The use of disclosure consulting services by publicly traded companies has come under regulatory scrutiny, as the niche but growing industry poses numerous risks if left without proper regulation. Recently, companies listed in China’s A-share market received a thorough and detailed survey about disclosure consulting firms from the securities regulator. Industry insiders hope that this move will aid the healthy development of this nascent industry. While niche, the role that these consulting firms play in the development and reform of China’s capital markets should not be underestimated.
Disclosure consulting services include the preparation or review of routine announcements, periodic reports, social responsibility reports, and responses to regulatory inquiries, as well as consulting on policy. The widespread use of these services has led to the emergence of leading firms in the sector. The industry’s growth shows that companies recognize the importance of disclosure, and its development trajectory is overwhelmingly positive. However, there are issues that cannot be ignored, such as the risk of information leaks. Of particular concern is whether the founders of some consulting firms, formerly employed by regulatory bodies, might lead to “regulatory arbitrage” or a grey area of operations — an issue that the market is closely watching. The survey by the China Securities Regulatory Commission (CSRC) reflects a rational and moderate stance by the regulator, aimed at promoting legal and compliant operations to support the healthy and stable development of the capital market.
