Legal Study On System Construction Of Resale Of Restricted Securities

Securities of restricted securities in resale of restricted securities market shall beinterpreted broadly. The securities are defined in accordance with its structure and areissued to specific investors and no public persuasion and open manner in disguise isadopted in the issuance, which differ from way of establishing a company throughprivate placement.Although positive exploration has been taken in our regional market, lack ofinvestor protection and resale restriction, inadequate supervision especially disclosureof information, disorder of trading markets still exist.In order to establish a new, objective and operable rule on resale of restrictedsecurities, contradictions of the resale restrictions and securities circulation shall besolved, and balance between promotion of private placement and protection of theinvestors’ interests shall be required. Throughout the evolution of resale of restrictedsecurities in the United States, the revision of rules follows the legal basis ofproviding a reliable guidanceTherefore, the construction of private securities transfer system shall be focusedon the following aspects.First of all, resale of restricted securities shall be established.(a) Qualifiedinvestors should be judged through subjective (e.g. sufficient securities tradingexperience, knowledge and risk bearing capacity, etc.) and objective (e.g. net assets)standards. Qualified investors can be divided into financial institutions, related partiesof issuers, legal person and natural person acquiring certain knowledge, experience and wealth.(b) Restriction of holding period. Qualified financial institutionalinvestors shall be free from this restriction. In order to prove the investing purpose, itshall apply to the other three types.(c) Restriction of resale volume. Resale volumeshall set highest and lowest limitations. A registration of reform shall be submitted tosecurities supervision agency if resale volume exceeds the limitation.Moreover, a national trading market shall be established for institutionalinvestors where all trading securities shall be registered and be listed only in thismarket which means it can not be listed on Shanghai Stock Exchange and ShenzhenStock Exchange. No holding period limitations are imposed.In the end, regulatory system especially disclosure of information shall beestablished. Public company shall be introduced and established， to whichmandatory and continuous disclosure obligations shall be bound. The obligation ofinformation disclosure includes issuance information disclosure and continuousinformation disclosure.