[News alert]CSRC reviewed rules on confidentiality and filing management on foreign listing Chinese companies, benefit CICC (3908 HK)
- CSRC announced a revision of the rules on confidentiality and filing management on foreign listing Chinese companies. Revision announced on Apr 1st.
- The revision aims to enhance the confidentiality and filing management on foreign listing Chinese companies, clarify the liability of information securities, protect national information securities, and avoid unnecessary sensitive information mentioned in the auditing workpaper.
- The new rule provided more clarified guidance on filling the confidential information, enable Chinese companies to have foreign listing more efficiently, and also guided companies to be liable for confidential and sensitive information leakage.
- The key line to watch is that the new rule deleted the claim that in-site inspective should mainly depend on Chinese regulatory authorities. We see this is a proactive policy easing the long negotiation between CSRC and PCOAB regarding the supervision on China concept stocks.
- The background of US-China tension in this matter should be dated back to the announcement of “Holding Foreign Companies Accountable Act” (HFCAA) in Dec 2020, which mainly to solve the problem that the China laws that China concept stocks comply are not compatible with US auditing inspection. Key conflicts between US and China are US requires to turn in the auditing workpaper to PCAOB to review and to allow PCAOB to have full discretion of in-site inspection on China auditing institutions, while China refutes the act due to concerns on data leakage that might contain data on national securities. While PCOAB emphasized that the integrity of auditing is the key thing they would want to inspect rather than reviewing the sensitive information, the emphasis has no strong promise to alleviate the concern on China side.
- China authorities have claimed several times that China will continue to support companies to go listing abroad, and we see this round of revision is a positive message and actual action for the support. In addition to the revision, an uncertified news flow also claimed that China is allowing over 200 China concept stocks to turn in the auditing workpapers.
- Overall we see the actions are a step forward and could largely alleviate delisting risk of China concept stock and could help China brokers to continue to establish international business. Therefore, we see CICC (3908 HK) is one of the key beneficiaries of the easing, under our China brokerage/wealth management coverage.