People's Bank of China, Administration of Short-term Bonds of Securities Companies Measures

Promulgated: October 18 2004
Effective: November 1 2004
Interpreting authority: People's Bank of China
Applicability: "Short-term bonds of securities companies" refers to financial bonds that are issued on the interbank bond market by securities companies for the purpose of short-term financing, and that have repayment of principal and interest within a certain time period specified (Article 2).

Main contents: Securities companies applying for the issuance of short-term bonds shall comply with the following basic requirements, and be subject to examination and certification by the China Securities Regulatory Commission (CSRC): (1) the securities company shall have attained national interbank loans market membership for one year or more; (2) the issuer shall have disclosed detailed financial information in the national interbank loans market in accordance with uniform standards for one year, and have no record of violation of regulations relating to information disclosure in the past year; (3) keeping of clients' transaction settlement funds complies with stipulations of the CSRC; (4) the securities company has a sound internal control system; and (5) the securities company shall carry out valuation of assets and liabilities using a market capitalization approach (Article 9). The balance of short-term bonds repayable of securities companies shall not exceed 60% of the net capital (Article 13). The issuance period of short-term bonds of securities companies shall not be more than three working days (Article 15). Such bonds shall be issued by way of auction, with issue rate or price determined by both the demand and supply parties themselves (Article 16). Securities companies may not use the funds raised from issuance of short-term bonds for the following purposes: (1) fixed-asset investments and construction of service points; (2) investments in the secondary stock market; (3) financing for clients' securities transactions; or (4) long-term equity investments (Article 20). Part Three concerns transactions, custody, settlement and payment; and Part Four information disclosure. Securities companies issuing short-term bonds shall disclose information before January 20th, July 20th and April 30th each year (Article 28). Listed securities companies are just required to disclose information before April 30th each year (Article 30).
Related legislation: PRC People's Bank of China Law (Revised), Dec 27 2003, CLP 2004 No.1 p4 and Administration of Bond Transactions in the National Interbank Bond Market Measures, Apr 30 2000, CLP 2000 No.6 p9