Improvement Of Legal System Of Ipo Due Diligence Of China Mainland

As one of the basic systems of the stock market,the initial public offering(IPO)is an important part of the legal system of China's financial market.Since the implementation of the IPO sponsor system in China mainland in 2004,the IPO market of China mainland has made gratifying achievements,but some companies from China mainland listed through fraud,which causednegative effects to securities market.The quality of due diligence(D.D.)of sponsor from China mainland has gradually become the focus of attention.In the sponsor system,sponsor play the role as gatekeeper and its attitude toward D.D.is critical the operation of the IPO market.One of requirement of IPO is that the company applying for listing must be investigated and recommend by sponsor.Public investors make investing decisions reference to the documents whichsponsor issued for companies applying for listing.However,if sponsor is not diligent,it may cause the company that does not meet the standard to enter the queue of listed companies,and false information would flow into the securities market,which would interfere with investors to make the right judgments of investing.Usually,the performance of the sponsor not to fulfill its diligence is poor quality of D.D.of the sponsor.Through the study of cases happened in China mainland,it is not difficult to find that there are many shortcomings for sponsors in the work of D.D.D.D.is the basis of the sponsor's business work,and it is an important step to ensure that the sponsor is able to fulfill its obligations of diligence.Although China Securities Regulatory Commission(CSRC)has issued relevant provisions to regulate sponsors to do the fine D.D.,but the current legal system is not playing a good constraint for the current problems of sponsor.At present,most of the shortcomings of D.D.making by Chinese mainland sponsor are not rigorous in the interview process and the implementation of the process is not standardized,including the failure to effectively verify the identity of respondents,not seek to obtain a clear answer from respondents,not save enough time for interview so on.In the beginning of the establishment of sponsor system of China mainland,the principal problem of sponsor's D.D.is that D.D.areas are not cover enough.The regulation promulgated by CSRC about IPO have limitation towards time and the main purpose is to respond and resolve to the outstanding problems of the market at that time.After the main problem of IPO market changed,the relevant regulation should be naturally sound and perfect to remove the relevant problems.Considering that the current sponsorship system in China is the exemption of the sponsor system in Hong Kong,the reform experience of the sponsor system in Hong Kong will help China mainland to sort out the measure when improving the existing system.The supervision towards IPO of Chinese mainland is similar to Hong Kong,which is that the authorities of the two regions are inclines to depend on the inspection of sponsor towards IPO market.Looking back at the reform of the sponsorship system in Hong Kong,China mainland can see that some of the problems faced by the IPO market are exactly the same as those of the Mainland market.After the reform of IPO system in 2012,the quality of the sponsor's D.D.in Hong Kong has improved.At the same time,The reformer of D.D.in China mainland seems to be stagnant and the problem that companies go list by fraud has not significantly reduced,which means the D.D.law system still has room to take Hong Kong for reference.