Administrative Provisions on Subordinated Debts of Securities Companies

Administrative Provisions on Subordinated Debts of Securities Companies

Announcement of the China Securities Regulatory Commission [2012] No.51

December 27, 2012

Administrative Provisions on Subordinated Debts of Securities Companies are hereby promulgated and shall come into effect as of the date of promulgation.

Administrative Provisions on Subordinated Debts of Securities Companies
　
Article 1 For the purposes of regulating the administration of the subordinated debts of securities companies and maintaining the lawful rights and benefits of the investors, these Provisions are hereby enacted in accordance with the Securities Law, the Regulations on Supervision and Administration of Securities Companies and other laws and administrative regulations.
　
Article 2 In these Provisions, the "subordinated debts of the securities companies" refer to the subordinated debts that are borrowed by securities companies from shareholders or institution investors and that are with repayment priority order lower than that of common debts (hereafter referred to as the "subordinated debts") and the negotiable securities that are issued by securities companies to the institution investors and that are with repayment priority order lower than that of common debts (hereafter referred to as the "subordinated bonds"). The subordinated debts and subordinated bonds shall be in the same repayment order of securities companies.
The "institution investors" as mentioned in the previous Paragraph refer to, (1) Financial institutions which are established with approval by financial supervisory authorities, including but not limited to commercial banks, securities companies, fund management companies, trust companies and insurance companies;(2) Wealth management products issued by above-mentioned financial institutions to investors, including but not limited to banking wealth management products, trust products, investment-purpose insurance products, fund products, and securities company's asset management products; (3) Enterprise legal persons with registered capital of not less than RMB10 million; (4) Partnership with the capital contributions subscribed by partners of not less than RMB50 million and the paid-in capital contributions of not less than RMB10 million; and (5) Other investors as recognized by China Securities Regulatory Commission.
The subordinated bonds of securities companies shall only be issued by non-public manner, and the advertisements, public induction or disguised public means shall not be employed. The number of the institution investors of the bonds of each stage shall not exceed 200.
　
Article 3 The subordinated debts include long-term subordinated debts and short-term subordinated debts.
The subordinated debts borrowed or issued by the securities companies with the period of more than one year (exclusive) shall be defined as the long-term subordinated debts.
The subordinated debts with the period of more than 3 months (inclusive) but less than one year (inclusive) borrowed or issued by securities companies to meet the normal needs in liquid capital shall be defined as short-term subordinated debts.
　
Article 4 The long-term subordinated debts may be calculated into net capital at certain percentage. Where the maturity is longer than three years, two years or one year, long-term subordinated debts may respectively and in principle be calculated into net capital at the percentage of 100%, 70% and 50%.
Short-term subordinated debts may not be calculated into net capital. Where a security company borrows or issues short-term subordinated debts for the purpose of meeting the needs in liquid capital for underwriting stocks or bonds business, it may deduct the risk capital reserves in light of the following standards,
1.
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