(Yicai) Nov. 13 -- The Shanghai and Shenzhen stock exchanges have revised their rules on information disclosure of refinancing business after a probe into a unit of Chinese private equity firm Hillhouse Capital exposed a loophole.

After the revision, shareholders with equities of at least 5 percent in a listed company can no longer dodge their information disclosure obligations by lowering their holdings via securities refinancing.

The refinancing of securities is when equity holders lend their shares in listed companies to borrowers through a securities exchange at a specific rate. The borrowers return the stock by the agreed deadline and pay a corresponding fee.

Hillhouse's unit HHLR Management, which was Chinese solar panel giant Longi Green Energy Technology's third-largest shareholder with a 5.85 percent stake as of the end of last year, received a letter of notice from the China Securities Regulatory Commission on Nov. 8 for allegedly unlawfully selling some equity in Longi.

HHLR plans to participate in the refinancing of securities and will lend out 1 percent of Longi's shares for no more than 182 days, temporarily bringing its holdings to below 5 percent, Longi said on March 21. HHLR's intentions are not to pare its stake, and it will not lead to a sale, it added.

HHLR participated in the refinancing of securities and lent out 1 percent of Longi's shares for no more than 182 days in March, temporarily bringing its holdings to below 5 percent, a minimum stake for shareholders to bear their disclosure obligations.

HHLR's holdings in Longi were reduced to 4.85 percent on March 31 after it lent out the shares. However, the ratio only returned to 4.98 percent after the lending period expired on Sept. 30.

This indicates that HHLR sold 0.87 percent of its equity during the lending period but did not declare the transaction, and the selling price and amount were not made public.

As a tool originally aiming to increase market liquidity and vitality, refinancing will also disturb the market's order if abused, China Galaxy Securities said. The regulator's timely patch of the loophole can better maintain the stock market's fair-trade environment and enhance common investors' confidence.

Editor: Futura Costaglione