Others News
- Brokers brace for tighter rules
Date: 23-Mar-2007 Sources: (Xinhua Online)
China's stock regulator plans to raise the threshold for brokers which seek back-door listings and also to boost oversight to curb potential insider trading during the takeover process, industry sources said Thursday.
Brokerages which want to acquire existing public firms for a listing must have 800 million yuan (103 million U.S. dollars) in net capital, the sources said, citing a draft regulation sent to them.
The firms must also have earned a combined profit of at least 100 million yuan in the latest two years and to be ranked among the top 20 players in either brokerage or investment banking business, they said.
In addition, the regulator is set to closely monitor employees at both brokers and their takeover targets to see if they illegally profit from gaining insider information, according to the people.
Several Chinese brokers have been pursuing public stock sales via taking over already-listed firms as the regulator hopes to create stronger participants to beef up the industry's competitiveness.
But the frenzy has also spurred market speculation over potential takeover targets, making their shares rise sharply but only to tumble later when the rumors turned out to be just that.
'The watchdog has found some irregularities during (previous) back-door listings,' said a brokerage source in Shanghai. 'It wants to only let qualified brokers list and hopes the moves will not stir irregular stock-price movements.'
GF Securities Co in September proposed to buy control of Shenzhen-listed Yan Bian Highway Construction Co as it aimed to become the first domestic broker to go public in almost four years.
But the deal has yet to gain regulatory approval partly because the watchdog suspected some senior GF executives benefited from buying shares in Yan Bian before the news was released, Caijing Magazine reported on Wednesday, citing unnamed sources.
'The higher requirements on back-door issues may prompt brokers to favor initial public offerings, which are less complicated,' said another Shanghai-based securities executive.
The source noted that local brokers such as Everbright Securities Co and Orient Securities Co have scrapped original plans for back-door listings but instead pursued the IPO path as early as next year.
Most Chinese brokers posted losses in the four years ended 2005.
Their losses prevent them from seeking IPOs.
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