· Document Number：Announcement of National Association of Financial Market Institutional Investors No. 7 [2018]

· Area of Law： Leasing

· Level of Authority： Industry Regulations

· Date issued：03-27-2018

· Effective Date：03-27-2018

· Status： Effective

· Issuing Authority： National Association of Financial Market Institution Investors

Announcement of National Association of Financial Market Institutional Investors
(No. 7 [2018])
Announcement on Issuing the Self-disciplinary Convention on the Credit Rating Agencies for Non-financial Corporate Debt Financing Instruments
For the purposes of regulating the credit rating business in the market of non-financial corporate debt financing instruments and promoting the sound and regulated development of the rating business and the effective role of the credit risk disclosure function of rating, according to the Measures for the Administration of Non-financial Corporate Debt Financing Instruments in the Inter-bank Bond Market (Order No. 1 [2008], PBC), Announcement No. 7 [2017] 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 Self-disciplinary Convention on the Credit Rating Agencies 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.
Annex: Self-disciplinary Convention on the Credit Rating Agencies for Non-financial Corporate Debt Financing Instruments
National Association of Financial Market Institutional Investors
March 27, 2018
Annex:
Self-disciplinary Convention on the Credit Rating Agencies 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”) and establishing a self-disciplinary management constraint mechanism for the market behavior of credit rating agencies, to guarantee fair competition in the market and promote the sustainable development of the industry, this Convention is 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 [2008], PBC) and other rules, and the relevant self-disciplinary rules of NAFMII.
Article 2 Credit rating agencies providing credit rating for debt financing instruments (hereinafter referred to as “rating agencies”) shall reach a consensus through consultation and undertake to jointly comply with this Convention.
Article 3 Rating agencies shall comply with the laws and regulations of the state and the relevant provisions issued by the People's Bank of China (“PBC”), consciously accept the self-disciplinary management of NAFMII, and carry out business operation in compliance with laws and regulations.
Article 4 A rating agency shall consciously maintain the financial order, follow the principles of independence, objectiveness and impartiality, and shall not impair the public interests or the lawful rights and interests of the market participants, establish sound professional ethics, actively promote the industrial self-regulation, and strive to create a sound environment for the development of the industry.
Chapter II Self-disciplinary Clauses
Article 5 During the process of providing credit rating for debt financing instruments, a rating agency or rating practitioner shall undertake not have any of the following acts:
(1) Colluding with a ratee to alter the rating materials or distort the rating results.
(2) Undertaking and guaranteeing rating by express or tacit means, or undertaking business by means of unfair competition such as participating in bid for rating, price lower than the business cost and defaming peers, etc.
(3) Disclosing credit rating or rating range to the client or relevant institution before an rating entrustment agreement is signed, including conducting marketing by pre-evaluating rating or rating range and other means, and disclosing the rating range to the client or relevant institution indirectly or directly, among others.
(4) Offering or accepting illicit interests by cash gift, kickback and other means.
(5) Issuing a rating report with false record, misleading statement or major omission caused by a rating agency's subjective intent or failure to perform the due diligence obligation.
(6) Offering rating to entities or debt financing instruments with conflict of interests as prescribed in the laws and regulations, regulatory requirements or self-disciplinary rules with the institution, or conducting transactions of securities or derivative products having conflict of interests with the rating activities.
(7) Other acts causing adverse impact on issuers, investors and other relevant parties in violation of the relevant laws and regulations or regulatory requirements.
Article 6 A rating agency or rating practitioner shall comply with the provisions of the relevant laws and regulations, and self-disciplinary rules, and consciously perform the obligation of self-regulation:
(1) Carrying out business in strict accordance with the relevant regulatory requirements of the PBC and the self-disciplinary rules of NAFMII, and conducting business operation in compliance with laws and regulations.
(2) Guaranteeing independence of the agency and business, independently, objectively and impartially carrying out business, and ensuring that the rating business department is separated from the market department, consulting business department and other business departments.
(3) Establishing and improving the mechanism for the prevention of conflicts of interest including the firewall system, disqualification system, analyst rotation and traceability of persons leaving their positions, among others, effectively identifying, preventing and eliminating conflicts of interest arising from the credit rating business; and disclosing the actual and potential conflicts of interest, measures taken, and possible consequences in a timely manner, if it is impossible to effectively eliminate it.
(4) Improving the transparency of credit rating, fully disclosing the rating methods, rating models and rating results and other relevant information according to the relevant rules and regulatory requirements, ensure the authenticity, accuracy, completeness, timeliness and fairness of the disclosed information, and consciously accept the supervision of the public.
(5) Carrying out rating business under the principle of consistency, adopting the consistent rating procedures and standards for the rating of a same type or a same rating object, and maintaining consistency with the procedures and standards disclosed by this agency.
(6) Establishing and improving the rating quality control mechanism to ensure the timeliness, completeness and reliability of the rating information; and verifying the authenticity and accuracy of the relevant materials issued by other intermediary service institutions, if adopted, within the scope of reasonable knowledge and ability.
Chapter III Implementation of the Convention
Article 7 NAFMII shall be responsible for organizing the implementation of this Convention and conducting supervision and inspection of the compliance with this Convention by the rating agencies. Where a rating agency is verified to have violated this Convention and caused adverse impact, NAFMII shall have the right to impose self-disciplinary punishment according to the Rules for the Self-disciplinary Punishment on the Non-financial Corporate Debt Financing Instrument Market and other relevant provisions, and report the punishment results to the PBC. Where a violator is suspected of violation of laws and regulations, NAFMII may transfer it to the relevant department for further punishment.
Article 8 The rating agencies shall fully understand and consciously perform various self-disciplinary rules of this Convention, and accept and cooperate with NAFMII to carry out self-disciplinary investigation. Agencies violating this Convention shall voluntarily accept the self-disciplinary punishments of NAFMII.
Those who have the acts in violation of Article 5 of this Convention and fall under serious circumstances shall voluntarily accept self-disciplinary punishment decisions such as warning, serious warning, public condemning, suspension of related business, suspension of membership rights, determination of inappropriate candidates, or cancellation of membership.
Article 9 NAFMII shall encourage the member entities of the Convention to supervise each other. Where a member entity of this Convention violates this Convention, each entity and individual shall have the right to tip off to NAFMII; and NAFMII may also carry out investigation on a regular and irregular basis.
Chapter IV Supplementary Provisions
Article 10 During the validity period of this Convention, according to actual needs, the member entities of the Convention may request comments on amendment to this Convention, and amend this Convention after extensively requesting comments.