Officials of Relevant CSRC Department Answered Reporter Questions
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On April 2, 2022, China Securities Regulatory Commission (CSRC) released the revised Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments, hereinafter referred to as the revised “Provisions”) for public comments. The reporter interviewed the officials of relevant department at the CSRC regarding the revised Provisions.
1. Reporter: What is the main consideration for revising the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing (Announcement No. 29 ) at the current time?
CSRC Official: The Provisions played a positive role in promoting confidentiality and archives administration related to overseas securities offering and listing since it was first released in 2009. After more than a decade, however, the document has not kept up with the changing legal and institutional landscape, and the evolving market and regulatory practices.
The revised Provisions will provide a clearer guidance on confidentiality and archives administration for the overseas securities listing and offering by relevant market entities, thus promoting the legal compliance and efficiency of such activities. The revised Provisions will safeguard national information security by guiding companies to properly protect state secrets and sensitive information. It will also promote secure and efficient cross-border regulatory cooperation including joint inspections between relevant authorities and overseas regulators for the protection of global investors.
2. Reporter: What positive role will the revised Provisions play to facilitate overseas listing activities?
CSRC Official: The CSRC fully respects companies’ independent choices for listing venues. The revised Provisions aims to further strengthen confidentiality and archives administration concerning overseas securities offering and listing by domestic companies, clearly identify companies’ duty on information security and safeguard national information security, reduce unnecessary entrance of state secrets and sensitive information into working papers, which will improve the efficiency in cross-border regulatory cooperation. The revision is consistent with the principle of promoting opening-up while maintaining security, and will promote orderly securities offering and listing activities in overseas markets by domestic companies.
3. Reporter: What benefits will the revised Provisions bring to cross-border regulatory cooperation, in particular to audit oversight cooperation?
CSRC Official: On the basis of requirements laid out in Article 177 of the Securities Law, the revised Provisions specifies that requests made by overseas regulators to conduct investigations, including collecting evidence for investigation purpose, and inspections in the Chinese mainland shall be carried out through cross-border regulatory cooperation mechanisms. The CSRC and competent authorities of the Chinese government will provide necessary assistance pursuant to bilateral and multilateral cooperation mechanisms. In addition, referencing international common practice in cross-border audit oversight cooperation, the revised Provisions deletes the stipulation that “on-site inspections shall be dominated by domestic regulators or depend on the conclusions of inspections by domestic regulators”. The modification demonstrates the open attitude that Chinese regulators have consistently held towards audit oversight cooperation and the alignment of the Provisions with international common practice, which will lay an institutional foundation for secure, efficient cross-border regulatory cooperation including joint inspections.
4. Reporter: The revised Provisions requires companies to provide a written statement of compliance with Article 3 and 4 of the revised Provisions to securities companies and securities service providers. Will this requirement raise the compliance burden for relevant companies?
CSRC Official: It is a crucial compliance requirement for companies to fulfill their principal duty on information security and properly protect state secrets and sensitive information in accordance with applicable laws and regulations. In practice, documents and materials provided by companies to relevant securities companies and securities service providers rarely contain state secrets and sensitive information. In case such information is absolutely necessary for completing the audit work, for example, the revised Provisions reaffirms that companies must fulfill necessary approval or filing procedures in accordance with laws and regulations, keep a record of the information provided and the procedures followed, and provide a written statement for its compliance with the above requirement to relevant securities companies and securities service providers. Overall it will not bring a hefty cost to companies. The implementation of the revised Provisions will enable companies to better maintain information security and to lower legal risks, so as to support eligible domestic companies to continue to tap into overseas market for offering and listing activities.