China Securities Regulatory Commission amends securities offering and underwriting rules to broaden IPO preferential allocation and ban strategic placement share lending during lock-ups

The China Securities Regulatory Commission issued amendments to the Measures for the Administration of Securities Offering and Underwriting, effective immediately, broadening the scope of investors eligible for IPO preferential allocation, assigning stock exchanges to set detailed rules for category-based allocation, and tightening constraints on how strategic placement investors can use allocated shares during lock-up periods. The changes add bank wealth management products and insurance asset management products as preferential allocation participants for IPOs, while also authorising stock exchanges to specify other circumstances eligible for preferential allocation. For IPO category-based allocation, the measures now explicitly provide that stock exchanges will formulate the detailed rules, aligning with the STAR Market pilot arrangements for differentiated allocation in offerings by pre-profit companies. The amendments also delete the provision that allowed strategic placement investors to lend allocated securities during the committed lock-up period, effectively prohibiting such lending, and make further adjustments to align with the new Company Law, including strengthened language on prohibitions against harming company interests through financial assistance, an exemption from supervisor-related provisions where a company lawfully does not establish a supervisory board, and updated terminology for shareholder governance bodies. The commission indicated it will focus on implementation of the revised measures and push market participants to fulfil their responsibilities to improve the market-based and law-based functioning of issuance, underwriting and pricing.