Major shareholders reduce their holdings or cause the stock price to collapse? The strictest new regulations for reducing holdings have landed! What are the implications?

Bagel Finance

2024-06-04 09:00Published on the official account of Beijing China Business Newspaper "Bagel Finance".

Fake divorce and securities lending will not work at all!

More than a month ago, the China Securities Regulatory Commission (CSRC) solicited public comments on the Administrative Measures for the Reduction of Shareholdings by Shareholders of Listed Companies (Consultation Draft).

Major shareholders reduce their holdings or cause the stock price to collapse? The strictest new regulations for reducing holdings have landed! What are the implications?

Now, the boots hit the ground. The China Securities Regulatory Commission (CSRC) officially issued the Interim Measures for the Administration of Shareholding Reduction by Shareholders of Listed Companies (hereinafter referred to as the "Administrative Measures for Shareholding Reduction") and the Rules for the Administration of the Company's Shares Held by Directors, Supervisors and Senior Managers of Listed Companies and Their Changes (hereinafter referred to as the "Shareholding Change Rules") to further regulate the shareholding reduction behavior, which is known as the strictest and most comprehensive new shareholding reduction regulations in the history of A-shares.

The China Securities Regulatory Commission also stated that the "Administrative Measures for Shareholding Reduction", the "Rules for Changes in Shareholdings" and the unrevised reverse linkage regulations on venture capital, as special provisions, together constitute the "1+2" institutional framework, and the system of shareholding reduction rules is clearer and clearer.

From the content point of view, the new regulations on shareholding reduction contain different types of shareholders, shares from different sources, and shareholding reductions through different trading and non-trading methods, and at the same time set up a "fallback" clause to clarify that major shareholders shall not circumvent the shareholding reduction restrictions in any way.

Retrospectively, since 2005, with the implementation of the reform of equity division, a large number of restricted shares have been lifted and flowed into the secondary market, opening the era of "full circulation" in the mainland stock market.

One of them is that there have been a number of cases in the A-share market in which shareholders of listed companies have divided their shares due to divorce, and the market has questioned the relevant behaviors for suspected "detour reduction".

Shareholders are worried that once a major shareholder reduces his holdings by a large amount, it will easily be interpreted as a negative signal, believing that there is a problem with the company's development, or the outlook is no longer optimistic, which will then trigger external investors to follow the trend and sell, resulting in large fluctuations in stock prices, which may seriously exacerbate the risk of stock price crash.

Let's take a look, what is the impact of the new rules on the stock market?

1. Enhance market stability

First of all, the most significant impact is the increased stability of the market. By requiring shareholders to disclose their shareholding reduction plans in advance, including key information such as the cause, quantity, method and time span of the shareholding reduction, the new rules effectively reduce market uncertainty and enhance market stability and transparency.

2. Protect the interests of small and medium-sized investors

Second, the new rules effectively protect the interests of small and medium-sized investors by limiting the speed and scale of shareholding reductions. In the past, some major shareholders took advantage of internal information to quickly reduce their holdings, often selling at the high point of the stock price to obtain huge profits, which not only harmed the interests of small and medium-sized investors, but also undermined the fairness of the market.

3. Enhance market confidence

The implementation of the new rules will help boost investors' confidence in the market. By regulating the reduction of holdings, the regulator has demonstrated a zero-tolerance attitude towards market chaos and a firm determination to protect the rights and interests of investors.

In general, with the implementation of the new rules on reducing shareholdings, the ecology of A-shares is also expected to usher in substantial changes. A new round of market is coming!

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