Working Rules for Investigation of Credit Rating Business for Non-financial Corporate Debt Financing Instruments
· Document Number：Announcement of National Association of Financial Market Institutional Investors No. 8 
· Area of Law： Leasing
· Level of Authority： Industry Regulations
· Date issued：03-27-2018
· Effective Date：05-01-2018
· Status： Effective
· Issuing Authority： National Association of Financial Market Institution Investors
Announcement of National Association of Financial Market Institutional Investors
(No. 8 )
Announcement on Issuing the Working Rules and Procedures for the Investigation and Interview of the Credit Rating Business for Non-financial Corporate Debt Financing Instruments
For the purposes of strengthening the self-disciplinary management of the credit rating industry, promoting the effective investigation and interview of rating agencies, and enhancing the work quality and level of credit rating, according to the Measures for the Administration of Non-financial Corporate Debt Financing Instruments in the Inter-bank Bond Market (Order No. 1 , PBC), Announcement No. 7  of the People's Bank of China and the Self-disciplinary Guidelines for the Credit Rating Business of Non-financial Corporate Debt Financing Instruments, National Association of Financial Market Institutional Investors (“NAFMII”) has organized market participants to develop the Working Rules and Procedures for the Investigation and Interview of the Credit Rating Business for Non-financial Corporate Debt Financing Instruments, as deliberated and adopted at the fourth meeting of the Fifth Executive Council of NAFMII and granted recordation and approved by the People's Bank of China, is hereby issued and shall come into force on May 1, 2018.
Annex: Working Rules and Procedures for the Investigation and Interview of the Credit Rating Business for Non-financial Corporate Debt Financing Instruments
National Association of Financial Market Institutional Investors
March 27, 2018
Working Rules and Procedures for the Investigation and Interview of the Credit Rating Business for Non-financial Corporate Debt Financing Instruments
Chapter I General Provisions
Article 1 For the purposes of regulating the credit rating business of non-financial corporate debt financing instruments (hereinafter referred to as “debt financing instruments”) in the interbank bond market, enhancing the work quality of investigation and interview of rating, guaranteeing the fairness, consistency and completeness of credit rating, and promoting the sound development of the market, these Rules and Procedures are hereby developed according to the Measures for the Administration of Non-financial Corporate Debt Financing Instruments in the Inter-bank Bond Market (Order No. 1 , PBC) and other rules, and the relevant self-disciplinary rules of NAFMII.
Article 2 Investigation and interview is the basis for the quality control and guarantee of rating. To guarantee the timeliness, adequacy and reliability of the information on which rating agencies base, credit rating agencies shall effectively carry out investigation and interview, to accurately and comprehensively identify and determine the credit risks of rating objects.
Article 3 For the purpose of these Rules and Procedures, investigation and interview means a series of activities of collecting, reviewing, analyzing and verifying the information required for rating within the reasonable scope carried out by the credit rating agencies during the process of the initial rating and follow-up rating of the debt financing instruments issuers and debts. The application of the credit rating results to the rating business and subsequent follow-up rating of the debt financing instrument registration issuance documents shall be governed by these Rules and Procedures.
Article 4 Credit rating agencies shall conduct investigation and interview of rating objects under the principles of independence, objectiveness and impartiality. Those who participate in investigation and interview shall have good professional ethics and professional competence, and carry out investigation and interview under the principles of independence, objectiveness, honesty and good faith, and due diligence and accountability. The enterprises rated and rating clients shall cooperate with the credit rating work, arrange investigations, interviews and other necessary activities relevant to rating, provide relevant materials in a timely manner, and ensure the authenticity, accuracy and completeness of the materials.
Chapter II Investigation and Interview Process and Methods
Article 5 After accepting the commission of rating, a credit rating agency shall form a project team and pay attention to maintaining the continuity of members and the rotation mechanism. The number of project team members and the qualifications of members shall satisfy the relevant regulatory requirements of the People's Bank of China. A team leader shall have at least 3 years of experience in credit rating and be responsible for the entire process of investigation and interview.
Article 6 A project team shall, according to the characteristics and operating conditions of the rating objects, determine the content of data collection, develop a detailed investigation outline, and collect information through multiple channels and multiple methods. The materials to be collected shall include at a minimum:
(1) The macroeconomic environment, regional economic conditions, industry (or sector) development trends, policies and regulatory measures, among others.
(2) The basic data, production and business operation, financial data and other relevant information of the rated enterprise, including but not limited to the corporate tax registration document, bylaws, shareholders' information and shareholding ratio, corporate governance, organizational structure, personnel status, production and business operation data, relevant materials or description of key technology level, research and development status, system documents, business plans and summary reports, development plans, financial audit reports of the company and main subsidiaries, credit information, the company and its controlling shareholders, actual controllers, and relevant records of credit enhancement agencies in the credit system of the People's Bank of China, the State Administration for Industry and Commerce, the State Administration of Taxation, the People's Court, and other credit information disclosure platforms, among others.
(3) The issuance plan, the purpose of the funds raised, the arrangement for the measures for guarantee for the repayment of debts and the debt repayment plan, among others, shall also be included, if the rating object is a debt financing instrument.
(4) The relevant materials of the underlying assets in the asset pool, the design scheme of the transaction structure and the materials of the entities involved, among others, shall also be included, if the rating object is an asset-backed note.
(5) The credit enhancement program, relevant materials of the credit enhancement agency or the relevant materials of the pledged assets, if there are credit enhancement measures for debt financing instruments.
(6) Other relevant materials, including historical breach records, external guarantees, lawsuits, and other matters that have a significant impact on the credit level.
Article 7 The channels for collecting the rating information shall include:
(1) the rated enterprises and relevant institutions with business, management, supervision and other relationships with the rated enterprise, including the rated enterprises' important clients, controlling shareholders, relevant financial institutions, government departments, judicial departments and other social credit agencies, among others, and
(2) the open information disclosure media, Internet and other reliable channels, including the information issuance media designated by regulatory institutions, information issued by the authoritative statistical departments, professional information and data providers, and website or publications of the industry association, among others.
Article 8 On-site investigation and interview is an important method for credit rating agencies to understand and master the credit risks of rating objects. A credit rating agency shall have in-depth understanding of the corporate governance, production, operation, and financial operations, among others, of the rating object through on-site interviews, visiting production, operation and management premises and other methods, and compare with the materials obtained through other channels for confirmation, to fully and objectively reveal credit risks.
The project team shall review and analyze the relevant information collected previously and form a work program for on-site investigation and interview which shall include the site of on-site investigation, interviewer, interviewee, interview time, interview content, and matters requiring cooperation of the rating object.
Where on-site investigation and interview is not carried out, telephone interview, letter inquiry and other effective alternative methods shall be adopted and records shall be effectively kept, to ensure the quality of the rating information.
Article 9 Under the following circumstances, a credit rating agency shall conduct on-site investigation and interview of the rating objects:
(1) Initial rating of the rated enterprise is conducted.
(2) Consecutive rating of the multi-phase debt financing instruments issued by a same enterprise is conducted, and the interval with the most recent on-site investigation and interview exceeds one year.
(3) When tracking rating is conducted, the interval with the most recent on-site investigation and interview exceeds two years, or the members of the project team have been completely replaced after the previous on-site investigation and interview.
Where an important matter that may affect the solvency as set out in the Rules for Disclosure of Information on Non-financial Corporate Debt Financing Instruments in the Inter-bank Bond Market occurs to a rated enterprise, the project team shall, after knowing or should have knowing the matter, assess whether or not to conduct on-site investigation and interview in a timely manner; and shall report to the person in charge of the department or the rating director for review, and record and keep the rating situation in detail, if it decides not to conduct on-site investigation and interview upon prudential assessment.
Article 10 Sufficient interview time shall be arranged for on-site investigations and interviews by credit rating agencies and the on-site investigation and interview for the initial rating shall not be less than three days.
Article 11 Interviewees shall include the senior executive of a rating object, the person in charge and other relevant personnel of the management department, the financial department and the main business department, the actual controller and the person in charge of a subsidiary whose total assets, net assets, operating revenues or net profits in the previous year account for more than 35% of the company's consolidated data. Where no on-site interview of an aforesaid object is available, the project team shall list the reasons in the interview records and conduct supplementary investigations by other effective means.
If necessary, the project team shall interview the affiliated institutions of the rating object, including but not limited to the financial institutions with business contacts with the rating object, major shareholders, industry management department or industry association, major entities with business contacts therewith, external guarantee objects or credit enhancement agencies and other external affiliated institutions.
Article 12 A project team shall focus on understanding the risks of the rating object or relevant institution, put forward specific questions, keep detailed interview records, and ensure the integrity and accuracy of the interview records.
The interview records shall, at a minimum, include the names of the interviewees, the names and positions of the interviewees, the location of the interview, the duration of the interview and the content of the interview. After the end of an interview, the interviewers and interviewees shall affix signatures to the interview records for confirmation, and the interview records shall be kept as working papers in a unified manner.
Article 13 To obtain and verify the information on credit risk and confirm the production, operation and management status of the rating object or the existing abnormal phenomena, the project team shall inspect its main production and operation premises and important underlying assets, among others.
Article 14 The investigation and interview work shall run through the whole process of rating. After the end of an on-site interview, the project team may, according to the rating needs, conduct off-site investigation or hold another on-site interview.
A credit rating agency shall continuously monitor the credit changes of the rated enterprises, and communicate with the rating object and concerned parties in a timely manner to obtain and assess the relevant information upon discovery of any information that may be reasonably expected to affect the risk status of the rated enterprises.
Article 15 A credit rating agency shall evaluate the timeliness, completeness and reliability of the information collected and verify the authenticity, accuracy and consistency of the information on which the rating is based within a reasonable range. Where a credit rating agency finds any material difference in the information or has any objection against the materials, it shall carry out key investigation and review of the relevant matters and require the rating object to offer explanation; and if necessary, it shall further understand the situation from the underwriter, accounting firm, asset appraisal agency, law firm and other professional institutions.
Article 16 A credit rating agency shall keep the list of rating materials, interview outlines, on-site interview records, telephone interview records, mail records and information assessment status, among others, as working papers, and incorporate other relevant materials of the rating objects obtained into the project archival for safekeeping in a timely manner.
Chapter III Internal Management
Article 17 A credit rating agency shall develop and timely improve the internal rules on investigation and interview of relevant rating projects, and establish a quality assurance and liability mechanism for the rating information, including the investigation interview rules and quality assurance system for the rating information, among others.
Article 18 The compliance management department of a credit rating agency shall examine and supervise the compliance of the investigation and interview work, timely propose the improvement measures for the existing problems and supervise the implementation thereof.
Article 19 During the process of investigation and interview, rating personnel shall not fall under the following circumstances:
(1) Discussing the rating fees with the staff member of a rating object, or inducing an institution to be rated to pay high fees for obtaining a higher rating.
(2) Undertaking to grant a certain rating to a rating object or relevant institution.
(3) Raising requirements irrelevant to the rating work, and implicitly indicating, demanding or accepting any form of economic benefits from the customer.
(4) Utilizing his or her own identity, status, and materials and information on the rating object obtained in practice to seek personal gain for himself or herself or any other person.
(5) Instigating and cooperating with a rating object and another stakeholder to alter or conceal the relevant rating information.
(6) Other violations of laws and regulations that affect the independence and impartiality of rating.
Article 20 A credit rating agency and its relevant staff member shall perform the confidentiality obligations in the investigation and interview work according to the law; and before the rating information is disclosed according to the law, except for the regulatory requirements, the purpose agreed in the rating agreement, the client and the rating object, the credit rating agency and its relevant staff members shall perform the obligation of maintaining information confidential, and shall not disclose the relevant rating information to other internal personnel or any external party.
Chapter IV Self-disciplinary Management and Punishment
Article 21 NAFMII may, by on-site or off-site means, investigate the implementation and compliance of the investigation and interview of the rating projects of credit rating agencies. Credit rating agencies shall actively cooperate with investigations and provide authentic, accurate and complete materials in a timely manner.
Article 22 Where a credit rating agency or its practitioner violates the relevant provisions of these Rules and Procedures, NAFMII shall, in light of the circumstance of violation of regulation and according to the Rules for the Self-disciplinary Punishment on the Non-financial Corporate Debt Financing Instrument Market, impose corresponding self-disciplinary punishment upon the violator and report the punishment results to the People's Bank of China. Where a violator is suspected of violation of laws and regulations, NAFMII may transfer it to the relevant department for further punishment.
Chapter V Supplementary Provisions
Article 23 The secretariat of NAFMI shall be responsible for interpreting and amending these Rules and Procedures.
Article 24 These Rules and Procedures shall come into force on May 1, 2018.