Department of Public Offering Supervision of the China Securities Regulatory Commission, Standards for Examination and Verification of Share Issues Memorandum (No.18) - Regulatory Requirements on the Qualifications and Acts of the Inquiry Recipients of Initial Public Offerings of Shares

Promulgated: December 7 2004

Main contents: Inquiry recipients' own business or securities investment products managed by them shall be limited to the following categories: (1) securities investment funds approved to be established; (2) social security funds; (3) securities companies' own business; (4) approved collective asset management plans of securities companies; (5) trust and investment companies' own business; (6) trust products in securities markets wherein investment companies may invest according to the trust contracts; (7) finance companies' own business; (8) insurance institutional investors; (9) approved insurance products of insurance institutional investors; (10) qualified foreign institutional investors (QFII); (11) approved enterprise pension funds; and (12) other securities investment products subject to the consent of the China Securities Regulatory Commission (Section One).
Section Two concerns regulatory requirements on the qualifications of inquiry recipients. For securities companies, they should be comprehensive-type securities companies and have registered as sponsor institutions (including their controlling subsidiaries registered as sponsor institutions). Trust and investment companies shall have registered capital of Rmb400 million or above; finance companies shall have registered capital of Rmb300 million or above.
Section Three specifies the regulatory requirements on the acts of inquiry recipients. Inquiry recipients shall comprise three or more types of specified institutional investors. Fund management companies and QFII shall account for 50% or above of the total number of inquiry recipients. The upper limit of inquiry recipients' quotation range shall not exceed the lower limit by 20%, and the same for offer price range determined between the issuer and its sponsor(s). Inquiry recipients having a controlling shareholding relationship with the issuer or its sponsor(s), or other inquiry recipients having materially interested relationships thereby affecting the issuer or its sponsor(s) to make independent investment decisions, shall not engage in the inquiry or rights issue of that initial public offering. Sponsors and distributors of the initial public offering shall not engage in the inquiry and rights issue thereof.
Related legislation: Several Issues Concerning the Trial Implementation of an Inquiry System for Initial Public Offerings of Shares Circular, Dec 7 2004, CLP 2005 No.1 p9