China Securities Regulatory Commission, Provisions for the Administration of the Subordinated Obligations of Securities Companies

中国证券监督管理委员会证券公司次级债管理规定

January 10, 2013 | BY

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Requirements on issuance of subordinated obligations lowered to decrease the cost of financing for securities companies.

Clp Reference: 3700/12.12.27 Promulgated: 2012-12-27 Effective: 2012-12-27

Promulgated: December 27 2012
Effective: as of date of promulgation


Applicability: For the purposes of these Provisions, the term “subordinated obligation of a securities company” means a subordinated debt taken out by a securities company from a shareholder or institutional investor and the repayment sequence of which falls below that of ordinary debts or a negotiable security offered by a securities company to institutional investors and the repayment sequence of which falls below that of ordinary debts (Subordinated Bonds).


For the purposes of the preceding paragraph, the term “institutional investor” means a financial institution established with the approval of the state's financial regulator, such as a commercial bank, securities company, fund management company, trust company or insurance company; the wealth management products offered to investors by the aforementioned financial institutions include but are not limited to financial management products of banks, trust products, investment-linked insurance products, fund products, asset management products of securities companies, etc.; an enterprise with legal personality with registered capital of not less than Rmb10 million; a partnership with total capital contributions subscribed for by the partners of not less than Rmb50 million and total paid-in capital contributions of not less than Rmb10 million; or other investor recognised by the CSRC.


Main contents: Subordinated Bonds of a securities company may only be offered privately, and such means as announcements, public inducements or a disguised public offer method may not be used. The total number of institutional investors for any bond tranche may not exceed 200 (Article 2).


A subordinated obligation with a term of more than one year taken out or offered by a securities company is a long-term subordinated obligation.


A subordinated obligation with a term of at least three months and up to one year taken out or offered by a securities company for the purposes of meeting regular working capital requirements is a short-term subordinated obligation.


A long-term subordinated obligation may be counted as part of net capital at a certain percentage. Where the maturity date is at least three, two or one year(s) it may, in principle, be counted as part of net capital at the rate of 100%, 70% or 50%, respectively (Article 3).


A short-term subordinated obligation may not be counted as part of net capital (Article 4).


The Subordinated Bonds of a securities company may be lawfully offered and transferred to institutional investors on a stock exchange or CSRC-recognised exchange (Article 9).


Once the Subordinated Bonds of a securities company have been approved, they may be offered in tranches (Article 13).


Repealed legislation: Provisions on Borrowing of Subordinated Debts by Securities Companies, 2010

clp reference:3700/12.12.27promulgated:2012-12-27effective:2012-12-27

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