HONG KONG : China’s two main bourses on Friday issued guidelines for rating the performances of sponsor institutions such as brokerages who help firms list on the exchanges, as part of efforts to battle capital market fraud.
Sponsors would be assessed by the “quality” of listed firms they assisted, such as management competency, market performance and whether firms were operating under sound internal governance, according to a statement jointly issued by the Shanghai stock exchange and Shenzhen stock exchange.
The other criteria in evaluating sponsors is how they perform in assisting firms in the initial public offering process, including the information disclosed in IPO prospectus and efforts put into due diligence, the exchanges said in the statement.
Based on the assessments, sponsors would be given scores and be divided into three categories of A, B and C. On-site supervision or inspection would be conducted at sponsors receiving C for three consecutive times, according to the guidelines.
Chinese bourses are tightening vetting processes as the government reforms capital markets and weeds out frauds. Both Shanghai and Shenzhen stock exchanges have tapped technology such as big data and artificial intelligence in combating fraud.
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