisms, improve compliance and risk control levels, formulate and standardize the employment system, prohibit the transfer of interests or commercial bribery, and disclose the employment matters in documents such as issuing sponsorships.
With the implementation of the Science and Technology Innovation Board and the implementation of the GEM registration system, and the legalization of the registration system, securities service intermediary institutions, as the "gatekeeper of the securities market", are increasingly responsibilities. It can be seen that it will become more common for securities companies to hire lawyers to participate in IPO projects, and securities lawyers will also play a more important role.
From the due diligence stage to the underwriting and issuance stage, the work of securities lawyers runs through the project, and puts forward higher requirements for the professional qualities of securities lawyers in various aspects such as legal research, document production, etc. The prospects of securities lawyers are also worth looking forward to and have great potential.
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