Circular on Promulgating the Implementing Rules of the Shanghai Stock Exchange for Offline Issuance of Shares in Initial Public Offerings

Shang Zheng Fa [2016] No. 2

January 5, 2016

Participants in offline issuance of new shares,

In order to regulate the offline issuance of shares by companies intending to be listed on the Shanghai Stock Exchange (hereafter referred to as the "SSE") in initial public offerings and to improve the efficiency of offline subscription of shares in initial public offerings and clearance of funds, , and in accordance with the Administrative Measures for Securities Issuance and Underwriting and the relevant regulations, these Implementing Rules of the Shanghai Stock Exchange for Offline Issuance of Shares in Initial Public Offerings (See Appendix, hereinafter referred to as the "Rules") are jointly formulated by the SSE and China Securities Depository and Clearing Corporation Limited (hereinafter referred to as "CSDC") and are hereby promulgated for your implementation and compliance.

The Implementing Measures of the Shanghai Stock Exchange for Offline Issuance of Shares in Initial Public Offerings (Shang Zheng Fa [2014] No. 30) promulgated on May 9, 2014 shall be repealed simultaneously.

It is hereby notified.

Implementing Rules of the Shanghai Stock Exchange for Offline Issuance of Shares in Initial Public Offerings

Chapter I General Provisions
　
Article 1 These Implementing Rules are formulated in accordance with the Administrative Measures for Securities Issuance and Underwriting and the relevant regulations in order to regulate the offline issuance of shares by companies intending to be listed on the Shanghai Stock Exchange in initial public offerings and to improve the efficiency of offline subscription of shares in initial public offerings and clearance of funds.
　
Article 2 The inquiry, subscription, collection and payment of funds as well as the initial registration of shares of initial public offerings to be completed via the offline subscription electronic platform (hereinafter referred to as the "subscription platform") of the SSE and the depository and clearing platform of the Shanghai Branch of China Securities Depository and Clearing Corporation Limited (China Securities Depository and Clearing Corporation Limited is hereinafter referred to as "CSDC"; and such platform is hereinafter referred to as the "depository and clearing platform") shall be governed by these Rules.
　
Article 3 Offline investors, who participate in offline issuance of shares in initial public offerings, and the securities investment products under their management (hereinafter referred to as the "allotment object") shall comply with the Administrative Measures for Securities Issuance and Underwriting and other relevant provisions.
　
Article 4 A clearing bank of securities funds, after its written application submitted has been approved by the Shanghai Branch of China Securities Depository and Clearing Corporation Limited (hereinafter referred to as the "CSDC Shanghai Branch"), may become the clearing bank for offline issuance referred to herein (hereinafter referred to as the "clearing bank").

Chapter II Basic Provisions
　
Article 5 Upon written authorization of a lead underwriter, the SSE shall provide qualified offline investors with the subscription platform for quotation and subscription.
　
Article 6 Upon written authorization of a lead underwriter, the CSDC Shanghai Branch shall provide the depository and clearing platform for the collection of funds raised through offline issuance for the lead underwriter.
Upon written authorization of an issuer, the CSDC Shanghai Branch shall make initial registration according to the result data of offline allotment provided by the lead underwriter.
　
Article 7 Information about offline investors and allotment objects is subject to the registration and filing by the Securities Association of China (hereinafter referred to as the "SAC"). The SSE acquires information relating to the offline investors and allotment objects from the SAC.
The lead underwriter shall review the qualification of offline investors based on the quotation conditions previously announced, undertake the responsibility of information disclosure, and check the relevant information about offline investors who intend to participate in the offline offering via the subscription platform.
　
Article 8 The lead underwriter shall, according to the relevant provisions on self-discipline of the SAC, request the offline investors participating in the offline issuance and allotment objects under their management to take two trading days before the start of the initial inquiry as the base date, and that the average daily market value of non-restricted A shares issued on the SSE held by them for the 20 trading days before the base date (inclusive) shall be more than CNY10 million (inclusive) and no less than the market value previously determined and announced by the issuer and the lead underwriter.
The calculation rules for market value specified in the Implementing Rules of the Shanghai Stock Exchange for Online Subscription of Shares in Initial Public Offerings at Market Value shall be employed for the calculation of market value of non-restricted A-shares on the SSE held by the offline investors participating in the offline issuance and allotment objects under their management.
　
Article 9 The lead underwriter shall provide the relevant information such as the name and the securities account of the allotment object, the bank account for collection and payment and the stock codes to the depository and clearing platform via the subscription platform. After the information mentioned above is forwarded to the clearing bank via the depository and clearing platform, the clearing bank shall be responsible for examining the compliance of the bank account of the allotment object for collection and payment of subscription funds.
　
Article 10 Any lead underwriter that participates in the offline issuance of shares in an initial public offering shall apply to the SSE for the CA certificate of the subscription platform. For any offline investor having finished its registration and filing procedures with the SAC, the lead underwriter shall apply for the CA certificate on its behalf. Meanwhile, any institution that is a lead underwriter and offline investor shall apply for the CA certificate separately. The CA certificate may be used for many times in initial public offerings.
Offline investors may log in the subscription platform with the CA certificate to participate in quotation and subscription. A lead underwriter can only log in the subscription platform with the CA certificate for data exchange.
　
Article 11 The lead underwriter and the clearing bank complete the relevant date exchange with the depository and clearing platform via the Participant Remote Operating Platform (hereinafter referred to as the "PROP") of the CSDC Shanghai Branch.

Chapter III Inquiry and Subscription
　
Article 12 Where an issuer and a lead underwriter determine the issue price by inquiry to offline investors, they may, after determining the range of issue price through initial inquiry, either determine the issue price by accumulated bidding inquiry and allot shares to allotment objects participating in the accumulated bidding inquiry, or determine the issue price by initial inquiry and allot shares to allotment objects participating in subscription.
Where shares are directly priced by the issuer and the lead underwriter for the issue price, the shares to be issued in a public offering by the issuer shall be fully offered to online investors directly at a set price. Offline issuance shall not be arranged any more.
　
Article 13 Upon receipt of the stock code, the issuer and the lead underwriter may publish the prospectus and the tombstone.
　
Article 14 To participate in the initial inquiry, offline investors shall meet the following conditions,
1. Having completed the record-filing with the SAC prior to 12:00 AM on the trading day before the start of the initial inquiry;
2. Having met the requirements for the holding of market value as previously determined and announced by the issuer and the lead underwriter for the participation in new shares issuance;
3. Being users that have opened a CA certificate; and
4. Other requirements provided by the issuer and the lead underwriter.
　
Article 15 The lead underwriter shall, prior to 10:00 AM on the trading day before the start of the initial inquiry, record parameter standards for the market value held and submit and confirm the relevant information concerning the initial inquiry such as the stock code and the name of the issuer through the subscription platform to initiate the offline issuance.
The lead underwriter shall weed out disqualified offline investors and allotment objects via the subscription platform before 9:00 PM of the same day and complete the initial confirmation. Based on the parameter standards for the market value held, the subscription platform will automatically check the qualifications of offline investors and the allotment objects that have passed the lead underwriter's initial confirmation, and will cancel those disqualified.
　
Article 16 During the initial inquiry, quotation of an offline investor and the allotment object under its management shall consist of the price per share and the corresponding intended amount of subscription, and there must be only one quotation. A non-individual investor shall provide quotation on the basis of the institute. Intended amount of subscription declared by each allotment object shall not exceed the total amount of initial offline issuance.
Upon completion of recording all the quotations for all allotment objects that intend to participate in the quotation, offline investors shall submit all the records on a lump-sum basis. Offline investors may submit the records of quotations for several times; however, the last submission of all quotation records shall prevail.
Each quotation of the issuance is recorded in the subscription platform, and the lead underwriter may check the relevant quotations on a real-time basis. Upon closure of the initial inquiry, the lead underwriter may acquire the initial inquiry and quotations from the subscription platform.
　
Article 17 Upon closure of the initial inquiry, the lead underwriter shall, within the range of offline investors and allotment objects qualified to participate in offline issuance and according to the relevant provisions of the Administrative Measures for Securities Issuance and Underwriting and the valid quotation conditions as determined and announced by the issuer and the lead underwriter in advance, eliminate the quotations in initial inquiry that shall not participate in the accumulated bidding inquiry or fixed price subscription (collectively, the "subscription") and corresponding intended subscription amount.
The lead underwriter shall, prior to 3:00 PM on the trading day before the subscription day (T day), send the information of allotment objects under the management of offline investors after elimination to the depository and clearing platform via the subscription platform in accordance with Article 9 of these Rules, and one allotment object can only correspond to one collection and payment bank account.
The depository and clearing platform automatically verifies the validity of the code of securities account of the allotment objects forwarded via the subscription platform, the result of which will be fed back to the lead underwriter. Then, the information of allotment objects with valid securities account code will be provided to the clearing bank.
　
Article 18 The lead underwriter shall, prior to 3:30 PM on the T-1 day, record and submit subscription parameters such as the determined range of issue price (or issue price) and the total number of shares issued offline via the subscription platform, and confirm such parameters before the start of subscription. The total number of shares issued offline shall be determined by the issuer and the lead underwriter after adjusting the total number of initial offline issuance according to the issuance proposal disclosed in advance.
Before 9:30 AM on the T day, the subscription platform automatically eliminates the quotation of allotment objects in the initial inquiry lower than issue price or the lower limit of the range of issue price determined by the issuer and the lead underwriter and the intended amount of subscription corresponding thereto.
　
Article 19 The subscription date of offline issuance of new shares is the same day as that of online issuance and the time for the subscription of offline issuance is from 9:30 AM to 3:00 PM. During the subscription, an offline investor may fill in with the same subscription price for each allotment object under its management, and there shall be one specified subscription amount for each subscription price or one specified subscription amount filled in based on the issue price. At the time of subscription, investors don't need to pay funds for such subscription.
When the "intended subscription amount" corresponding to the effective quotation in the allotment object's initial inquiry is no more than the total amount of shares issued offline, the amount applied by the allotment object shall be no less than the "intended subscription amount", and shall be neither more than the maximum amount for each allotment object specified by the lead underwriter nor the total amount of shares issued offline. When an allotment object's "intended subscription amount" is in excess of the total amount of shares issued offline, the subscription amount filled in by the allotment object shall be the total amount of shares issued offline.
The subscription records, after being inputted by the offline investors for all the allotment objects participating in the subscription, shall be all submitted on a lump-sum basis. During the offline subscription, offline investors may repeatedly submit the subscription records, but all the records submitted for the last time shall prevail.
　
Article 20 The lead underwriter may check the subscription on a real-time basis between 9:30 AM and 3:00 PM on the T day via the subscription platform, and check and download the result of subscription after 3:00 PM on the T day. Besides, the lead underwriter shall complete the confirmation of the subscription result data at the subscription platform before 3:30 PM on the T day.
　
Article 21 The issuer and the lead underwriter shall choose the object eligible for allotment among the offline investors with valid subscription based on the allotment principle previously determined. The lead underwriter shall send the data on payable amount for shares allotted offline of each allotment object, including the issue price, number of shares allotted, allotment fund, securities account, and the ID code of the allotment objects, to the subscription platform of the SSE before 3:00 PM on the T 1 day. And the subscription platform of the SSE shall provide such data to the depository and clearing platform before 3:30 PM on the same day. Any allotment object may check its payable amount for shares allotted offline through the subscription platform.
The lead underwriter shall release the tombstone on the payable amount for shares allotted offline on the T 2 day.
　
Article 22 For the issuance of each stock, any allotment object that has participated in offline issuance and the associated account shall not subscribe for new shares online. Offline investors that intend to participate in the offline issuance of new shares shall file the account of allotment objects and associated accounts for record via the subscription platform.
The associated account of allotment object refers to the securities account with the same "name of account holder" and "numbers of valid identity document" as the registration information of the securities account of the allotment object.

Chapter IV Collection and Payment of Funds
　
Article 23 The CSDC Shanghai Branch shall open a special account for offline issuance in the clearing bank exclusively for collection and payment of funds for offline subscription and open a master account in the clearing system for accounting of funds for offline subscription to set up detail account for accounting of the subscription funds for each allotment object; such account shall be used for the accounting of funds for offline subscription by the allotment objects.
　
Article 24 The lead underwriter shall, in accordance with the requirements of Article 9 and Article 17 herein, provide the clearing bank with the relevant information of the allotment object as the basis for the clearing bank to examine and verify the compliance of the collection and payment bank account of such allotment object.
　
Article 25 Offline investors shall pay the subscription funds of new shares in the full amount for their allotment objects according to the payable amount of shares allotted offline before 4:00 PM on the T 2 day.
When transferring the subscription funds, offline investors shall transfer the subscription funds for the shares allotted to the special account for offline issuance opened by the CSDC Shanghai Branch in the clearing bank, and indicate the corresponding securities account and stock code for subscription in the remark column of the payment voucher. Failure to indicate or any error in the information in the remark column will lead to a failure of transfer. Each allotment object can only transfer the subscription funds from one clearing bank. The allotment object shall transfer in and out the subscription funds via the collection and payment account of the bank filed.
The issuer and the lead underwriter shall make an express requirement on the above-mentioned transfer of subscription funds in the tombstone.
　
Article 26 The clearing bank shall, according to the information of the collection and payment bank account of each allotment object provided by the lead underwriter, verify the compliance of such account. Where such verification is passed, the clearing bank shall, according to the transfer order of the allotment object, transfer the subscription funds into the special account for offline issuance opened by the CSDC Shanghai Branch in the clearing bank, and send an electronic transfer notice to the CSDC Shanghai Branch. Such notice shall expressly indicate the master account of the CSDC Shanghai Branch for accounting of funds for offline subscription, the securities account of the allotment object for subscription and the stock code of the securities to be subscribed and keep the relevant transfer voucher.
Where the verification is not passed, the clearing bank shall refund the funds and notify in a way as agreed by the CSDC Shanghai Branch, which shall notify the lead underwriter after summarization.
　
Article 27 The CSDC Shanghai Branch shall, according to the electronic transfer notice of the clearing bank, examine and verify the amount of subscription funds of each allotment object on a real-time basis. The lead underwriter may check the transfer of subscription funds of each allotment object via the comprehensive business terminal of PROP on a real-time basis; offline investors may check the transfer of subscription funds of each allotment object under their management via the comprehensive business terminal of PROP on a real-time basis.
　
Article 28 The lead underwriter shall, after 5:30 PM on the T 2 day, obtain the transfer of subscription funds of each allotment object by 4:00 PM on the T 2 day via PROP mailbox.
For allotment objects that have not paid the subscription funds in the full amount before 4:00 PM on the T 2 day, the allotted shares corresponding to the insufficient part of funds shall be underwritten by the lead underwriter or be treated in the way previously determined and disclosed by the issuer and the lead underwriter.
　
Article 29 The lead underwriter shall send the determined result data of allotment, including the issue price, number of shares allotted, allotment fund, securities account, the term of restricted sales of shares allotted and the ID code of the allotment objects, to the subscription platform through PROP before 2:00 PM on the T 3 day. And the subscription platform shall then send such data to the depository and clearing platform.
The lead underwriter shall release the tombstone on the result of offline issuance to the market when the offline issuance is finished.
　
Article 30 The depository and clearing platform shall, according to the above-mentioned result data of allotment provided by the lead underwriter, provide the refundable amount of each allotment object as well as the total amount raised by the lead underwriter underwriting the offline issuance, respectively, on the basis of the bank for payment of the subscription fund by each allotment object, for the relevant clearing banks through PROP before 10:00 AM on the (T 4) day.
Where the lead underwriter fails to provide the above-mentioned result data of allotment within a specified time, the time of refunding by the CSDC Shanghai Branch will be postponed. Any loss arising therefrom to the allotment objects shall be assumed by the lead underwriter.
　
Article 31 The clearing bank shall, according to the electronic refunding details provided by the lead underwriter via the depository and clearing platform, refund the funds to the allotment objects based on the remittance voucher maintained by the same on the T 4 day and transfer the raised funds according to the bank account for collection and payment of funds raised by the lead underwriter from offline issuance provided by the lead underwriter via the depository and clearing platform.
　
Article 32 The interest generated from the subscription funds for offline issuance shall be transferred to the protection funds for securities investors by the CSDC Shanghai Branch in accordance with the relevant provisions.

Chapter V Share Registration
　
Article 33 The lead underwriter shall send the result data of offline allotment to the subscription platform of the SSE in accordance of Article 29 herein, and ensure the authenticity, accuracy and completeness of the result data of offline allotment sent. The initial registration for shares issued offline shall be handled thereby on depository and clearing platform according to the said result data of offline allotment transferred by the SSE.
Any legal liability arising from errors in the result data of offline allotment sent by the lead underwriter shall be assumed by the lead underwriter.
For shares underwritten by the lead underwriter according to Article 28 herein or treated in other ways, the lead underwriter shall transfer the relevant funds with the issuer by itself. The issuer shall apply to the CSDC Shanghai Branch for the registration of new shares, and the CSDC Shanghai Branch shall deal with such registration correspondingly.

Chapter VI Supplementary Provisions
　
Article 34 Any special arrangement for offline issuance required by an issuer and a lead underwriter shall be subject to the approval of the securities regulatory authority and SSE and CSDC Shanghai Branch shall be informed of the same timely to determine the specific ways of operation through negotiation.
　
Article 35 These Rules shall be interpreted by the SSE and CSDC.

Article 36 These Rules shall come into force as of the date of promulgation. The Implementing Measures of the Shanghai Stock Exchange for Offline Issuance of Shares in Initial Public Offerings (Shang Zheng Fa [2014] No. 30) shall be repealed simultaneously. In case of any discrepancy between the relevant provisions on subscription of shares in initial public offerings promulgated by the SSE and CSDC and these Rules, these Rules shall prevail.