1. 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.
2. The securities trading place should formulate the investor suitability management system, especially to adapt to the investor suitability requirements of the board where the principal shares are located. At the same time, the securities company should check and evaluate whether the customers meet the investor suitability, and guide the investors to participate in the convertible bond trading rationally.
3. To prevent the risk of forced redemption, the issuer shall timely disclose the possible redemption conditions before the redemption conditions are met, and fully prompt the market of the risks.
4. The design of the terms of redemption and repurchase should embody the principle of equality of rights and obligations. The trigger conditions, exercise period, exercise times and interest calculation methods of redemption and repurchase should be equal and consistent, and the rights of issuers or bondholders should not be restricted unilaterally.
5. Securities trading places should strengthen risk monitoring, establish a monitoring mechanism of cross securities between convertible bonds and principal stocks, and formulate targeted abnormal volatility indicators.
7. The interim disclosure events are specified in detail, mainly including the price adjustment of share conversion, the cumulative amount of converted shares reaching 10% of the companys shares, the total amount of shares not converted less than 30 million yuan, and the change of credit rating of convertible bonds.
8. It is required that the conversion price determined by issuing convertible bonds shall not be lower than the average trading price of the issuers stocks 20 trading days prior to the announcement date of the prospectus and the average price of the previous trading day, and if the convertible bonds are issued to non-specific objects, they shall not be revised upward, and those issued to specific objects shall not be revised downward.
9. Where convertible bonds are issued to non-specific objects, the issuer shall employ a bond trustee for the bondholders, and where convertible bonds are issued to specific objects, the matters for entrusted management of bonds shall be stipulated in the prospectus.
10. The new third board will be included in the adjustment scope to provide institutional basis for future market reform and development.
The soaring of convertible bond market
Recently, the convertible bond market staged a soaring market, almost every day in the performance of temporary stop, or even twice fuse.
On October 22, nearly 20 convertible bond markets were temporarily closed. At the end of the day, Zhengyuan convertible bonds (353.805, 0.00, 0.00%) soared by 176%, Yinhe convertible bonds (199.000, - 8.00, - 3.86%) rose by 73%, and 13 convertible bonds rose by more than 10%. On October 23, the convertible bond market staged a roller coaster trend. Yinhe convertible bonds rose 116.91% at one time, and then turned green to fall 3.86% in the end. The highest price on the day was 449 yuan per piece, and 199 yuan at the end of the day, with a killing rate of 125.6%. Smart convertible bonds (215.000, 70.00, 48.28%) were up 148.28% at one time in the session, and narrowed to 48.28% by the end of the day. By the end of the day, there were only four convertible bonds with an increase of more than 10%.
It is worth noting that some wechat groups are still advocating the statement that small capital leverage can leverage large profits of convertible bonds, and continue to encourage the speculation of convertible bonds. And from the discussion of intelligent convertible bond stocks, we can find that many retail investors are suffering from heavy losses.
There are also investors to show account losses, three convertible bonds loss more than 90000 yuan.
The craziness of convertible bonds has aroused regulatory concerns.
The Shanghai Stock Exchange said that this week (from October 19, 2020 to October 23, 2020), convertible bond trading will be under key monitoring, and self-discipline supervision will be timely implemented for abnormal trading behaviors that affect the normal trading order of the market and mislead investors trading decisions. At the same time, special verification was conducted on 15 major issues of listed companies.
The Shenzhen Stock Exchange also issued a notice saying that it will continue to focus on monitoring and timely take regulatory measures for abnormal convertible bonds such as Zhengyuan convertible bonds, intelligent convertible bonds, Blue Shield convertible bonds (306.000, - 54.50, - 15.12%) and Wanli convertible bonds (279.180, - 101.82, - 26.72%).
Convertible bond market ushers in regulatory norms
China Securities Regulatory Commission (CSRC) issued the management measures on the evening of 23rd, aiming at the phenomenon that some convertible bonds have been over hyped and have gone up and down sharply in recent years, and put forward the institutional solutions.
According to the CSRC, convertible bonds, as a kind of hybrid securities with both equity and debt, have seen a substantial increase in the issuance scale in recent years, which is one of the important channels for enterprises to refinance. However, the recent phenomenon of individual convertible bonds being over hyped, rising and falling sharply has fully exposed the problem of mismatch between system rules and product attributes
First, there are no rules specifically regulating convertible bonds at the regulatory level, and the relevant provisions are mainly scattered in the documents of different regulatory lines, and lack of systematicness and pertinence in the system design.
Third, the protection mechanism of convertible bond holders is not perfect, and investor protection needs to be strengthened. In order to solve the above problems, it is necessary to issue a special and unified regulation as soon as possible to standardize the convertible bonds.
Based on the principle of problem orientation, the administrative measures focus on solving the problems such as the mismatch between the trading rules of convertible bonds and their equity nature, the mismatch between the information disclosure rules and their debt nature, the unequal rights and responsibilities of issuers and investors, the incomplete daily monitoring, and the lack of entrusted management system, etc., through improving the transaction transfer, the appropriateness of investors, information disclosure, and the protection of the rights and interests of convertible bond holders Protection, redemption and resale terms and other systems to prevent transaction risks and strengthen investor protection.
At the same time, considering that the relevant rules of convertible bonds are relatively scattered, and more rules are distributed in the newly issued regulations, the administrative measures not only need to integrate as a whole, but also need to maintain the stability of the existing rules. Therefore, the management measures mainly focus on overall coordination and filling the gaps, and maintain the existing reasonable rules unchanged in principle. At present, the new third board has set up a select layer and issued shares to unspecified objects, which further increases the demand for non listed public companies to issue convertible bonds. This time, the management measures will bring the new three boards into the adjustment scope, and provide the system basis for the future market reform and development. At the same time, the administrative measures also put 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 improving the supporting rules of trading places.
The Administrative Measures specify the positive conditions for the issuance of convertible bonds: first, to meet the conditions for public issuance of corporate bonds; second, to meet the conditions for issuing new shares, except for the transfer of shares by way of purchasing shares of the company. Clarify the negative conditions of issuing convertible bonds
One is that the debt default is still in the continuous state, and the issuance is not allowed;
Second, if the purpose of the funds raised by the company bonds is changed, it shall not be issued. 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.
In view of the phenomenon that some convertible bonds have been stir fried, the administrative measures have made four improvements in the transaction of convertible bonds.
The second is to improve the investor suitability system. Convertible bonds are highly speculative, volatile, and risky, and this feature will be further amplified with the fluctuation of the stock price. Some convertible bonds become high-risk products, which do not match the investment experience and risk tolerance of retail investors. Therefore, it is required that the securities trading places should formulate the investor suitability management system, especially to adapt to the investor suitability requirements of the board where the main stocks are located. At the same time, the securities companies are required to check and evaluate whether the customers meet the investors suitability, and guide the investors to participate in the convertible bond trading reasonably.
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.
In addition, the SFC is concerned that the redemption and repurchase provisions in the prospectus of some convertible bonds are obviously not equivalent. For example, the issuer can exercise the foreclosure right only when the price of the principal shares is higher than the conversion price for 15 trading days, while the holder can exercise the right of repurchase only after 30 trading days when the price of the principal shares is lower than the price of the converted shares; the number of times that the issuer can exercise the mandatory redemption right is not limited, and the holders repurchase right can only be exercised once a year. In order to protect the legitimate rights and interests of investors, this regulation requires that the design of redemption and resale terms should reflect the principle of equal rights and obligations. The trigger conditions, exercise period, exercise times and interest calculation methods of redemption and resale should be equal and consistent, and the rights of issuers or bondholders should not be unilaterally expanded. Sponsors and law firms should be fair to the terms Check and comment.
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.
Strengthen the management of information disclosure and return to the debt nature of convertible bonds
At the level of China Securities Regulatory Commission, there are no rules to regulate the information disclosure of convertible bonds at present. The Shanghai and Shenzhen stock exchanges regulate 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 exercise of the mandatory redemption right by the issuer, the price of the convertible bonds will fluctuate greatly. In this process, Article 92 of the easy law stipulates that in case of public issuance of corporate bonds, 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 administrative measures, referring to the measures for the administration of issuance and trading of corporate bonds, has established a entrusted management system for convertible 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 included 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.
This article is from Guo Chenqi, editor in charge of securities companies in China_ NBJ9931