As approved by China Securities Regulatory Commission (‘CSRC’), Shenzhen Stock Exchange (‘SZSE’) recently formulated and promulgated the Guidelines for Book Building Issuance Business of Corporate Bonds (hereinafter referred to as “the Guidelines”). According to CSRC’s overall arrangement, the Guidelines is promulgated after several rounds of opinions solicited from the market, discussion and revision. It aims to implement CSRC’s work requirements of ‘legal, strict and overall supervision’, further promote the healthy development of bond market, regulate the book building issuance business of corporate bonds, and protect the legitimate rights and interests of all transaction parties.
The Guidelines fully consider the characteristics of the bond market of SZSE, cover the existing book building business of public offering corporate bonds (including corporate bonds issued to public investors and issued to eligible investors), and further regulate the issuance pricing and placement behaviors of corporate bonds in primary market to prevent interest transport. It regulates book building business mainly in the following aspects:
- It regulates all the elements of book building, including the applicable scope, bookkeeping place, business participants, requirements for bookkeeping scene and basic methods of book building. As for public offering of corporate bonds, underwriters and issuers may independently choose to carry out book building in the place of the underwriter or SZSE; as for private placement of corporate bonds, no compulsory bookkeeping are required due to characteristics such as flexible product design, few investors and private placement.
- It regulates bookrunners to establish and perfect relevant risk control system and operating procedures, and improve work papers filing system. It regulates the responsibilities of each participant, including clearly defining the responsibility range of bookrunners and strengthening their internal control management system, preventing various risks with the core of interest conflict in book building, prohibiting participants to violate fair competition, have improper interest transport and unfairly treat different kinds of investors during the book building. Besides, it clearly defines relevant requirements for bookrunners on keeping documents and data related to book building.
- It clearly defines the self-regulatory responsibility for SZSE. SZSE may irregularly organize book building inspection work together with CSRC, and take regulatory measures or disciplinary actions against anybody in violation of the Guidelines, including regulatory measures like interpretation and explanation, written warning, interview or reporting to CSRC according to the seriousness of the case, and disciplinary actions like a notice of criticism or public censure according to the seriousness of the case as for those seriously violate relevant laws and regulations as well as the Guidelines.
The Guidelines further defines relevant requirements for market participants, it is operational, practical and flexible, and plays an important role in regulating the issuance pricing and placement behaviors as well as preventing interest transport in the primary market of corporate bonds.
