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On 22 April 2022, SZSE officially launched four basic business rules, namely, the Rules on the Review of Corporate Bonds Issuance and Listing, the Rules for the Listing of Corporate Bonds (2022 Revision), the Rules for the Listing of Private Placement Corporate Bonds (2022 Revision), and the Management Measures for Investor Suitability in the Bond Market (2022 Revision). This is an important move made by SZSE to enforce the Securities Law, maintain market- and law-oriented requirements, comprehensively promote the registration-based corporate bonds system reform, and further standardize and improve the review business of bond issuance and listing. These new rules will help better define the responsibility of market participants, protect the legitimate rights and interests of investors, and safeguard the stable and healthy development of the bond market.
Further Improving the Rules on the Review of Bond Issuance and Listing
Since the registration-based system is adopted in the public issuance of corporate bonds, SZSE has earnestly implemented the decisions and arrangements made by the CPC Central Committee and the State Council, as well as the requirements of the Party Committee of the CSRC. SZSE has been consolidating the basic systems of the bond market and improving the business rules for the registration-based system for corporate bond issuance. Since 2020, a well-established system of review rules for bond issuance and listing has been taking shape after SZSE launches business arrangement notices for the registration-based system of corporate bonds, guidelines for key concerns of review, reference guidelines for the preparation of prospectuses, and reference guidelines for the preparation of terms for the protection of investor rights and interests.
The new Rules on the Review of Corporate Bonds Issuance and Listing separates the provisions on the review of public issuance of corporate bonds from the original rules on the listing of corporate bonds, forming an independent set of basic business rules for the review of issuance and listing. It comprehensively governs such businesses as application and acceptance, review items, review procedures, suspension and termination matters, and self-discipline. This is aimed to build a concise and clear rule system with the review rules for issuance and listing as the core, the business guidelines such as the key concerns of the review as the backbone, and the business guidelines like the reference for the preparation of the prospectus as the supplement.
Further Reinforcing the Responsibilities of Market Participants
To advance the registration-based system reform which centers on information disclosure, and on the basis of previous regulatory experience, these new rules place further focus on improving the quality of information disclosure, promoting the creation of a good market ecology, and creating a more standardized and transparent bond market. First, the issuers are required to make disclosures on major matters, including major changes in their equity structure and the pledge or mortgage of their substantial assets. Second, the information disclosure requirements for guarantors and bankruptcy administrators are provided, stating that guarantors should disclose annual financial reports and major events, and bankruptcy administrators should disclose bankruptcy progress and other matters on a regular basis in accordance with regulations. Third, the arrangements for voluntary disclosure, public commitment disclosure and suspension of disclosure are clarified.
In addition, to urge market participants to hold their positions and fulfill their duties, and to safeguard the “access”, SZSE makes it clear that according to the principle of “an issuer is subject to supervision when its application is accepted”, from the date of acceptance of application documents, the issuers and their related parties, lead underwriters and securities service providers will bear corresponding legal responsibilities. At the same time, SZSE highlights the duty of care of professional institutions, and further refines and improves the relevant provisions of regulatory measures and disciplinary sanctions to make sure that the market participants duly perform their duties.
Improving the Investor Protection Mechanism
SZSE further improves the mechanism of bondholders’ meeting. First, SZSE specifies the circumstances which call for a holder's meeting, including the addition of new issuers or transfer of assets by their controlling shareholders or de facto controllers for free or at obviously unreasonable consideration and that such transfer results in high uncertainty of the issuer's solvency. Second, SZSE revises the scope of the participants for vote avoidance at bond holders’ meeting by stating that the issuer, its related parties and the bond holders who have conflicts of interest in the resolution matters should avoid voting. Third, SZSE improves the arrangements for proposals and announcement and effectiveness of meeting resolutions. Besides, it is stipulated that when the issuer and its other relevant parties fail to respond to the meeting resolutions in a timely manner, the trustee should take timely measures.
In addition, with the cancellation of mandatory rating requirements for public issuance of corporate bonds, this revision of the rules introduces the circumstances that affect the protection of investors’ rights and interests, such as the occurrence of major events that seriously affect the issuer’s solvency, which is taken as the criteria for adjusting the investor suitability during the duration. Moreover, the scope of bonds that individual investors can purchase is adjusted to provide better investor protection.
Next, SZSE will continue to implement the policy of “system building, non-interference, zero tolerance” and the requirement of “four awes and one joint force”, adhere to the general principle of pursuing progress while ensuring stability, and base itself on the “two big pictures” and the needs of the nation. SZSE will implement the new development concept completely, accurately and comprehensively, promote and improve the regulatory system and mechanism in line with the law and characteristics of the development of the bond market, deepen the reform and orderly opening of the bond market, and further improve its performance in bond review and supervision, risk prevention and control, and product innovation. SZSE will play better in fulfilling its fundamental role of serving the high-quality development of the real economy as a bond market.
