Ten leeway securities regulatory bureau initiated self-inspection and on-site inspection of bonds in its jurisdiction to ＂early warning and mine clearance＂ in advance.
Our reporter Wu Xiaolu
On May 9, Heilongjiang Securities Regulatory Bureau released the random sampling results of the on-site inspection objects of corporate bond issuers in 2023. Since April, multi-local securities regulatory bureaus have started the self-inspection or on-site inspection of corporate bonds in the jurisdiction in 2023. According to the incomplete statistics of the website of the CSRC, as of May 9, a total of 13 local securities regulatory bureaus have carried out self-inspection and on-site inspection of bonds in their jurisdictions, of which 10 local securities regulatory bureaus have issued a "double random" on-site inspection list, and 4 local securities regulatory bureaus have carried out self-inspection of corporate bonds or ABS (Note: Henan Securities Regulatory Bureau has carried out both self-inspection and on-site inspection).
Some people in the industry told reporters that on-site inspection and self-inspection of bond issuers are routine actions of the regulatory authorities, but this year’s self-inspection shows the characteristics of increasing the number of inspections, expanding the scope and being targeted.
Fei Chao, general manager of the Quality Control Headquarters of Caida Securities Investment Banking Committee, told the Securities Daily reporter that the normalized regulatory inspection and self-inspection work is conducive to strengthening the risk management and control of the surviving bonds, supervising the bond issuing enterprises to fulfill their obligations in a standardized manner, and urging the trustee to perform their duties and responsibilities, which is conducive to better protecting the rights and interests of investors and promoting the stable and healthy development of the bond market.
Normalization development
Self-inspection and on-site inspection
Judging from the random sampling list of 10 local securities regulatory bureaus, most local securities regulatory bureaus selected one or two bond issuers as the "double random" on-site inspection targets in 2023. As for the reasons for the on-site inspection, the local securities regulatory bureaus said that it was to implement the requirements of the the State Council and China Securities Regulatory Commissions on establishing a "double random" spot check mechanism.
The securities regulatory bureaus in Beijing, Jiangsu, Fujian and Henan have successively issued notices to carry out comprehensive self-examination or designated self-examination. Judging from the object of self-inspection, Beijing Securities Regulatory Bureau requires that issuers with surviving bonds as of April 30 should carry out self-inspection of bond business; Fujian Securities Regulatory Bureau and Henan Securities Regulatory Bureau require that as of April 30, issuers and original rights holders of surviving corporate bonds and ABS conduct self-inspection. In addition, the Fujian Securities Regulatory Bureau also requires relevant intermediaries to conduct self-examination; Jiangsu Securities Regulatory Bureau appointed 385 bond issuers to conduct self-examination and self-correction on the surviving bonds.
"Self-inspection of bonds is the proper normalization of bond supervision. Expanding and standardizing the scope of self-inspection is the optimization of bond supervision in the new stage and the key to the stable development of the bond market." Tian Lihui, dean of the Institute of Financial Development of Nankai University, said in an interview with a reporter from Securities Daily.
A related person from the bond financing department of a brokerage told reporters that the normalized on-site inspection or self-examination will help to find problems in advance and "early warning and demining" in advance.
The 2023 System Work Conference of the China Securities Regulatory Commission mentioned, "Strengthen comprehensive judgment and forward-looking response, and steadily and orderly resolve risks in key areas such as private equity funds, local trading venues, and bond defaults." The 2023 bond supervision work conference of the China Securities Regulatory Commission proposed, "comprehensively deepen the prevention and resolution of key bond risks, strive to further converge the risk of bond default, and protect the legitimate rights and interests of investors."
Regarding the reasons for the self-inspection by the securities regulatory bureaus in the four places, Fei Chao said, "The regulatory authorities aim to further transmit the regulatory pressure through the normalized inspection system, clarify the regulatory priorities, and effectively implement the decision-making arrangements of the 2023 CSRC System Work Conference and the Bond Supervision Work Conference to ensure the stable and healthy development of the bond market in the jurisdiction."
New urban investment and real estate enterprises
Special index
Self-examination and on-site inspection are not "two choices". On April 24, 2023, Henan Securities Regulatory Bureau issued the self-inspection notice of corporate bonds in its jurisdiction, and on May 6, 2023, it released the "double random" extraction list of the on-site inspection objects of corporate bond issuers in its jurisdiction.
In the notice of self-inspection, Henan Securities Regulatory Bureau stated that if the issuer of corporate bonds and the original owner of ABS found violations of laws and regulations in the self-inspection stage and took timely rectification and remedial measures, Henan Securities Regulatory Bureau would handle them as appropriate according to the seriousness of the circumstances and the harmful consequences; For issuers and original rights holders who refuse to conduct self-examination, fail to conduct self-examination seriously, and fail to complete self-examination on schedule, as well as issuers and original rights holders who fail to truthfully reflect the situation and deliberately conceal illegal acts during self-examination, Henan Securities Regulatory Bureau will focus on and strictly deal with them in subsequent on-site inspections.
The Beijing Securities Regulatory Bureau also stated in the self-inspection notice that on the basis of the self-inspection work of corporate bond issuers, the Beijing Securities Regulatory Bureau will carry out on-site inspection according to the work arrangement.
Judging from the self-examination papers of corporate bond issuers issued by the local securities regulatory bureau, the regulatory authorities focus on four aspects, namely, solvency, information disclosure, fund raising, corporate governance and commitment fulfillment.
Among them, in terms of solvency, the self-inspection draft requires the city investment issuer and the real estate enterprise issuer to fill in the special indicators of self-inspection respectively. "This is a new requirement put forward by the regulatory authorities this year." A related person from the bond financing department of the above-mentioned brokerage firm told the reporter that it may be because the scale of bonds issued by city investment companies is relatively large, and the potential risks of real estate enterprises are relatively high, so they have become key enterprises.
"Since the self-inspection work is to promote and standardize bond issuance, and city investment companies and real estate enterprises are often highly leveraged, they are required to fill in special indicators and make more demanding information disclosure, which is the need for risk prevention and market stability." Tian Lihui said.
"Combined with the key concerns of corporate bond review issued by the Shanghai and Shenzhen Stock Exchanges in 2021, this is a specific regulation made by the regulatory authorities in combination with key concerns and related information disclosure requirements, aiming at guiding and urging issuers and related intermediaries to improve corporate bond information disclosure quality, effectively arranging risk of debt of enterprises in related industries, and doing a good job in risk prevention." Fei Chao said.