Issues concerning the Self-Inspection and Rectification of Quoted Private Placement Institutions

 2018-06-24  8



  • Document NumberNo. 1394 [2017] of National Equities Exchange and Quotations Co., Ltd.
  • Area of Law Enterprises
  • Level of Authority Industry Regulations
  • Date issued10-27-2017
  • Effective Date10-27-2017
  • Status Effective
  • Issuing Authority National Equities Exchange and Quotations Co. Ltd



Notice of National Equities Exchange and Quotations Co., Ltd. on Issues concerning the Self-Inspection and Rectification of Quoted Private Placement Institutions
(No. 1394 [2017] of National Equities Exchange and Quotations Co., Ltd.)
All market participants:
The Notice on Matters concerning the Quoted Financing of Financial Enterprises (Announcement No. 36 [2016], NEEQ, hereinafter referred to as the “Notice”) requires that “a quoted private placement institution shall conduct self-inspection on whether the increased quotation conditions in this Notice (excluding items (2), (3) and (7)) are met,” and the issues on the standards for the calculation of conditions for the self-inspection and rectification of quoted private placement institutions are hereby announced as follows:
I. Scope of self-inspection and rectification
From the date of issuance of the Notice on May 27, 2016, quoted private placement institutions registered as management institutions of privately offered investment funds (hereinafter referred to as the “management institutions of privately offered funds”) at the Asset Management Association of China (hereinafter referred to as the “AMAC”) shall be included in the scope of self-inspection and rectification.
II. Basis for financial reports on self-inspection and rectification
Consolidated financial statements of financial reports in 2016 shall be taken as the basis for the calculation in respect of income share, and the cited financial data shall be audited by the accounting firms qualified for conducting the securities and futures business, and the accounting firms shall issue special audit opinions.
III. Standards for the calculation of indicators relating to self-inspection and rectification
(1) Indicators on income share
The Notice requires that “the sum of management fee income and performance remuneration shall account for 80% or more of the income source,” of which the “sum of management fee income and performance remuneration” shall include “management fee income, performance remuneration and investment consulting fee income (relating to the fund management business) and follow-up investment return,” and the “income source” shall cover “management fee income, performance remuneration, investment consulting fee income, investment return, and profits and losses from the change in fair value.”
As to the standards for the calculation of “follow-up investment return,” the proceeds from the amount of not more than 20% of the capital contribution by the private placement institution as the fund management institution in the fund it manages shall be taken as the calculation basis.
(2) Asset management scale
The Notice requires that “the annual average paid-in assets managed by a private placement institution of venture capital investment type in the last three years is two billion yuan or more, and the annual average paid-in assets managed by a private placement institution of private equity type in the last three years is five billion yuan or more.” For the determination of management scale and types of paid-in assets of quoted private placement institutions, the information recorded by the AMAC shall prevail.
IV. Quoted private placement institutions shall submit rectification reports to the NEEQ before November 10, 2017. Sponsoring broker-dealers shall check the self-inspection and rectification of quoted private placement institutions under their sustainable guidance, issue check reports, and submit the reports with self-inspection and rectification reports. The self-inspection and rectification reports and check reports of quoted private placement institutions shall explain item by item whether the conditions prescribed in the Notice are met, and list the calculation process and calculation basis. The documents issued by quoted private placement institutions and relevant intermediaries shall be true, accurate and complete.
V. The NEEQ shall examine the submitted self-inspection and rectification reports and check reports, and in the course of examination, may require quoted private placement institutions and their sponsoring broker-dealers to make interpretation, explanations and corrections. The NEEQ shall, after examining self-inspection and rectification reports and check reports, require quoted private placement institutions and sponsoring broker-dealers to uniformly disclose the reports on the designated disclosure date. The NEEQ shall remove quoted private placement institutions that fail to submit or disclose self-inspection and rectification reports on the designated disclosure date or have submitted self-inspection and rectification reports but fail to meet rectification conditions upon examination.
VI. On the designated disclosure date (T day) of the NEEQ, quoted private placement institutions and sponsoring broker-dealers shall disclose self-inspection and rectification reports and check reports respectively. Quoted private placement institutions that fail to meet self-inspection and rectification conditions shall, at the same time, disclose the announcement on the disclosure of risks of quotation termination, and suspend trading on the T+1 day. A quoted company that fails to meet rectification conditions on the T+2 day shall resume trading. The quoted company and sponsoring broker-dealers during the period of trading resumption shall continuously disclose the risks of quotation termination (for at least three times). A quoted company that fails to meet rectification conditions on the T+7 day shall complete compulsory delisting.
For a company that submits an application for the active termination of quotation to the NEEQ before the designated date of disclosure, the NEEQ will continue to perform the procedures for the examination of active termination of quotation, and issue the quotation termination announcement after completing examination.
For a company that is suspected of any regulatory violation or any other matter that needs to be verified, the NEEQ shall, after completing the handling of the relevant matters, initiate the quotation termination procedure.
VII. After the completion of self-inspection and rectification, the follow-up financing of a quoted private placement institution that has completed self-inspection and rectification, or a quoted company that is not registered as a management institution of privately offered funds at the AMAC but a subsidiary thereof within the scope of consolidated statements is registered as a management institution of privately offered funds shall strictly comply with the relevant requirements of the Notice. A quoted private placement institution that is registered at the AMAC as the securities type private placement institution (management institution of privately offered securities investment funds) shall not conduct financing through the NEEQ.
National Equities Exchange and Quotations Co., Ltd.
October 27, 2017