Increasing transparency

Finally, regulatory changes addressing the issues in the onshore IPO market can be summarised as below.

Pricing

The price-to-earning ratio is too high and new offerings are overpriced. The first trading day is usually very active, resulting in companies often closing below the listing price at the end of the day.

A higher disclosure obligation has been introduced to justify the high pricing of the shares and allow individual investors to supervise the pricing process. For example, if a company's shares are priced 25% higher than shares of other companies in the same industry, the issuer will have to disclose the reasons justifying the price difference. Also, five to 10 individual investors will be able to participate in the pricing enquiry process where the old rules stated that only institutional investors were entitled to participate in this process.

Approval system

The main challenge here is to obtain approval from the CSRC to list onshore, often causing listed companies to be overvalued.

Listed companies may now be subject to tighter rules on suspension and delisting. This is intended to stop the problem of the so-called “never die bird” and overvalued listed companies. For example, the Shenzhen Stock Exchange, Rules on Listing of Shares on the ChiNext, which entered into force on May 1 earlier this year, now provide that poorly performing companies will be delisted if the price of their shares fall below their par value for 20 consecutive trading days or if they are warned three times for improper practices including misrepresenting their assets.

Securities fraud

Insider trading is an acknowledged fact in the Chinese stock markets and affects investor confidence.

There are new stricter regulations on insider dealing. The Chairman of the CSRC, Guo Shuqing has said that insider dealing will no longer be tolerated. For example, on June 8 2012, the Tentative Provisions on Strengthening the Regulation of Unusual Stock Transactions in the Course of Material Asset Re-organisation of Listed Companies (Draft for Comments) were released, which state that the stock exchange is to conduct an examination of any unusual transaction where a listed company decides to suspend trading to enter into restructuring involving major assets.

2. How do the Guidelines released during the May Holiday from the CSRC change the IPO market?

The Guiding Opinions on Further Intensifying the Reform of the System for Offering of New Shares issued on April 28 2012 and their complement (Measures for the Administration of the Offering and Underwriting of Securities (2nd Revision)) issued on May 18 2012 would be a positive change to the legislative framework if enforced correctly.

The provisions above specifically institute the following changes:

• Five to 10 individual investors may participate in the pricing enquiry process. They must possess at least five years of investment experience to be qualified;

• Share issuers and lead underwriters are allowed to determine the share price through negotiation between themselves.;

• Up to 50% of the offered shares may be offered through offline placement; and

• Divulging information after obtaining CSRC approval and before the publication of the preliminary prospectus is strictly prohibited.

a. Are investors happy with the increased transparency the reforms offer?

Investors are certainly happy about the changes. These regulations are bringing positive changes to the pre-existing framework as transparency has been increased, efforts are being made to diminish insider trading and the problem of overvaluation is being addressed.

b. Was there anything else you were hoping the reforms would address in relation to IPOs?

On other stock exchanges, decision power is being given to the market while the government only plays a minor role in the pricing, and investors are making investment decisions. The reforms are a step in the right direction, but legal professionals hoped they would further reduce the role of administrative examination and approvals in order to become a registration system. The government is expected to focus on supervising, rather than regulating the market. Fraud needs to be eliminated by enhancing market supervision and restoring investor confidence. new regulations can be formulated to address this issue and give the investor the right tools to defend their rights and recover losses. Third parties, including lawyers, will then be able to assist deceived investors without facing administrative barriers.

3. Last year, the Shanghai International Board was supposed to be launched, but the economic crisis caused it to be delayed. When do you expect the Board to be launched and how have you advised clients who are considering listing on the Board?

The economic crisis is not the sole, but a contributing cause in the delay in launching the Shanghai International Board. China rapidly recovered from the economic crisis and recently slowed down its development to focus on added-value industries like high tech and green technologies. No definite time table has been set and so we are not advising any clients to wait to list on the Board.

We believe the following issues need to be addressed before the Board is launched:

• Non-convertible currency: the biggest obstacle to the launch is that renminbi is not a freely convertible currency;

• Enforcement: Chinese governmental entities will not have full control over the issuers and, due to conflict of laws and jurisdictions, cross-board legal enforcement will be a problem;

• Confidence: Chinese investor confidence is at a new low meaning less money is being invested in the market; and

• Affordability: can China afford another new Board? The risk of failure is important in this environment.

An indicator that the market may not be ready yet is that whenever news on the launch of this new Board is broadcast, there is a negative effect on the stock markets.

4. Towards the end of last year MOFCOM released new security review provisions for VIE structures. How have the provisions affected VIEs in China?

The main concern when these provisions came out on September 1 2011 was whether these structures would negatively affect companies listed overseas (e.g. Sina. com) or whether the Chinese government's tolerance of such structures would be affected. These new provisions provide that structures giving foreign investors indirect control of domestic enterprises may not be used to avoid the standard M&A security review necessary to complete a transaction. Article 9 states: “A foreign investor may not attempt to circumvent the Security Review by any means, including but not limited to holding on behalf of another, a trust, multi-level reinvestment, lease, loan, control by agreement, offshore transaction or other such means.” The review is intended to block transactions which may affect national security, the stable operation of the national economy, basic societal order and people's living conditions and R&D capacity for key technologies related to national security. We believe that the government will continue to tolerate this structure, but there are still potential risks attached to its use.

5. Since the China Banking Regulatory Commission (CBRC) issued the Guidelines on the Participation in Stock Index Futures Trading by Trust Companies in September 2011, how have trust players found participating in the Index?

The Guidelines issued on June 27 2011 by the China Banking Regulatory Commission (CBRC) set up new rules for trust companies wishing to directly or indirectly participate in stock index futures trading on approval from the CBRC as well as the qualification to engage in stock index futures trading.

For trust companies, the Guidelines enlarge the scope of activities they are entitled to engage in. The Guidelines differentiate between structural collective trust schemes or a trust managed by a trust company with two or more settlers, for which trading is permitted for hedging and arbitrage purposes, and single trust businesses with one settler, which can engage in trading for hedging, arbitrage and speculative trading. It also forbids the existing business of a trust company from participating in stock index futures trading. In cases where the bank is the settlor, some additional restrictions may apply. Although these regulations open the door to a new market for trust players, CBRC, concerned about regulating market risks, decided to impose restrictions on the trust companies for trading these products. For example, Article 15 of these rules provides that: “If a single trust of a trust company participates in stock index futures trading, the risk exposure of the stock index futures held at the end of any trading day may not exceed 80% of the net value of the trust assets […]”. This means reactions may differ depending on the trust company.

6. What are some of your experiences and strategies for IPOs you are working on?

Our initial strategy for offshore listings is to focus on emerging markets including Korea and Malaysia. The depreciation of Chinese companies in the US and Hong Kong following last year's scandal and the financial crisis did not establish an ideal environment for listings on these markets. Emerging markets usually have a good image of Chinese companies, PE is usually in line with the industry and higher than in the US or Hong Kong, and shares can easily be sold on the market.

For onshore and offshore listings, we usually advise Chinese companies to make sure they have an adequate filing system to maintain clean records of all historical documents. We also advise them on the importance of effective corporate governance policies.

We also educate domestic enterprises on the benefits of maintaining a good corporate image and the necessity of engaging the right third parties to support them whether for public relations or preparing for an IPO. In addition, we emphasise the importance of maintaining good corporate governance even after the company has been listed and the need to comply with all continuous listing obligations.

7. What are some of the most common problems or issues that generally arise during IPOs?

The problems on the domestic market are obtaining CSRC approval. There are over 600 companies queuing to obtain such approval. Other problems include previous shareholders are usually not cooperative when documents need to be gathered to prove previous company restructuring, the transparency of financial statements and the due diligence process requires the existence of any associated trading or related transactions to be verified. It is difficult to complete this part of the process due to the limited documentation and the similarity of Chinese names; and assembling the necessary documentation to prove the growth of a company and the projected growth to satisfy CSRC requirements is also hard.

The problems on the overseas market are: ensuring that the CFO and members of the management team understand both markets and are able to communicate with overseas investors; increasing the transparency of management and financial affairs.

8. What are the major issues or concerns issuers might have with both onshore and offshore listings? How do you address these issues?

For the onshore market, the issue remains obtaining the approval of the CSRC. For the offshore market and in the pre-listing phase, Decree No 10 issued by MOFCOM and Decree No 75 issued by SAFE, are still a major obstacle for domestic companies wishing to list legally overseas.

In the post-listing phase, following the Muddy Waters report scandal last year, restoring foreign investor confidence in Chinese companies is still a problem. Time may erase the negative impact, but we also advise our clients to ensure compliance of their continuous operations and corporate image.

9. What is your outlook for the market over the next twelve months? What are some of the major trends you see emerging?

As the financial crisis and European debt crisis ease, the market will recover and activity levels in M&A, IPOs and market trading will increase accordingly. Cooperation between global governments will help in this regard.

With regard to onshore trends, we expect: the Chinese government to reduce the number of required approvals; more market regulations reforms; the government to adopt a zero-tolerance attitude towards financial fraud and insider trading; and market participants to be able to receive higher profits since the government is pushing listed companies to distribute more dividends.

Offshore, we expect Chinese companies will slowly recover from the Muddy Waters scandal and the strongest companies with real business will maintain their good status. Chinese companies still have a lot to offer offshore markets.

提高透明度

段和段律师事务所的高俊律师和宋永泉律师对当前中国资本市场的发展提供了指引，当中涉及对透明度提高的要求，以及从“浑水丑闻”中恢复过来的前景。

1. 在过去几年中，影响中国资本市场的重要法规变化有哪一些？这些新法规如何阐明现行法规所出现的问题？

首先，允许外国投资者发行人民币计价债券 (点心债券) 这一新规定的出现成为中国货币走向国际化的一个重大进步。其次，在临近去年年底之时，新RQFII (人民币的合格境外机构投资者) 计划的发布为外国投资者可投资产品提供了多样化发展。今年，引起关注的是有关国内市场首次公开募股 (IPO) 的最新立法。

其次，人民币计价债券市场的新举措及RQFII计划是中国政府采取的另一措施，以展示政府将合理促进人民币国际化和实现其自由兑换的承诺。

最后，就境内IPO市场而言，对解决当前问题的法规变革可总结如下：

定价

PE太高，新上市股票价格被高估。第一个交易日往往十分活跃，使上市公司通常在当天交易结束时以低于上市价格收盘。

新法规引入了更严格的信息披露义务，以说明股票定价高的理由，并允许个人投资者监督定价过程。例如，如果新股发行价高出同一行业的其他公司股票价格的25%，发行人必须披露说明价格差异的原因。同时，5到10名个人投资者可以参与询价过程——根据旧规则，只有机构投资者有资格参与此过程。

审批制度

企业面临的主要挑战是获得中国证监会关于允许其在境内上市的核准，导致当前上市公司的价值经常被高估。

上市公司现在可能受到更严格的停牌和摘牌规则的制约，以解决“不死鸟” 和上市公司被高估的问题。例如，于今年5月1日生效的《深圳证券交易所创业板股票上市规则》规定，业绩不佳的公司，如果其股票价格已经连续20个交易日低于票面价值或因包括对其资产作虚假陈述在内的不当行为被警告3次的，将被摘牌退市。

证券欺诈

内幕交易被认为是中国股票市场中的一个现象，影响投资者信心。

新法规对内幕交易行为监管更加严格。中国证监会主席郭树清指出，内幕交易行为是不能再容忍的。2012年6月8日公布实施的《关于加强与上市公司重大资产重组相关股票异常交易监管的暂行规定(征求意见稿)》(征询意见稿)规定，当上市公司决定暂停股票交易并对主要资产进行重组时，证券交易所应对其不正常的股票交易进行检查。

2． 中国证监会于五一假期颁布的指导方针，对于首次公开发行股票市场起了什么变化作用？

如果2012年4月27日颁布的《关于进一步深化新股发行体制改革的指导意见》及2012年5月18日颁布的补充规定 (《证券发行与承销管理办法》(第二次修订)) 能正确实施，将对目前的法律架构起到一个积极的改变作用。

上述规定具体作出了以下的改变：

1. 5-10个个人投资者可以参与询价过程。个人投资者作为询价对象应当具备5年以上投资经验。

2. 发行人与主承销商可自主协商确定发行价格。

3. 参与网下配售的股票可以达到已发行股票的50%。

4. 发行人发行申请经中国证监会核准后、依法刊登招股意向书前，严禁将信息披露。

a. 投资者是否欢迎此次改革所带来的透明度的增加？

投资者对于此次改革当然是持欢迎态度的。由于增加了透明度，加强了削弱内幕交易的力度，并且对定价过高的问题作出处理，改革对现有法律架构带来了积极的转变。

b. 是否有其他您希望通过改革能够给首次公开发行股票市场带来的改变？

在其他主要的股票交易市场，决策是交由市场作出的，政府只是在定价方面扮演一个小角色，投资决定都是由投资者作出。改革是通往正确方向的第一步，法律界人士希望它能够进一步削弱行政审批的力度，使股票交易市场转变为备案制。政府应当致力监察市场而不是监管市场。市场监察力度应加强以减少欺诈，恢复投资者的信心。当局可以制定新法规处理这问题，给与投资者保护其权利并且追索其损失的工具。第三方，包括律师，也可帮助受骗的投资者而无需面对行政障碍。

3. 去年，上海国际板预计应推出，但却受经济危机的影响而推迟。在您看来，上海国际板何时能推出？您对考虑在国际板上市的客户有何建议？

根据我们对市场的了解，经济危机不是唯一引起上海国际板延迟推出的原因。中国已从经济危机中快速恢复过来，目前正有意减缓其发展的速度，而将关注点放在如高科技和绿色技术等附加值产业上。由于没有明确的时间表，因此我们目前不建议任何客户等待在国际板上市。

同时，我们认为，在国际板推出之前，还需要解决以下问题：

1. 非自由兑换货币：推出国际板最大的障碍在于人民币并非一个可以自由兑换的货币。

2. 法律执行：中国政府机构对股票发行者不具有完全的管辖权。由于法律和管辖权的冲突，跨版法律执行也会成为一个问题。

3. 信心：中国投资者的信心正陷入新的低谷期，因此，投入市场的资金将减少。

4. 负担能力：中国是否能负担得起一个新的上市板块? 在目前的环境下，失败的风险尤为重要。

一个有趣的事实是，每当有关新的上市板块新闻发布时，股市总会受到负面影响，这也反映了市场对新上市板块的推出尚未准备好。

4. 去年年底，商务部就VIE架构颁布了新的《安全审查制度的规定》。该《规定》对于VIE架构在中国境内的实施有何影响？

对于去年9月1日颁布的《规定》，主要焦点在于它对目前使用VIE架构在海外上市的公司（如：新浪）是否会产生消极影响，以及是否会影响中国政府对该结构的容忍度。《规定》明确表明，让外国投资者非直接控制境内公司的架构，不得被用作规避达成交易所必要进行的标准并购安全审查。《规定》第九条明确表明，“外国投资者不得以任何方式实质规避并购安全审查，包括但不限于代持、信托、多层次再投资、租赁、贷款、协议控制、境外交易等方式”。因一些交易可能影响国家安全、国家经济稳步发展、社会基本秩序、人民生存环境及与国家安全有关的主要科技的研究与开发的能力，这样的审查，目的在于制止此类交易的发生。我们相信，政府会继续容忍这样的架构，但是对于架构的使用仍然有一定的潜在风险。

5. 自中国银监会2011年9月发布《信托公司参与股指期货交易业务指引》以来，信托业务投资者对参与股指期货交易有什么体会？

去年6月27日，中国银监会出台《信托公司参与股指期货交易业务指引》，规定直接或间接参与股指期货交易的信托公司须经银监会批准，并制定了相应的资质要求。

对信托公司而言，该文件的出台扩大了它们有权从事的交易活动的范围。换言之，指引区分了结构化集体信托计划，或一个由信托公司管理并有2个或以上财产委托人的信托（允许此信托进行以套期保值和套利为目的的交易），和有1个财产委托人的单一信托业务（此信托可以从事套期保值、套利和投机交易）。该文件同时也明确禁止信托公司固有业务参与股指期货交易。当银行为财产委托人时，还可能适用另外的限制。尽管该文件为信托业务投资者开启了一道投资新市场的门，但银监会为了控制市场风险，决定对参与此类产品交易的信托公司设置一些限制。例如，该文件第15条特别规定，“信托公司单一信托参与股指期货交易，在任何交易日日终持有股指期货的风险敞口不得超过信托资产净值的80% ……”。因此，各信托公司对此可能会有不同的反应。

6. 对于您目前处理的首次公开发行股票的案例，您的经验和策略是什么？

对于离岸上市的初步策略，我们目前主要集中于新兴市场，包括韩国和马来西亚。受到去年的丑闻和金融危机的影响，中国公司在美国和香港市场的市值均下降，未能缔造在这些市场上上市的理想条件。而新兴市场通常对于中国公司有良好的印象，市盈率通常也符合行业标准，并且高于美国和香港市场，股票也能轻易地在市场上出售。

对于在岸或离岸上市，我们通常建议中国公司要确保有一个健全的存档系统，以妥善保存历史资料。我们也向它们提到有效的公司治理措施的重要性。

我们同时教育境内公司维持公司良好形象的重要性，以及聘请合适的第三方在公共关系或公开发行股票准备工作方面作支援的必要性。我们还注重公司在上市之后维持有效的法人治理措施的重要性，以及遵守所有持续上市义务的必要性。

7. 在首次公开发行股票过程中，最常见的问题或往往会出现的问题有哪些？

在国内市场上的问题有: 证监会的核准。目前有超过600家公司正排队等候证监会的审批。此外，为证明之前的公司重组而需要收集相关文件时，前股东往往不愿意合作。财务报表的透明度也是一个问题。再加上尽职调查往往需要核查关联交易或相关交易，但由于有限的文件资料和中国人名字的相似性，完成核查工作非常困难。为满足证监会的要求，需要收集必要的文件资料以证明公司的增长和预期的增长，这一部分也相当困难。

在海外市场上的问题是要确保首席财务官和管理团队能了解国内外市场，并能和海外投资者进行沟通。此外是要增加管理及财务事项的透明度。

8. 发行人在在岸或离岸上市可能要面对的主要问题和可能会关心的问题是什么？您如何处理这些问题？

就在岸市场而言，主要的问题仍然在于如何得到中国证监会的批准。就离岸市场而言，在准备上市阶段，商务部颁布的10号令及外汇局颁布的75号文，对于拟在境外依法上市的境内公司，仍然构成了主要的障碍。

至于上市后的阶段，发生去年浑水 (Muddy Waters) 报告的丑闻后，恢复外国投资者对中国公司的信心仍然是一个问题。时间可能会消除负面的影响，但我们还是建议我们的客户要确保其持续经营的合规性和公司的形象。

9. 您对市场未来一年的前景有何看法？您认为市场会出现哪些主要的走势？

随著金融危机和欧洲债务危机的缓和，市场将缓慢复苏，诸如并购、IPO及市场交易等领域，其活跃度也将随之增长。各国政府之间的合作将对此产生积极意义。

对于境内市场，我们预期中国政府将减少须要审批的项目、市场监管将有更多改革、政府对财务欺诈和内幕交易将采取零容忍态度。此外，因为政府正促使上市公司分配更多的股息，市场参与者将能获得更高的利润。

境外市场方面，我们预期中国企业将慢慢从“浑水丑闻”中恢复过来，其中具实际业务的强者将继续维持强势。中国企业对境外市场仍是大有裨益的。