· Document Number：No. 47 [2016] f the Shanghai Stock Exchange

· Area of Law： Securities

· Level of Authority： Industry Regulations

· Date issued：09-30-2016

· Effective Date：09-30-2016

· Status： Effective

· Issuing Authority： Shanghai Stock Exchange

Notice of the Shanghai Stock Exchange on Issuing the Guidelines of the Shanghai Stock Exchange on the Business of the Issuance of Corporate Bonds in Manner of Book Building
(No. 47 [2016] of the Shanghai Stock Exchange)
All market participants:
For the purpose of promoting the healthy development of the bond market and regulating the business of the issuance of corporate bonds in manner of book building, the Shanghai Stock Exchange (hereinafter referred to as the “SSE”) has developed the Guidelines of the Shanghai Stock Exchange on the Business of the Issuance of Corporate Bonds in Manner of Book Building which are hereby issued for your compliance and implementation.
All the parties participating in the book building shall establish all the internal rules in accordance with the Guidelines by November 30, 2016 and the SSE will conduct the inspection of their implementation of the Guidelines.
Annex: Guidelines of the Shanghai Stock Exchange on the Business of the Issuance of Corporate Bonds in Manner of Book Building
Shanghai Stock Exchange
September 30, 2016
Annex
Guidelines of the Shanghai Stock Exchange on the Business of the Issuance of Corporate Bonds in Manner of Book Building
Chapter I General Provisions
Article 1 For the purpose of regulating the business of the issuance of corporate bonds in manner of book building and protecting the legitimate rights and interests of all market participants, these Guidelines are developed in accordance with the Securities Law, the Measures for the Administration of the Issuance and Trading of Corporate Bonds and the relevant business rules of the Shanghai Stock Exchange (“SSE”).
Article 2 These Guidelines shall be applied to all the corporate bonds which are consistent with the Measures for the Administration of the Issuance and Trading of Corporate Bonds, publicly issued in manner of book building and listed on the SSE.
Article 3 The term “issuance in manner of book building” as mentioned in these Guidelines means that the interest rates and the prices of the publicly issued corporate bonds shall be determined through the enquiry or other market-oriented means, that is, after determining the interest rates or the price ranges through negotiation, issuers and underwriting institutions shall disclose the issuance documents to the market. Then investors shall send their subscription orders and book runners shall record the intentions of the investors as to the interest rate, price or quantity of the corporate bonds for sale. Finally, the placing of the corporate bonds shall be conducted at the interest rates or prices determined in accordance with the agreed rules on the pricing and placing.
Article 4 For the publicly issued corporate bonds, the book building shall be conducted under the principle of fairness, justice and openness.
Article 5 Publicly issued corporate bonds shall be issued in manner of book building by issuers and underwriting institutions at the sites owned by the underwriting institutions or at the SSE according to their own choices. Where the issuance in manner of book building is conducted at the site owned by an underwriting institution, such issuance shall be in compliance with these Guidelines.
Article 6 Underwriting institutions shall treat all types of investors equally and shall not seek illicit interests or transfer interests to other interested parties through the holding of shares for others, trust or other means; shall not, in a direct manner or through the interested parties, fund the investors participating in the subscription; and shall not have any other behavior that violates the fair competition or disrupts the market order.
Article 7 The corporate bonds to be issued in manner of book building shall be subscribed by fax or other means. The SSC may raise its efficiency and develop and improve the issuance system based on the market demand.
Article 8 All participants of the book building which include issuers, book runners, lead underwriters, member of underwriting syndicates, investors, law firms and other relevant institutions shall, when engaging in the business of book building as prescribed by these Guidelines, comply with the relevant laws, regulations, administrative rules, regulatory documents , these Guidelines or other business rules of the SSC, strictly perform their statutory duties, and assume the corresponding legal liabilities.
The SSC shall implement the self-discipline regulation of all the participants of the book building in accordance with the laws, regulations, administrative rules, regulatory documents, these Guidelines and other business rules.
Article II Participants of the Book Building
Article 9 The participants of the book building include issuers, book runners, lead underwriters, members of underwriting syndicates, investors, law firms and other relevant institutions.
Article 10 Issuers of corporate bonds shall determine the book runners and, based on the adequate enquiry, negotiate with the lead underwriters to determine the arrangement for the issuance in manner of book building as well as the interest rates or the price ranges regarding the book building.
Article 11 A book runner is a lead underwriter commissioned by the issuer to be in charge of the operation of the book building. Where an issuer chooses multiple institutions as the lead underwriters, it shall designate one of these institutions to lead the book building work and conduct the bookkeeping at the only designated site.
Article 12 A book runner shall perform the following duties:
1. negotiating with the issuer on the time schedule and detailed plan for the book building;
2. negotiating with the issuer to determine the interest rate or the price range regarding the book building based on the adequate enquiry;
3. recording the intentions of the investors subscribing the corporate bond on the interest rate or the price and quantity;
4. organizing the book building work, maintaining the order of the booking on site, and ensuring the smooth progress of the book building work;
5. conducting the pricing and placing of the corporate bond in accordance with these Guidelines and the relevant agreements;
6. recording and explaining the decision-making process of all the important matters in the process of the book building and keeping the relevant documents and materials related to all the stages of the procedure of the book building in a proper manner;
7. conducting the information disclosure regarding the issuance in manner of book building in accordance with the relevant provisions;
8. conducting other work related to the issuance in manner of book building as required by the SSC or as commissioned by the issuer.
Article 13 When forming an underwriting syndicate in accordance with the relevant provisions and the actual demand, the lead underwriters shall inquire with the members of the syndicate and the potential investors under the principle of diligence and consciousness, and participate in the determination of the interest rate or the price range regarding the book building, subscription, placing, distribution and payment.
Article 14 Members of an underwriting syndicate shall join the syndicate and participate in the enquiry, subscription, distribution and payment under the arrangement on the issuance in manner of book building and the relevant agreements.
Article 15 Where there are two or more underwriting institutions jointly undertaking the lead underwriting for the issuance of the corporate bond, all the underwriting institutions undertaking the lead underwriting shall jointly assume the responsibility of the lead underwriter and fulfill the relevant obligation. Where an underwriting syndicate is comprised of three or more underwriting institutions, it can be equipped with a co-lead underwriter assisting the lead underwriter with the organization of the underwriting activities.
Article 16 Investors shall actively provide cooperation in the enquiry for the issuance of corporate bonds, feed back the investment demand to members of underwriting syndicates in a timely and accurate manner, and participate in the subscription, distribution (if any) and payment in accordance with the issuance documents.
The investors participating in the subscription shall meet the requirements of the SSE or the prospectus on the suitability management of bond investors.
Article 17 Law firms shall witness such matter as the process of the issuance in manner of book building, the placing, the qualifications of the investors participating in the subscription and the capital transfer and issue special legal opinions.
Article 18 The participants of the book building shall not violate the fair competition, conduct the transfer of illicit interests or disrupt the market order; the relevant personnel shall not directly or indirectly seek or transfer illicit interests for themselves or others.
Chapter III Internal Control Rules for Book Building
Article 19 A book runner shall, in accordance with the laws and regulations and these Guidelines, establish and improve the internal control rules for the book building, specifying the operation rules for the book building, the decision-making mechanism, the risk control mechanism, the emergency disposal mechanism and the requirements on the filing of the relevant documents and materials.
Article 20 Book runners and members of underwriting syndicates shall separate the issuance business from the investment and transaction business, so as to achieve the effective separation of the business procedure from the personnel arrangement.
Article 21 A book runner shall designate the department responsible for the issuance of corporate bonds in manner of book building and the compliance or risk control department independent from the issuance department shall conduct the full-process supervision over the book building. Where there is no compliance or risk control department, the person who is in charge of compliance or risk control shall conduct the supervision.
Article 22 Book runners shall conduct the collective decision-making as to the interest rate or price for the issuance of the corporate bond, the placing, the distribution and other important matters concerning the book building. There shall be no less than three book runners participating in the collective decision-making. The personnel who conduct the supervision shall not participate in the decision-making, but shall conduct the full-process supervision over the decision-making and confirm the result of the decision-making in writing.
Article 23 A book runner shall properly keep the documents and materials related to all the stages of the book building which include but are not limited to the paper documents on the subscription order, the basis for the pricing and distribution, the placing result of the book building and the record of the process of the collective decision-making as well as the electronic documents such as the emails, the telephone recordings, the calculation program for the book building and the on-site surveillance video of the book building for at least five years after the completion of the repayment of the capital with interest of the current corporate bond.
Chapter IV On-site Management of Book Building
Article 24 Where the issuance of a corporate bond in manner of book building is conducted at the site owned by an underwriting institution, the book runners shall specify the area used exclusively for the book building. The physical space of the area for the book building shall satisfy the need of the book building and shall be relatively independent from the areas for other business for of the sake of safety and confidentiality.
Article 25 The sites for the book building shall be equipped with answering machines, computers, fax machines, printers and other special equipment which are workable and can provide smooth communication. The personnel who participate in the book building on site shall negotiate the relevant matters with the outside only through the special communication tools at the site or the communication tools approved by the book runners and the book runners shall well implement the recording and explanation work. The on-site supervisors for the book building shall supervise the use of the communication tools.
Article 26 The sites for the book building shall be equipped with video surveillance tools and book runners shall videotape the process of the book building. The video materials shall be kept for at least five years after the completion of the repayment of the capital with interest of the current corporate bond.
Article 27 The personnel who participate in the book building on site include the relevant personnel of issuers, the personnel responsible for the issuance and the personnel responsible for the internal supervision of book runners, lawyers and other personnel related to the issuance who are approved by book runners (hereinafter referred to as the “on-site personnel”).
Article 28 Before the book building, book runners shall specify and record the personnel who participate in the book building on site.During the book building, on-site personnel shall sign their names for confirmation after entering the sites for the book building and anyone who is not one of the on-site personnel may not enter the sites for the book building. Where it is necessary to enter the sites, the consent of the book runners shall be obtained and the relevant information such as the reasons for entering the sites shall also be recorded. During the book building, if one of the on-site personnel has to leave from the sites for the book building, the book runners shall record the reason and time of his or her leaving and other relevant information, and make sure that he or she will not divulge any information about the book building.
Article 29 During the book building, the on-site personnel may not divulge the quotation information, take the documents on the book building out the of sites or provide others outside of the sites with the photocopy or copy of such documents except as otherwise provided by the relevant laws and regulations and these Guidelines.
Chapter V The Procedure of the Book Building
Article 30 Before the book building, a book runner shall conduct the enquiry toward all members of the underwriting syndicate and the potential investors and clearly record the enquiry.
Article 31 Before the book building, a book runner shall urge and assist the issuer in disclosing the prospectus, the abstract of the prospectus, the issuance announcement, the credit rating report and other issuance documents no later than the trading day immediately before the day of book building.
An issuance announcement shall specify the issuance procedure, the issuance targets, the interest rate or price range, the principles for determining the interest rate or price range, the rules for placing, the site for the book building and other arrangements.
Article 32 Investors shall directly send written subscription orders to the book runner in accordance with the issuance announcement, or send the written subscription demand to members of the underwriting syndicate which shall send the written subscription orders to the book runner. Members of the underwriting syndicate shall, based on the subscription demand of the investors and their own investment demand, send written subscription orders to the book runner, and preserve all the written subscription demand and orders they accepted and sent and form up the subscription record.
Article 33 A book runner shall accept subscription orders at the time agreed in the issuance announcement and record the information about all the valid subscription orders which shall serve as the basis for the pricing and placing. The subscription interest rates or prices and quantity shall be consistent with the corresponding subscription orders.
Article 34 A book runner shall determine the issuance interest rate or the price in strict accordance with the pricing mode disclosed in the issuance announcement, and effectively make the written record and explanation. No institution or individual may intentionally interfere in or manipulate the issuance interest rate or price.
Article 35 A book runner shall conduct the placing of the corporate bond under the principle of the priority in terms of the interest rate (price). When it comes to the marginal area, the book runner shall conduct the placing in proportion in principle and may make reasonable adjustments based on actual situations, and record the basis for the placing and the process of the decision-making at the same time.
Article 36 After the determination of the placing result, the book runner shall send the documents on the confirmation of the placing and the payment notice to the members of the underwriting syndicate and the investors which are placed, and arrange the collection and transfer of the raised fund in accordance with the documents on the issuance.
Article 37 A book runners shall set the distribution period base on the distribution need and make arrangements for the members of the underwriting syndicate to conduct the distribution according to the agreement.
Article 38 The issuer and the book runner shall publicly disclose the result of the book building to the market no later than the trading day immediately after the book building. Where the payment period expires and there is a change to the issuance result, the issuer shall publicly disclose the final result of the issuance in manner of book building to the market before its listing or transfer.
Article 39 A book runner shall arrange the work of the collection and transfer of the raised fund in accordance with the documents on the issuance and the members of the underwriting syndicate and the investors shall cooperate with the book runner in completing the payment within the agreed time limit. Where the payment is not made in time, the book runner shall cooperate with the issuer in conducting the emergency disposal in accordance with the documents on the issuance or the agreement.
Article 40 A book runner shall formulate the emergency disposal plan and effectively conduct the emergency disposal work for the issuance in manner of book building.
Before the book building, if a policy adjustment which will probably have a major impact on the issuance of the corporate bond is made or there is a clear evidence showing that the interest rate or the price range seriously deviates from the market, the lead underwriter and the issuer may delay the issuance or adjust the interest rate or the price range upon consensus through negotiation and disclose the delay on the issuance or the adjustment to the interest rate or the price range, the relevant reasons and the evidence in a timely manner and make report to the SSE at the same time.
During the book building, upon the emergence of any man-made mal-operation, malfunction of the system or payment default which may affect the normal issuance and the listing, the issuer and the book runner shall conduct the relevant emergency disposal work in accordance with the emergency plan determined beforehand, make disclosure in a timely manner and make report to the SSE at the same time.
Article VI Self-discipline Management
Article 41 Underwriting institutions shall establish and improve the relevant rules for the book building in accordance with these Guidelines and send them to the SEE for future reference.
Article 42 Underwriting institutions shall keep the materials relevant to the book building which include but are not limited to the paper documents, the recordings, the electronic materials and the videos and file such materials for futures reference. The materials shall be able to reflect the whole process of the issuance in manner of book building in a truthful and comprehensive manner and shall be produced as required by the Securities Association of China and kept properly.
Article 43 Issuers and underwriting institutions shall not conduct the exaggerated publicity, or induce or mislead investors by false advertising or other illicit means.
Article 44 Where a party participating in the book building violates the laws, regulations, rules, these Guidelines or other business rules of the SSE, the SSE may, in light of the seriousness of circumstances, take such regulatory measures or disciplinary actions as oral warning, written warning, regulatory interview, ordering the violator to make correction with a specific time limit, ordering the violator to make public rectification, clarification or explanation, suspending the acceptance of the relevant documents submitted by the violator, circulating a notice of criticism and giving public reprimand.
Regulatory measures and disciplinary actions may be taken separately or concurrently. The disciplinary actions or other measures which are taken shall be written into violators' credit archives.
Article 45 The SSE may conduct the on-site or off-site inspection of the implementation by underwriting institutions of the issuance in manner of book building on a regular or irregular basis. Underwriting institutions shall provide cooperation and shall not refuse to provide or delay the provision of the relevant materials for any reason, or provide unauthentic, inaccurate or incomplete materials. The content of the inspection includes:
1. the establishment of the internal control rules for the book building;
2. the compliance of the project in terms of issuance application, promotion, pricing and placing;
3. Whether the book runner diligently and dutifully urge and assist the issuer in disclosing the information in a truthful, accurate, complete and timely manner;
4. The completeness of the archival documents and materials relevant to all stages of the book building;
5. other necessary content.
Upon the discovery of any violation of the laws, regulations, rules, regulatory documents, these Guideline or other business rules of the SSE, the SSE shall take regulatory measures against or disciplinary actions against the relevant institutions or personnel, and may demand the replacement of the site for book building.
Article 46 Where an underwriting institution fails to establish or improve the internal control rules for the book building in accordance with these Guidelines or fails to report the relevant information as required, the SSE shall, in light of the seriousness of the circumstance, take regulatory measures or disciplinary actions, and may demand the replacement of the site for book building.
Article 47 Where the underwriting institution or the on-site personnel for the book building fails to conduct the on-site management for the book building in accordance with these Guidelines or the issuance announcement, or the procedure of the book building is not in compliance with these Guidelines, the SSE shall, in light of the seriousness of the circumstance, take regulatory measures or disciplinary actions, and may demand the replacement of the site for book building.
Article 48 Where a party participating in the book building and its employees intentionally disturb the issuance interest rate or the price and the placing, or violate the laws, regulations, rule, regulatory documents, these guidelines or other business rules of the SSE by default, not making the relevant payment within the prescribed time limit or tunneling, the SSE may, in light of the seriousness of circumstances, take regulatory measures or disciplinary actions. For any suspected violation of the laws and regulations, the SSE may transfer the matter to the China Securities Regulatory Commission (“CSRC”) or other relevant departments for handling at the same time.
Article 49 Upon the discovery of any violation of these Guidelines by any underwriting institution and its relevant personnel, a market participant may report or file a complaint to the SSE.
Article VII Supplementary Provisions
Article 50 The mode of the issuance of the non-publicly issued corporate bonds shall be determined by underwriting institutions and issuers through negotiation and if the issuance in manner of book building is adopted, these guidelines shall be applied analogically. Where the information disclosure is involved, the scope of the disclosure shall be limited to the qualified investors of the non-publicly issued corporate bonds and the ultimate number of the targets of the issuance shall not exceed 200.
Article 51 These Guidelines shall be subject to the interpretation of the SSE.
Article 52 These Guidelines shall come into force on the date of issuance.