Dacheng Lawyers Invited for the "Comprehensive Response to Compliance Risks of Listed Companies’ Disclosure" Roundtable at Chambers Greater China Region High Quality Development Forum– Shanghai

On May 15, Chambers Greater China Region High Quality Development Forum 2024–Shanghai was officially opened, attracting more than 100 frontline legal practitioners and senior legal experts from all over the country. During the two-day forum, guests explored various professional topics, including enterprises' practices of going global and international arbitration, ESG legislative trends and investment opportunities, discussion on compliance of drugs and medical devices, how to interact with doctors in compliance with the Nine Guidelines and local by-laws, as well as pressing issues surrounding private equity fundraising, investment, management, and withdrawal in the current landscape. Dacheng Law Offices (Dacheng) was invited to participate in the Comprehensive Response to Compliance Risks of Listed Companies’ Disclosure Roundtable on that morning.

The roundtable was presided over by lawyer Ma Hongwei, head of the Dacheng Capital Markets Industry Committee and senior partner (under filing) at Dacheng Shanghai, with attendees including lawyer Chen Feng, vice-chair of the Advisory Committee and board director of Dacheng China, and senior partner at Dacheng Shanghai, lawyer Emilia Shi, head of Capital Markets Practice Team and senior partner at Dacheng Shanghai, lawyer Frank Qu, co-head of Finance Practice Group of Dacheng and senior partner at Dacheng Shanghai, and lawyer Ma Lang, co-head of Criminal Defense Practice Group of Dacheng and senior partner at Dacheng Shanghai. Focusing on information disclosure compliance regulation, their discussion provided a targeted analysis of compliance regulations, preventive measures, risk mitigation, and related solutions.

Mr. Ma Hongwei highlighted the compliance status of information disclosure among listed companies. He noted that, in light of the new Nine Guidelines, both regulatory policies and accountability practices are signaling to listed companies the critical importance of addressing the risks associated with information disclosure compliance. However, some listed companies continue to have a misguided understanding of the current regulatory landscape and trends, resulting in a neglect of the significance of compliance in information disclosure. In this regard, Ma Hongwei emphasizes that the accountability system for violations of information disclosure is being expanded across three dimensions: civil, administrative, and criminal. This framework will cover a broad spectrum of personnel, including actual controllers, controlling shareholders, directors, supervisors, and senior management of listed companies. In this regard, listed companies should embrace a "trinity and comprehensive response" approach, focus on risk mitigation, strengthen compliance management, and establish a compliance plan that is "all-encompassing, integrated, and multi-faceted".

Mr. Chen Feng noted that with the reform of the registration system and the introduction of policies like the new Nine Guidelines by the State Council, strict regulation has become the prevailing approach for the future securities market, and violations of information disclosure rules are a critical area of focus. Mr. Chen Feng stressed that the regulatory system is evolving with the times, and back-end regulation is being strengthened. He specifically mentioned administrative penalties, criminal penalties, and civil claims as key elements in the supervisory process. He believes that these three types of penalties serve as significant deterrents against illegal activities and are essential tools for maintaining fairness in the market. In addition, he recommended that listed companies take a multi-faceted approach to prevent credit and compliance risks related to approvals, including optimizing the corporate governance structure, improving information disclosure standards, and enhancing personnel training; effectively managing external relations and anticipating public sentiment; engaging third-party professional institutions for legal and information disclosure consultation; and mitigating financial liability by purchasing liability insurance.

Emilia Shi pointed out that whole-chain regulation encompasses every stage, from the declaration phase to follow-up oversight. She stressed that each link must adhere strictly to laws and regulations to ensure the authenticity and accuracy of information, thereby upholding the fairness and transparency of the market. When discussing information disclosure, Emilia stated that, as listed companies are crucial participants in the market, the quality of their information disclosure directly impacts investor decision-making and the market order. Therefore, listed companies must rigorously fulfill their information disclosure obligations to ensure that the information provided is authentic, accurate, complete, and timely. With the continuous evolution of the market and the emergence of new business models, lawyers must remain vigilant regarding changes in laws and regulations to ensure the compliance of new businesses and provide legal support for the steady development of enterprises.

Frank Qu said that in addition to the administrative penalties enforced by securities regulators, self-regulation by exchanges is a crucial component in maintaining market order and safeguarding investors' rights and interests. Information disclosure is a key focus of regulation because, within the framework of a comprehensive registration system, it serves as the cornerstone principle of capital markets. Additionally, it is a fundamental principle that must be rigorously maintained. Drawing from his extensive practical experience as a legal consultant for many exchanges, Frank emphasized that information disclosure includes both mandatory and voluntary formats. He noted that the focus of information disclosure should be on the essence of the actions, not just the outcomes. Therefore, Frank suggested that in addressing information disclosure issues for listed companies, enterprises and executives should enhance their proactive measures to prevent violations of information disclosure at the source. He also advised that law firms and accountants working with listed companies should emphasize mutual support, communication, and collaboration to better address the challenges of the complex market environment.

Mr. Ma Lang stressed that the notion of strong regulation can easily lead to misunderstandings. He noted that the current regulatory measures are not temporary or campaign-style efforts; rather, they represent a more precise, standardized, and normalized approach to regulation. This is essential for ensuring fairness, impartiality, and openness in capital markets and reflects the direction of future regulatory trends. He particularly mentioned Article 161 of the Criminal Law of the People's Republic of China. In the practice of criminal justice related to this offense, there is a trend toward differentiated treatment for organizations and executives. However, this does not imply that the fundamental information disclosure requirements for listed companies are being relaxed. Based on Mr. Ma Lang's experience in criminal practice, when listed companies address information disclosure compliance risks, it is important to differentiate supervision and management among actual controllers, major shareholders, and other non-shareholder senior executives to enhance the effectiveness of regulation.

During the closing remarks of the forum, Wang Shanliang, vice-chair of the board of Dacheng China and director of Dacheng Shanghai, delivered a speech on behalf of Dacheng, highlighting that in today's era of constant change, Chinese enterprises must endure challenges in the turbulent market environment. Legal professionals have always been committed to providing all-round global legal protection for enterprises and ensuring the robust operation of enterprises. All peers should leverage Chambers and Partners as an international platform to enhance the quality and efficiency of legal services, thereby providing a more robust legal foundation for enterprises seeking to expand internationally and achieve high-quality development. In closing, he wished the forum a complete success and expressed hope that, through the collective efforts of all, the legal industry would navigate a smoother path toward high-quality development.

This forum aims to build a platform for legal practitioners and senior legal experts to exchange ideas and discuss business. The lawyers at Dacheng analyzed and discussed the compliance of information disclosure for listed companies, offering comprehensive and practical solutions to help enterprises meet these requirements. They assisted both enterprises and practitioners in gaining a thorough understanding of compliance obligations, effectively reducing associated risks, resonating with participants and receiving widespread acclaim.