The China Securities Depositary and Clearing Corporation Limited ("CSDC") has recently issued the revised Implementing Rules for the Registration of Pledge on Securities (Draft for Comment) (the "Draft for Comment") to seek public opinions by October 31, 2019.
The Draft for Comment proposes principal changes in four respects as below. First, the previous pledge business rules and the supporting business guidelines are consolidated into the Implementing Rules for the Registration of Pledge on Securities and the unified pledge business guide that will be applicable in Beijing, Shanghai and Shenzhen. Second, the latest rules for private assets management are reflected and implemented, and the regulatory rules for pledge on securities involved in single-client assets management schemes in securities, fund and futures sectors are unified. The Subparagraph 4 of Article 4 is adjusted to read "the exclusive securities account for the single-client assets management scheme operated by the securities or futures operator", and the documents issued by the principal and by the custodian to prove their knowledge of the pledge on securities, should be presented when the pledge is handled. Third, collection of key elements regarding pledge on securities will be strengthened, and the parties to the business will be required to present truthful information on key elements regarding pledge on securities, on the business application form and bear legal liability accordingly. And fourth, relevant regulatory requirements are reflected and implemented, to regulate, in collaboration with stock exchanges, the transfer of the pledged securities as a result of default.