Three Interrelated Rules on GEM Access Take Effect Soon

ChinaVenture news-- According to related sources, the three interrelated rules on GEM access (known as One-plus-Two Measures) were officially released on July 1, and will take effect as from July 15, 2009. From now on, investors may register with outlets of securities companies, and complete their relevant application procedures for GEM transactions.

The new Rules were made out based on the Draft released recently for public comments, and no material changes were introduced. For example, the most critical requirement in the Draft that investors should have the investment experience of no less than two years remain unchanged. However, in the new rules, there is an additional requirement: No securities companies shall handle relevant application procedures for GEM transactions for an investor should the information provided by such investor fail to meet related requirements.

Under special circumstances, investors may, upon an entrustment agreement, go through their relevant application procedures for GEM transactions with securities companies.

Sources from the CSRC showed that as of June 23, there were a total of 106 pieces of comments in three categories.

The comments in the first category largely related to the general requirements: some argued that the investment experience of two years is too short, a little longer should be more suitable, for example, five years or even ten years. Others also claimed that just imposing restrictions on the investment experience is not enough, there should have some requirements on the capital adequacy.

The comments in the second category were mainly focused on operational specifics, for example, How is the signing of risk disclosure statements (who and how to sign the paper? Whether or not the prior spot inspection should be needed? And so on), how to define the first transaction? And other requests to stock exchanges about clarifying operational specifics.

In response to these requests, Shenzhen Stock Exchange will, together with China Securities Depository and Clearing Corporation Limited, work out Operational Guidelines, giving a detailed description of related technical processes. In the new Rules, the only one added Provision is Article IV in the Chapter: Implementation Methods: No securities companies shall handle relevant application procedures for GEM transactions for an investor should the information provided by such investor fail to meet related requirements.

Sources from Shenzhen Stock Exchange have made it clear that, for the time being, there are no standards for the information provided by investors. Given the poor industry-wide infrastructure, either in business management or in technical maturation, it takes time to get everything right. They added that the application for engaging in GEM transactions would not be subject to this requirement.