(Yicai) March 13 -- Chinese regulators will likely enhance on-site inspections and supervision of initial public offerings, with the proportion of on-site inspections of firms under review significantly rising, according to several insiders.

Such a move will control the risks of the IPO process, encourage some firms with a fluke mentality to withdraw voluntarily, provide solid support for sponsors and third-party institutions with strict guidance, and ensure the quality of listed companies, Tan Gefei, chief consulting expert of Shenzhen Elephant Investment Consulting, said to Yicai yesterday.

According to various reports, the proportion of IPO on-site inspections will increase to 20 percent or 30 percent from 5 percent.

“These are only speculations, and nothing has been finalized yet,” a person in charge of a brokerage investment bank told Yicai. The ratio of on-site inspections is not fixed and is determined based on the IPO situation, the person added.

The China Securities Regulatory Commission has repeatedly stated that it will significantly increase the proportion of on-site inspections of companies planning to go public.

The scope of on-site inspection and supervision of enterprises under review by the securities watchdog is still very limited, Wu Qing, chairman of the CSRC, said on March 6. The next step is to significantly increase the coverage and strengthen the investigation and punishment of violations of laws and regulations, he added.

However, some market participants have put forward different suggestions.

On-site inspection and supervision will not necessarily get better with a higher proportion, Wang Jiyue, a senior investment banker, told Yicai. Using them as the starting point of work does not directly endorse the financial authenticity of the issuer, Wang added, noting that the purpose is to urge intermediaries to practice more seriously and responsibly and prevent companies that can go public from doing anything illegal.

The CSRC leads on-site inspections, and a non-local securities regulatory bureau or the supervision and enforcement department of a non-local exchange is sent to the issuer for an on-site inspection, the person in charge of a brokerage investment bank noted. The main purpose is to verify the financial authenticity of the IPO and to obtain the financial statements of relevant parties, he added.

On-site supervisions are led by an exchange that goes to the investment bank headquarters of the sponsor institution and verifies the issuer through the intermediaries, the person noted, adding that this is mainly to tighten the responsibility of intermediaries without personally obtaining funds and cash flow, the person added.

Editor: Martin Kadiev