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Specifying the Rights and Responsibilities between the Sponsor and the Issuer

In order to ensure that the sponsor can obtain information necessary for the sufficient performance of duties in a timely manner, the authority of the sponsor should be expanded appropriately. Relevant legislation could give the sponsor certain rights. For example, they could have the right to be present at the shareholders meeting or the board of directors meeting of the issuer, or the right to express opinions on major decisions made by the issuer. They could also make it mandatory that the company cooperate with the sponsor's efforts to examine its bank accounts, important financial materials, important contracts and agreements, texts, and other important documents. A balance would thus be reached between the sponsor's responsibilities to the issuer and the sponsor's rights.

Specifying the Rights and Responsibilities between the Sponsor and the Regulator

The sponsor alone should be put in charge of reviewing the listing application materials and should be held accountable for any problem associated with the process. This could clearly define the responsibilities of the sponsor, making the sponsor more aware of such responsibilities and more motivated.

Specifying the Rights and Responsibilities between the Sponsor Institution and Other Intermediary Agencies

The sponsor should only bear supplementary guarantee liability for professional opinions or technical documents provided by accountant firms, law firms, and other intermediary agencies. In a case in which these professional opinions or documents contain false information, mistakes, or omission, the sponsor would be spared of legal liability as long as it could prove that it has performed necessary examination duties. This could ensure that the sponsor and these intermediary agencies take care of their own business.

Tougher Penalties for Law-Breaching Sponsors

Market-oriented reform should be accelerated. The introduction of a diversified investment body may help decentralize the equity structure of Chinese sponsor institutions. In turn, this is conducive to eliminating the interest ties between the sponsor institution and government agencies. It would enable the regulator to play its role fairly and justly. It would also strengthen penalties against sponsor institutions and improve the overall capability of sponsor institutions.

The sponsor punishment system and relevant systems must also be improved. The legislation process in relation to criminal liability of a sponsor must be sped up. The sponsor civil compensation system and compulsory liability insurance system should be built up. The sponsor's sense of responsibility should be raised. Their failure to actively perform their sponsoring, tutoring, and supervision duties should be appropriately sanctioned. Only through tougher punishment, greater risks, and higher costs of breaching will sponsors realize that they will bear economic losses if investors suffer losses from misleading, incomplete, inaccurate, and overdue disclosures by the issuing company.

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