The People's Bank of China ("PBC") has recently drafted and issued the Administrative Measures for Standardized Notes (Draft for Comment) (the "Draft for Comment") for public comments by March 14, 2020.
The Draft for Comment is comprised of 32 articles divided into eight chapters, namely general provisions, major participating institutions, underlying assets, establishment of standardized notes, information disclosure, investors protection, supervision and administration, and supplementary provisions. Among others, the Draft for Comment sets forth the administrative requirements over underlying assets, including the conditions, the methods to collect underlying assets, registration and custody, fund custody and qualified investment. It is provided, for example, that the original note holder, the depository institution and the standardized negotiable instrument investor shall enter into a deposit agreement to clarify the rights and interests on the standardized negotiable instrument and the rights and obligations of each party. The deposit agreement shall comply with applicable laws and regulations and the PBC's requirements, and provide clarity on at least nine major issues including "purposes of establishing the standardized negotiable instrument". The Draft for Comment also specifies the subjects responsible for information disclosure for standardized notes and the contents of information disclosures, the risk warning obligations due by the relevant parties, and the information disclosure principles that must be followed.