Some enterprises have collectively withdrawn their stock market listing applications recently. Yi Huiman, chair of the China Securities Regulatory Commission, said at a forum on Saturday that it is not because these companies have big problems or falsified accounts but because of the practices of their sponsors.

Thinking that the registration reform had thrown the gate to the capital market completely open, and supervision would disappear, some intermediary agencies have persuaded unqualified enterprises to submit applications to be listed.

But, as Yi said, the registration reform poses higher requirements for the intermediary agencies to act responsibly in checking their clients satisfy the requirements for being listed. Only the professional accounting firms that have a strong risk control and prevention abilities can adapt to the reform.
He urged the intermediary agencies to fulfill their duties, saying that the commission is making relevant rules to hold any irresponsible agencies accountable.

Since the science and technology innovation board piloted the registration reform in 2019, it is easier for enterprises to apply for initial public offerings, and the number of applicants has dramatically increased, and enterprises are lining up for approval to enter the stock market.

But although the threshold has been lowered, supervision has not been relaxed. The CSRC issued a rule for on-site inspection of enterprises applying an IPO on Jan 29 to strengthen supervision of listed companies. It was after this that the applicants started withdrawing their applications in large numbers. Apparently, these companies do not believe they can pass the new quality inspections for IPO enterprises.

Yi also stressed the securities watchdog will severely punish those enterprises trying to fight their way through the pass even if they know well about their "illnesses", as well as the accounting firms trying to help them in the process, and such companies and accounting firms will not be allowed to run away any more by simply withdrawing their applications.

The intermediary agencies' professionalism should be reflected in their judgment on not only whether companies are qualified to submit an IPO application, but also if they can pass the IPO enterprise quality inspection of the securities watchdog.

If the accounting firms regard it as a sustainable and profitable business to act as a broker for unqualified companies to enter the capital market, both they and the companies whose applications they put forward will be punished severely so as to avoid systemic risks in the financial sector.