In order to regulate the registration, depository and settlement of bonds on the inter-bank bond market, protect the legitimate rights and interests of investors and promote the healthy development of the bond market, the People s Bank of China (PBC) promulgated the Administrative Measures on the Registration, Depository and Settlement of Bonds on the Inter-bank Bond Market (hereinafter referred to as the Measures), which was passed on the 37th Governors Meeting on December 16, 2008. The Measures are hereby announced and will come into force on May 4, 2009.
Governor Zhou Xiaochuan
March 26, 2009
Appendix:
Administrative Measures on the Registration, Depository and Settlement of Bonds on the Inter-bank Bond Market
Chapter 1 General Provisions
Article 1 In pursuant to relevant laws and regulations such as the Law of the People s Republic of China on the People s Bank of China, the Measures are promulgated in order to regulate the registration, depository and settlement of bonds on the inter-bank bond market, protect the legitimate rights and interests of investors and promote the healthy development of the bond market.
Article 2 The Measures apply to the registration, depository and settlement of fixed-income securities (hereinafter referred to as bonds) on the inter-bank bond market.
The registration, depository and settlement of OTC book-entry T-bonds are subject to the Administrative Measures on the Trading of OTC Book-entry T-bonds.
Article 4 The PBC oversees the institutions on the inter-bank bond market undertaking bond registration, depository and settlement businesses as well as their registration, depository and settlement activities.
Article 5 Bond registration, depository and settlement institutions in the Measures refer to legal person entities engaged in the bond registration, depository and settlement businesses on the inter-bank bond market.
China Government Securities Depository Trust and Clearing Corporation is a PBC-designated bond registration, depository and settlement institution.
Article 6 Bond registration, depository and settlement institutions are responsible for centralized registration, primary depository and settlement, as well as secondary depository of OTC book-entry T-bonds upon approval by the PBC.
Article 7 Bond registration, depository and settlement institutions shall perform the following functions:
(1)Opening and managing bond accounts;
(2)Bond registration;
(3)Bond depository;
(4)Bond settlement;
(5)Paying principal, interest and other related earnings when bonds are redeemed;
(6)Acting as the lead custodian for negotiable bonds traded across markets;
(7)Managing collaterals including bonds;
(8)Claiming bond-related rights on bond issuers on behalf of bond holders;
(9)Providing services such as information inquiry, advisory and training in accordance with laws and regulations;
(10)Supervising secondary OTC depository business;
(11)Other functions required by the PBC.
Article 8 In order to guarantee smooth business operations, bond registration, depository and settlement institutions shall:
(1)Equip themselves with dedicated and proper equipments that process bond registration, depository and settlement, and strengthen technical means to guarantee data security;
(2)Establish an emergency response mechanism and disaster recovery system;
(3)Improve corporate governance, set up and improve the internal control mechanism and risk management system, and conduct internal auditing at regular intervals;
(4)Formulate rules and operational procedures concerning bond registration, depository and settlement, and enhance management of critical job positions.
Article 9 The bond registration, depository and settlement institutions shall report the following issues to the PBC for approval:
(1)Establishment of and amendment to Articles of Association, and major issues concerning M&A, reorganization and separation;
(2)Establishment of and amendment to the internal control system, risk management system, operational rules and emergency response plans;
(3)Expansion into new businesses, and alteration of the business model for bond registration, depository and settlement;
(4)Cooperation with other market agents in bond registration, depository and settlement businesses;
(5)Other issues required by the PBC.
Article 10 Bond registration, depository and settlement institutions shall report the following issues to the PBC for record:
(1)Establishment of and amendment to long-term business development plans;
(2)Alteration of senior management;
(3)Other issues required by the PBC.
Article 11 Bond registration, depository and settlement institutions shall cautiously save the original vouchers, documents and evidence in other forms concerning financial data of bond registration, depository and settlement, and keep the aforesaid information for at least 20 years after the maturity of the bonds.
Article 12 Bond registration, depository and settlement institutions shall, in light of their business development needs, establish and regularly release relevant information concerning bond registration, depository and settlement businesses to other organizations and individuals in accordance with concerning rules and regulations released by the PBC.
Article 13 Bond registration, depository and settlement institutions have the obligation of keep confidential the data and materials related to bond registration, depository and settlement businesses, but shall provide relevant information upon requests where:
(1)Bondholders make inquires into the financial information of their accounts;
(2)Agents of bondholders make inquires about the financial information of the accounts of the bondholders with written Power of Attorney;
(3)People s Courts, People s Procuratorates and public security institutions make inquires and collect evidence according to legal procedures;
(4)Other circumstances required by laws and regulations.
Bond registration, depository and settlement institutions should facilitate the bondholders access to the information of their bond accounts in a timely manner.
Article 14 Bond registration, depository and settlement institutions shall disclose the variety of charges and relevant charging standards concerning bond registration, depository and settlement transactions.
When establishing or adjusting charging items or standards, bond registration, depository and settlement institutions shall solicit the opinions of the National Financial Market Institutional Investors (referred to as NAFMII hereinafter), bond issuers and holders, and report the opinions to the PBC.
Article 15 Bond registration, depository and settlement institutions shall sign separate agreements with bond issuers and holders, which shall define the rights and obligations of both parties concerned.
Bond registration, depository and settlement institutions shall, on the basis of the feedback from NAFMII, bond issuers and holders, prepare related agreements in written forms, and report the opinions of parties concerned to the PBC.
Article 16 Bond registration, depository and settlement institutions shall conduct day-to-day monitoring over bond registration, depository and settlement activities, and report anomalies, major risks concerning business operations and technologies as well as major irregularities, if any, to the PBC and carbon copy NAFMII at the same time.
Bond registration, depository and settlement institutions shall cooperate with NAFMII for the purpose of setting up an on-site bond market monitoring system.
Article 17 Bond registration, depository and settlement institutions shall report relevant data and statistics of the previous month within the first five working days of each month, and submit annual work reports to the PBC within the first 20 working days after the conclusion of each calendar year.
NAFMII, bond registration, depository and settlement institutions and the National Inter-bank Funding Center shall set up an information and data exchange mechanism as per the requirements of the PBC.
Article 18 Bond registration, depository and settlement institutions shall release relevant statistical information concerning bond registration, depository and settlement businesses according to relevant rules and regulations, and shall not disclose non-publicly available information.
Chapter 3 Bond Account
Article 19 Bond account refers to an electronic account opened at bond registration, depository and settlement institutions recording the variety and amount of bonds and relevant changes thereof.
Article 20 Bond ownership is demonstrated by the holding of bond accounts. The amount of bonds owned by a bondholder is the balance in depository recorded in one s account. Provided that a bondholder raises any objection against the records in one s bond account, the bond registration, depository and settlement institution concerned shall review the records and give feedbacks in a timely manner; Where the bondholder incurs losses due to data errors as a result of mistakes on part of a bond registration, depository and settlement institution, the institution shall be held liable.
Article 21 Bond registration, depository and settlement institutions shall establish bond account management rules in line with the principle of centralized management of classified bonds.
Article 22 When opening a bond account, a bondholder shall file an application with the bond registration, depository and settlement institution in compliance with the rules and regulations of the PBC, and shall warrant the authenticity, accuracy and completeness of the materials submitted.
The bond account shall be under the real name of the applicant, and shall not be rented, lent or transferred.
Article 23 Bond accounts are classified into proprietary accounts and general agent accounts.
Article 24 One investor can open only one proprietary account, unless otherwise stipulated by the PBC.
A legal person investor shall open a proprietary account in the name of the legal person; a branch office of a commercial bank with the authorization of the legal person entity can open accounts in the name of the branch office; a non-legal person investor such as security investment funds can independently open proprietary accounts in compliance with the rules and regulations of the PBC.
Article 25 Banks dealing with OTC transactions and other institutions processing securities registration, deposit and settlement on exchanges can open general agent accounts at bond registration, depository and settlement institutions to keep a record of the total bond balance in secondary depository.
The total value of bonds owned by the holders of secondary deposit accounts confirmed by the bank dealing with OTC transactions and the other institution processing securities registration, deposit and settlement shall equal the value of the total bond balance recorded in the general agent account concerned, and the bonds under the general agent account shall be strictly separated from those under the proprietary accounts.
Article 26 A bondholder can apply to revoke one s account. A bond registration, depository and settlement institution shall approve the application of revoking bond accounts only if there are no deposited bonds, no undue repos or other unsettled claims, liabilities, pledges or frozen bonds under such an account.
Chapter 4 Bond Registration
Article 27 Bond registration refers to the validation of bond ownership by way of bookkeeping on the part of the bond registration, depository and settlement institution.
Article 28 After bond issuance, the bond issuer shall provide the photocopies of documents on the review, approval, and registration of bond issuance issued by relevant institutions and organizations. The bond registration, depository and settlement institution shall register the bonds in a timely manner upon the confirmation of receipt of the funds needed. If secondary depository is involved, the banks dealing with OTC transactions and the institution processing security registration, deposit and settlement on exchanges shall register the bonds for the holders of secondary bond deposit accounts.
Article 29 During the maturity of bonds, securities that derive from such bonds as per prior agreement with the bond issuer or the legitimate requirements of the bondholders shall be registered as derivative bonds by the bond registration, depository and settlement institution in compliance with relevant documents on bond issuance and the requirements of bondholders.
Article 30 Where the balance in a bond account changes due to transaction settlement, non-transaction transfer, exercise of option and etc., the bond registration, depository and settlement institution concerned shall register the alteration. When secondary deposit accounts are involved, the bank dealing OTC transactions and the institution processing security registration, depository and settlement shall register the alteration for the holders of the secondary bond deposit accounts.
Where there is alteration of a bond issuer due to separation, merger and dissolution, the inheritor of debts shall provide relevant certification materials to the bond registration, depository and settlement institution concerned, and the bond registration, depository and settlement institution shall register the alteration in a lawful and timely manner.
Article 31 The bond registration, depository and settlement institution may freeze up the bonds that are pledged for borrowing when providing bond pledge registration service upon the request of bondholders in a lawful manner or otherwise according to relevant laws and regulations. A bond registration, depository and settlement institution shall mark the frozen bonds in the account concerned in order to indicate the limited rights of such bonds.
Article 32 If the claim and liabilities terminate due to redemption, advance redemption and the exercise of option, the bond registration, depository and settlement institution shall register the revocation of bonds; Where secondary deposit accounts are involved, the bank dealing with OTC transactions and the institution processing security registration, depository and settlement on exchanges shall cancel the balance of bonds in a timely manner.
In case of the redemption of frozen bonds, the bond registration, deposit and settlement institution shall withdraw the principal and the accrued interests, and handle the bonds upon the presentation of effective legal documents by parties concerned.
Chapter 5 Bond Depository
Article 33 Bond depository refers to the centralized custody of bonds for bondholders as well as the management and protection of the rights and interests of bondholders on part of the bond registration, depository and settlement institutions.
Article 34 Bondholders shall entrust the bond registration, depository and settlement institutions to keep the bonds.
The relationship of bond deposit is established once the bond registration, depository and settlement institution opens an account for the bondholder, and terminates upon the revocation of the bond account.
Article 35 Bond registration, depository and settlement institutions shall manage the bonds in a safe and effective manner, ensure the authenticity, accuracy, completeness and safety of the records under the depository accounts. Bond registration, depository and settlement institutions shall have no ownership by any nature of the deposited bonds and shall not embezzle the deposited bonds.
In case of bankruptcy, dissolution, separation, merger and revocation of bond registration, depository and settlement institutions, the bonds deposited at these institutions shall be separated from asset liquidation.
Article 36 A bondholder conducting inter-market transactions may transfer one s bonds that are tradable in inter-market transactions to other depository institutions. Bond registration, depository and settlement institutions shall provide depository transfer service in a timely manner.
Article 37 When bond issuers entrust bond registration, depository and settlement institutions to redeem the principal and interests or to distribute returns, bond issuers shall make timely payment in full to bond registration, depository and settlement institutions. After receiving relevant payment, bond registration, depository and settlement institutions shall process the transactions in a timely manner; if bond issuers fail to fulfill the obligations mentioned above, bond registration, depository and settlement institutions have the right to delay the transactions, and bond issuers should explain the relevant situation to the market in a timely manner.
Chapter 6 Bond Settlement
Article 38 Bond settlement refers to the transfer of bond ownership upon the affirmation of a settlement instruction.
Article 39 Investors or their agents shall send bond settlement instructions in a timely manner as agreed in bond transaction contracts, and relevant bond accounts shall have enough balance for settlement.
Article 40 Bond registration, depository and settlement institutions shall define the format of instructions and means of sending, take effective measures to identify settlement instructions.
Bond registration, depository and settlement institutions shall settle the bonds for investors or their agents in accordance with effective settlement instructions. The settlement is irreversible once completed.
Article 41 The bond settlement mechanism on the inter-bank bond market comprises full-value settlement and net-value settlement. The PBC will release rules concerning net-value settlement in other regulations.
Article 42 Delivery versus payment, payment upon delivery, delivery upon payment and net bond ownership transfer can be applied in bond settlement and fund settlement.
Delivery versus payment refers to the way of settlement featuring synchronized bond ownership transfer and fund payment, with either of the tow as the precondition for the other.
Payment upon delivery refers to the payment of the bond-receiving party upon the full-value delivery of the bond-delivering party.
Delivery upon payment refers to the bond delivery of the bond-delivering party upon the full-value payment of the bond-receiving party.
Net bond ownership transfer refers to the transfer of bond ownership that is independent from the payment of fund.
Both parties concerned in the settlement shall shoulder the risks in bond settlement and fund settlement on their own.
Article 43 The fund and bond that have entered the process of settlement, and the collateral that is involved in the settlement process shall be dedicated to the specific settlement transaction, which cannot be otherwise handled.
Article 44 Bond registration, depository and settlement institutions can facilitate bond lending and borrowing for investors so as to ensure successful bond settlement, on which the PBC will stipulate in other regulations.
Article 45 The ownership transfer of the bonds whose circulation is limited shall be in compliance with relevant laws and regulations as well as the rules identified by relevant authorities in charge.
Article 46 When processing non-transaction ownership transfer such as deduction, inheritance, debt paying, donation and etc., bond registration, depository and settlement institutions shall require the party concerned to provide legitimate and valid legal documents.
Chapter 7 Legal Responsibilities
Article 47 Where bond registration, depository and settlement institutions and their staff are found to be engaged in the following activities, they shall be punished according to Article 46 in the Law of the People s Republic of China on the People s Bank of China:
(1)Negligence caused major loss of bond issuers and bondholders;
(2)Misappropriation of the deposited bonds and funds of bondholders.;
(3)Misrepresentation of the data under relevant bond accounts;
(4)Leakage of the information of the accounts of bondholders;
(5)Other behaviors that breach the Measures.
If the violation constitutes crimes, the violating party (parties) shall be investigated for criminal liabilities.
Article 48 The PBC shall penalize bondholders and bond issuers violating the Measures according to Article 46 in the Law of the People s Republic of China on the People s Bank of China if they breach the Measures and shall be penalized according to the Criminal Law if they perpetrate crimes.
Chapter 8 Supplementary Provisions
Article 49 The Measures is subject to interpretation by the PBC.
Article 50 The Measures shall enter into effect on May 4, 2009.
