2. According to the risk and characteristics of convertible bonds, securities trading places are required to formulate trading rules to prevent and restrain excessive speculation.
4. It is required that the securities trading places should formulate an investor suitability management system, and securities companies should check and evaluate the investors suitability of customers, guide investors to rationally participate in convertible bond trading, prevent the risk of forced redemption, and strengthen the supervision and regulation of issuers exercise of mandatory redemption rights.
5. To strengthen risk monitoring, the exchange is required to establish a cross variety monitoring mechanism, formulate targeted abnormal fluctuation indicators, and take relevant disposal measures in a timely manner.
7. We should improve the mechanism for determining and adjusting the price of conversion, and strengthen the regulation of the price and price correction.
8. We will strengthen the protection of the rights and interests of the holders of convertible bonds.
Adhere to the three principles
First, problem orientation. In view of the recent phenomenon that some convertible bonds have been over hyped and have gone up and down sharply, this paper focuses on solving the problems such as inappropriate management of investors appropriateness, lack of checks and balances in the trading system, unequal rights and responsibilities between issuers and investors, incomplete daily monitoring and lack of entrusted management system In order to prevent transaction risks and strengthen investor protection.
Second, overall planning and coordination. The existing issuance conditions remain basically unchanged, and each sector still applies its own issuance procedures and relevant rules.
The third is to reserve space. The new third board will be included in the adjustment scope to provide institutional basis for future market reform and development. At the same time, it also puts forward principled requirements on the appropriateness of investors, trading system, and the rights and responsibilities of issuers and investors, so as to reserve space for perfecting the supporting rules of trading places.
Clear six key points
The draft has eight chapters and 37 articles, mainly including general provisions, issuance conditions and procedures, transaction transfer, information disclosure, share conversion, redemption and resale, protection of convertible bond holders rights and interests, supervision and management and legal liability, and supplementary provisions.
The draft defines the positive conditions for issuing convertible bonds: first, it must meet the conditions for public issuance of corporate bonds; second, it must meet the conditions for issuing new shares, except for the transfer of shares by way of purchasing company shares.
The draft for public opinions clearly defines the negative conditions for issuing convertible bonds: first, if there is a debt default and it is still in a continuous state, it shall not be issued; second, it shall not be issued if the purpose of funds raised by corporate bonds is changed. In addition, if the purchase of assets by issuing convertible bonds to specific objects constitutes a major asset reorganization, it shall meet the conditions for material asset reorganization in addition to the above conditions.
With regard to the issuance procedures, according to the securities law and the specific implementation of the registration system reform, it is clear that the issuance of convertible bonds shall be reported to the CSRC for approval or registration in accordance with the stock issuance procedures; if the issuance of convertible bonds to specific objects to purchase assets constitutes a major asset restructuring, it shall be reported to the CSRC for approval or registration in accordance with the procedures for merger and acquisition.
Key point 2: improve the transaction transfer system
Focusing on the transaction and transfer system of convertible bonds, the draft for comments makes the following adjustments:
In view of the phenomenon that some convertible bonds have been hyped up, this draft regulation has made the following improvements to the transaction of convertible bonds:
One is to improve the trading system. According to the risk and characteristics of convertible bonds, securities trading places are required to formulate trading rules to prevent and restrain excessive speculation. In particular, it is necessary to reevaluate and improve the existing trading rules in combination with the equity nature of convertible bonds and the inherent defects of small convertible bonds that are easy to be hyped. Considering that the trading system needs to be carefully evaluated by the exchange based on the market conditions, this regulation only puts forward the principle requirements for the exchange, and the exchange shall improve the trading rules in accordance with the principles of these rules.
Third, guard against the risk of forced redemption. Forced redemption refers to the right of the issuer to redeem the bonds in advance according to the face value and interest of the bonds when the price of the principal shares is continuously higher than a certain proportion of the agreed conversion price for a certain period of time. In order to prevent the above transaction risks and protect the rights and interests of investors, this regulation clearly stipulates that if the redemption conditions are expected to be met, the issuer shall disclose them in time before the redemption conditions are met, so as to fully remind the market of the risks. If the issuer decides to redeem, it shall fully disclose the trading of convertible bonds of the company by its actual controller, controlling shareholder, shareholders holding more than 5% shares, directors, supervisors and senior managers; if the issuer decides not to redeem, it shall not exercise the redemption right again within the time limit specified by the trading place. At the same time, the issuer is required to abide by the principle of good faith when deciding whether to exercise the redemption right, and shall not mislead investors or damage the legitimate rights and interests of bondholders. The sponsor shall continuously supervise whether the exercise of the redemption right of the issuer is appropriate.
Fourth, strengthen risk monitoring. It is required to strengthen the risk monitoring in the stock exchange, establish a cross securities monitoring mechanism between convertible bonds and principal stocks, and formulate targeted abnormal volatility indicators. In case of abnormal fluctuation in convertible bond trading, the securities trading place may require the issuer to check, disclose the announcement of abnormal fluctuation, or take temporary suspension measures according to the business rules.
Key 3: improving information disclosure
According to the draft, at the level of the CSRC, there are no rules specifically regulating the information disclosure of convertible bonds. However, the two stock exchanges stipulate the information disclosure of convertible bonds in the stock listing rules, and do not consider its debt nature. Therefore, in terms of information disclosure, this regulation further belongs to the debt nature of convertible bonds. On the basis of the provisions on information disclosure of corporate bonds in Article 81 of the securities law, combined with the characteristics of convertible bonds and the actual regulatory experience of the exchange, the interim disclosure events are specified in detail, mainly including the price adjustment of convertible bonds and the cumulative amount of converted shares reaching the company 10% of the shares, the total amount of shares not converted is less than 30 million yuan, and the credit rating of convertible bonds has changed. In addition, due to the fact that the issuers exercise of the mandatory redemption right often leads to large fluctuations in the price of convertible bonds, insider trading is easy to occur in this process. In order to ensure the institutional supply of follow-up supervision and law enforcement, this regulation also explicitly takes the decision of the issuer to exercise the redemption right as a major event that should be disclosed.
Key point 4: improve the mechanism for determining and adjusting the price of conversion shares
The draft regulates the price and adjustment of convertible bonds. It requires that the conversion price determined by issuing convertible bonds shall not be lower than the average trading price of the issuers stock 20 trading days before the announcement date of the prospectus and the average price of the previous trading day, and those issued to non-specific objects shall not be revised upward, and those issued to specific objects shall not be revised downward. For downward amendment, it must be approved by more than two-thirds of the voting rights held by shareholders attending the meeting other than bondholders.
Key 5: strengthen the protection of the rights and interests of convertible bond holders
The draft points out that the current rules do not pay enough attention to the debt nature of convertible bonds in terms of the protection of holders, and do not set up a bond trustee management system to protect the holders. In accordance with Article 92 of the securities law, where corporate bonds are publicly issued, the issuer shall employ a bond trustee for the bondholders. In order to implement the provisions of the securities law and strengthen the protection of the rights and interests of bondholders, the draft for soliciting opinions has established a trustee management system for convertible bonds with reference to the administrative measures for issuance and trading of corporate bonds. If convertible bonds are issued to unspecified objects, the issuer shall employ a bond trustee for the bondholders. If convertible bonds are issued to specific objects, it shall be listed in the prospectus To stipulate the entrusted management of bonds. It is clear that the trustee shall perform the duties of entrusted management in accordance with the provisions of the administrative measures for the issuance and trading of corporate bonds and the agreement on bond trustee management. With regard to the bondholders meeting, it is required that the bondholders meeting rules stipulated in the bond offering prospectus shall be fair and reasonable. For major matters such as changing the contents of the bond offering prospectus, modifying the rules of the bondholders meeting, and changing the trustee, the trustee shall request the holding of a meeting of bondholders for decision. In addition, the draft also specifies the convergence of rules: if there are provisions in these measures, these Measures shall apply; if there are no provisions in these measures, other relevant provisions of the CSRC shall apply. Source: China Securities Journal Author: Min Xiuli, editor in charge: Zhong Qiming_ NF5619
In addition, the draft also specifies the convergence of rules: if there are provisions in these measures, these Measures shall apply; if there are no provisions in these measures, other relevant provisions of the CSRC shall apply.