On July 1, the Shanghai and Shenzhen Stock Exchanges issued a notice stating that in order to further improve the business processes and information disclosure requirements for the listing and listing, conversion, redemption, and repurchase of convertible corporate bonds, and fully protect the legitimate rights and interests of investors, the ” The Guidelines for Convertible Bonds are open to the market for comments. The deadline for comments is July 8, 2022.
Prominent investor protection value orientation
The Shanghai and Shenzhen Stock Exchanges stated that the “Guidelines for Convertible Bonds” adhere to the principle of marketization, with information disclosure as the core, and aim to provide targeted and systematic regulation of new situations and new problems in practice.
In order to highlight the value orientation of investor protection, the Guidelines for Convertible Bonds have made key specifications in the following aspects. First, clarify investor expectations. In response to issues such as the triggering of redemption or conversion price correction conditions but the company’s failure to respond in a timely manner that investors were more concerned about before, listed companies are required to hold a board of directors on the day when the conditions are triggered, and respond as soon as possible on whether to redeem or correct the conversion price. If the deliberation procedures and disclosure obligations are not performed in a timely manner, it is deemed that the redemption right is not exercised or the conversion price is not revised to clarify investor expectations.
Second, improve the business specifications for redemption, put-back, share conversion, and suspension of trading. Clarify the “cold period” that the redemption right cannot be exercised again for at least 3 months; it is clarified that the interval between the trigger date of the sell-back conditions and the first day of the sell-back application period shall not exceed 15 trading days, fully protecting the investor’s sell-back right , to speed up the return of investors’ funds; clarify the interval between the trigger date of the redemption conditions and the release date/redemption date of the redemption funds, leaving enough time for investors to trade and convert shares; Stop trading or transfer from the 3rd trading day a few days ago, prompting investors to convert shares as soon as possible to reduce unnecessary losses.
Furthermore, strict short-term trading supervision. It is clarified that shareholders, directors, supervisors and senior managers of listed companies who hold more than 5% of the shares to subscribe for or subscribe for, trade or transfer the convertible bonds issued by the company shall abide by the relevant regulations on short-term transactions. except.
At the same time, the responsibilities of intermediaries should be consolidated. Sponsors and independent financial advisors are required to express clear opinions during the supervision period on whether the convertible bond-related business complies with the stipulations in the prospectus or restructuring report, whether it misleads investors or damages the legitimate rights and interests of investors, etc., consolidate the responsibility for continuous supervision, strengthen Investor protection efforts.
In addition, the “Guidelines for Convertible Bonds” include directional convertible bonds into the scope of regulation, and provide for the conversion, redemption, repurchase, repurchase and cancellation of directional convertible bonds.
Standardize the whole-process business during the duration
Convertible bonds are hybrid securities with the dual nature of stocks and bonds, which can better meet the diversified investment and financing needs of listed companies and investors. In recent years, with the deepening of capital market reform, listed companies have actively issued convertible bonds to raise funds or purchase assets, and convertible bond transactions have been active. Financing structure and other aspects play an increasingly important role. However, in recent years, abnormal speculation and forced redemption of individual convertible bonds have also occurred in the operation of the convertible bond market, which have a greater impact on investors, and the need to further improve relevant business norms is highlighted.
Previously, the China Securities Regulatory Commission issued the “Administrative Measures for Convertible Corporate Bonds”. In response to issues such as speculation about convertible bonds, by strengthening top-level design, improving transaction mechanisms, investor suitability and other institutional arrangements, curb convertible bond trading risks and strengthen investor protection. .
Subsequently, the Shanghai and Shenzhen Stock Exchanges issued the “Implementation Rules for Convertible Corporate Bonds Trading (Draft for Comments)” (referred to as “Trading Rules”) and publicly solicited opinions from the market. The “Detailed Transactions” stipulate the investor suitability, transaction and transfer matters of convertible bonds issued to unspecified objects and convertible bonds issued to specific objects, which will help to further standardize and improve convertible bond transactions and transactions. Transfer and investor protection and other related systems.
The “Guidelines for Convertible Bonds” is a detailed implementation of the “Administrative Measures for Convertible Corporate Bonds” of the China Securities Regulatory Commission. Together with the “Detailed Trading Rules” that have been publicly solicited by the Shanghai and Shenzhen Stock Exchanges, it regulates information disclosure and trading mechanisms respectively. The whole-process business of convertible bonds during the duration together constitutes the self-regulatory rules system of convertible bonds at the exchange level, which can better play the role of protecting the interests of investors and maintaining the stable operation of the market.
The Shanghai and Shenzhen Stock Exchange said that in the next step, it will adhere to the direction of market-oriented and legalized reform, continue to improve the supply of the convertible bond system, improve the level of regulatory services, maintain the stable operation of the market, and promote the high-quality development of the convertible bond market.
(Editor in charge: Tian Yunfei)