Under Article 10 of China’s Securities Law, as revised in 2019, a company that offers shares to the public through underwriters must engage a securities firm as its baojianren (保荐人), its sponsor. The word joins bao, to guarantee, and jian, to recommend. The sponsor must carefully check the issuer’s application documents and disclosures “and supervise the issuer’s proper operation.”
Article 182 sets the penalty for a sponsor letter with false records, misleading statements or major omissions. The sponsor is warned, its business income is confiscated, and it is fined one to ten times that income. The sponsor system took effect on February 1, 2004.