In order to boost the sound construction of the Growth Enterprise Board (GEB) market, the China Securities Regulatory Commission (CSRC) has promulgated today the “Interim Provisions on Appropriate Management of Investors on the Growth Enterprise Board Market (Draft for Comment)” (the “Interim Provisions”) to solicit the public opinions. Meanwhile, the Shenzhen Stock Exchange and the Securities Association of China have promulgated relevant supporting documents of the “Interim Provisions” for public opinions as well.

The appropriate management system for the GEB investors is a significant part of the GEB system. Compared with those on the main board market, GEB companies, usually characterized by small scales and changeful business performances, pose higher investment risks. The aimless participation by a large number of investors with no knowledge of the GEB market risks or the risk-bearing capacities may trigger off a series of problems. The“Interim Measures for the Administration of Initial Public Offerings and Listings on the Growth Enterprise Board” (the “Measures for Administration”) issued on March 31 this year prescribes that “the admittance system for investors which fits their risk-bearing capacities should be established on the GEB market and the investment risks should be disclosed to the investors”. The "Rules on Supervision over Securities Companies" also demands the appropriateness of securities companies when selling financial products or providing relevant services to customers. To protect investors’ legal rights and forewarn investors to make prudent choice of investment on the GEB market, appropriate management of investors has been established on the GEB market and the basic requirements for investors to enter the market have been set as well. The establishment of appropriate management of investors aims at not limiting the rights of a certain group of investors when they invest in GEB companies, but making investors conscious of the GEB market risks so as to make prudent investment decisions by means of suitable procedures and requirements, thus protecting investors’ legal rights.

According to the requirements of the “Measures for Administration”, the current preliminary system of appropriate management of investors on the GEB market is composed of three parts. The main content of the first part, or the “Interim Provisions” formulated by the CSRC, formulated according to the “Measures for Administration”, puts forward the principled requirements of the appropriate management of investors on the GEB market and authorizes the self-discipline institutions to formulate the specific implementation measures and relevant essential clauses in the risk-revealing book. The main content of the second part, or the “Implementation Measures for Appropriate Management of Investors on the Growth Enterprise Board Market” (the “Implementation Measures”) formulated by the Shenzhen Stock Exchange defines the basic requirements, procedures, work mechanisms and regulatory requirements of the appropriate management of investors. The third part, or the “Revealing Book of Investment Risks on the Growth Enterprise Board Market (Essential Clauses)” (the “Essential Clauses”) formulated by the Securities Association of China, prescribes the clauses needed to be listed in the risk-revealing book formulated by securities companies.

According to the stipulations in the “Measures for Administration”, the natural person investor applying for participation in the GEB Market should have the transaction experience of more than two years (inclusive). The specific time to start the calculation of the transaction experience is the day when the first transaction happened in the account under the name of the investor at the Shanghai Stock Exchange or the Shenzhen Stock Exchange. When the investor having the transaction experience of more than 2 years applies for the access to the transaction on the GEB market, the securities company needs to sign the “Revealing Book of Investment Risks on the Growth Enterprise Board Market” in written form with him/her on the spot and require him/her to copy a paragraph of declaration. The handling personnel of the securities company should witness the signing of the investor and then signs for confirmation. As to the investor who doesn’t have the transaction experience of more than 2 years but still asks for the access to the transaction on the GEB market, the securities company needs to sign the “Revealing Book of Investment Risks on the Growth Enterprise Board Market” in written form with him/her on the spot and require him/her to copy a special declaration regarding the voluntary assuming of the market risks. The handling personnel of the securities company should witness the signing of the investor and then signs for confirmation; the signature and the confirmation of the person-in-charge of the securities company’s business department are also needed later.

In order to ensure the full implementation of the appropriate management system for investors on the GEB market, the “Interim Provisions” requires securities companies to take charge of the organization and the implementation of appropriate management of investors and requires the Shenzhen Stock Exchange and the Securities Association of China to carry out the self-discipline management towards the appropriate management of investors on the GEB market and the investor education implemented by securities companies. The CSRC and its agencies will also conduct supervision and inspections so as to take corresponding regulatory measures against any irregularities upon discovery.

An official of the CSRC said that the implementation of the appropriate management of investors, still in its infancy for exploration on China’s securities market, call for improvements and perfection in many aspects. The “Interim Provisions” and its supporting documents will soon be issued for implementation in a proper time after amendment and improvement based on the public opinions.