China’s new rules bar bankers from discussing IPOs with analysts

The Securities Association of China has drafted rules barring investment bankers from discussing profit forecasts and valuations with analysts. This is to ensure unbiased pricing of initial public offerings (IPOs). Under the draft rules, brokerages should also regularly check on their internal firewall systems, which were distributed to brokerages for their opinions. Such rules will prevent distortion of IPO pricing, protect investor interest in a market crucial to funding innovation and growth in the world’s second-biggest economy. China has adopted a US-style, registration-based IPO system in some parts of its stock market to make pricing of shares more market-oriented, with plans to soon expand the reform to the entire market. The rules also ban issuers, investment bankers and salespeople from exerting pressure on analysts to skew their research conclusions.