THE head of China's Securities Regulatory Commission, Liu Hongru, is threatening to throw mainland-listed firms who flout compliance standards off the country's two stock exchanges. In a hard-hitting speech, Mr Liu also sharply criticised merchant banks and brokers in Hongkong and China, some of whom, he said, had taken underwriting jobs just for the money and without considering the quality of firms to be listed. Questions are increasingly being asked about how seriously companies listed in Shanghai and Shenzhen are taking compliance rules. ''I'm aware of the situation where listed firms do not follow the standardised regulations, notably information disclosure,'' Mr Liu told a Shenzhen seminar on information disclosure by listed firms yesterday. ''Our commission, with the State Commission for Restructuring the Economy, is considering drafting a set of regulations which will put stringent controls on listed companies' continuous compliance.'' He said the two commissions would together scrutinise corporate developments at listed companies. Their aim would be to ensure that minority shareholders in listed companies were protected and that the markets were run in a fair, efficient and orderly fashion. ''In the case of companies that can not meet the required standards, we'll help to bring them up to scratch,'' said Mr Liu. ''But if they won't comply, we may end their listed status.'' He gave no specific details of proposed regulations or minimum standards that firms must meet to retain their listings. ''The capability of disclosing information in an efficient manner will directly affect the development of China's stock market and investors' confidence in mainland listed companies,'' he said. Mr Liu also hit out at some merchant banks and securities houses in Hongkong and China alike who, he said, had underwritten issues just for the money. ''They have not considered the quality of the companies to be listed, and no consultation with the relevant companies is provided after listing,'' he said. He did not name any financial institutions he regarded as having behaved irresponsibly. He said the example of Taiwan's more stringent underwriting system should be noted. He said disclosure would protect shareholders' interests, especially as the volume of share issues and listed companies in China grew. He noted that there had been five billion yuan (about HK$6.75 billion at the official rate) worth of issues this year. Mr Liu's remarks on information disclosure were echoed by the regulatory commission's chief accountant, Jesse Wang, who said the issue was one of critical importance in newly developing markets. Mr Wang said another set of securities regulations could be expected shortly. ''The anti-insider-trading and anti-fraud regulation is now waiting for the final review by the Vice-Premier and head of State Commission Securities Policies Committee, Zhu Rongji,'' he said. China's Securities Regulatory Commission is the executive agent of the State Commission Securities Policies Committee. As long as State Commission head Mr Zhu gave the go-ahead, the regulations would come into force, said Mr Wang. While regulations were important to the development of China's stock markets, enforcement of those regulations was equally critical. Mr Wang said the new regulations would be followed up by a series of guidelines. ''It's been our aim to make requirements stricter for companies because the quality of listed companies is crucial to the development of a stock market,'' he said. Yesterday's seminar was hosted by the Shenzhen stock exchange, the Shenzhen Commercial Daily and Beijing-based China Securities Co.
