To continuously strengthen the front-line regulation and urge market participants to take responsibility, the Shanghai Stock Exchange (SSE) recently circulated a notice of criticism against corporate bond issuers, including Fuguiniao Co., Ltd., Wuxi Wuzhou International Decoration City Co., Ltd., Hongye Chemical Group Co., Ltd., CEFC Shanghai International Group Co., Ltd., Bright Oceans Group Co., Ltd. and Dandong Port Group Co., Ltd.
To improve the risk prevent and control system of the bond market and protect investor’s legitimate rights and interest, the SSE issued the “SSE Guidelines for Credit Risk Management on Corporate Bonds in Duration (Trial)” (the Guidelines for short) in March 2017. The Guidelines standardizes the risk management responsibility of corporate bond issuers, guides and urges them to monitor and warn credit risks continuously and proactively, and requires them to communicate with investors and trustees and take effective measures to defuse credit risks. All market participants have actively implemented the Guidelines since its issuance, and good effects have been achieved, playing a positive role in guaranteeing the legitimate rights and interest of investors. However, several corporate bond issuers have not conformed to relevant regulations when handling bond risks and thus impaired investor’s legitimate rights and interest.
The 6 issuers being criticized in the notice have not performed their duties in credit risk management to different degrees, such as being slack to fulfill relevant promises favoring the risks defusing, not making and implementing the risk defusing and handling plan according relevant regulations, not making pre-warning against risks or disclosing the progress in risk handling in time, not cooperating with trustees in risk management according to relevant regulations, and not disclosing a periodic report in time. In addition, some senior managers of the issuers have not been diligent and responsible enough to urge the issuers to fulfill their duties or promises and have been slack or refused to cooperate in the normal duty fulfillment or right protection of other institutions and individuals. These behaviors have affected the issuers’ progresses in handling credit risks. The SSE also circulates a notice of criticism against the senior managers holding primary liability for these behaviors.
The bond issuers repaying the capital and interest according to relevant regulations and promises, and the issuers and relevant intermediaries earnestly managing credit risks and disclosing relevant information is the prerequisite and foundation for maintaining the integrity of the bond market, protecting investor’s legitimate rights and interest, and boosting the sound development of the bond market. Next, the SSE will continue to impose strict punishment on any violations found in the self-regulation, further boost the improvement of the judicial remedy for the bond market, and optimize the transfer system for defaulted bonds, thus promoting the high-quality development of the bond market.