In accordance with the Notice No.3 [2016] of the People's Bank of China, the Shanghai Head Office of the People's Bank of China has formulated the Implementation Rules for Registration and Regulation of Inter-Bank Bond Market Investment by Overseas Institutional Investors, which is effective on the date of its release.
The Shanghai Head Office of the People's Bank of China
May 27, 2016
Implementation Rules for Registration and Regulation of Inter-Bank Bond Market Investment by Overseas Institutional Investors
Article 1 Pursuant to the requirements of the Notice No.3 [2016] (hereinafter referred to as the Notice), the Implementation Rules are made for registration and regulation of investment in the inter-bank bond market by overseas institutional investors.
Article 2 The overseas institutional investors in the Implementation Rules refer to the overseas institutional investors stipulated by the Notice.
The settlement agents in the Implementation Rules refer to the inter-bank market settlement agents competent in international settlement business and entrusted by overseas institutional investors to provide bond agent trading and settlement services.
Article 3 A settlement agent shall perform the obligation of examining the qualifications of overseas institutional investors based on three principles, namely, know your customer, know your business and customer due diligence.
Article 4 A qualified overseas institutional investor can apply for investment registration at the People’s Bank of China (PBC) Shanghai Head Office through an entrusted settlement agent, who shall submit on behalf of the overseas institutional investor the Registration Form for Overseas Institutional Investors in China’s Inter-Bank Bond Market (see Appendix) and the agent settlement agreement. The overseas institutional investors that have already got access to the inter-bank bond market do not need to register for a second time, unless otherwise stipulated by the PBC.
Article 5 When a settlement agent makes investment registration, on behalf of an overseas institutional investor, for the first time, the following additional documents shall be submitted to the PBC Shanghai Head Office:
(1) Copy of the administrative license approval issued by the PBC for the settlement agent in the inter-bank bond market;
(2) Documents to prove competency in international settlement business;
(3) Documents to illustrate complete separation in assets, staff, system and institution arrangements between the proprietary business of investment management and agent business of investment for overseas institutions;
(4) Administrative system for the agent bond trading and settlement business, including but not limited to administrative measures for agent bond trading and settlement business, business operation procedures, risk control mechanism and code of conduct for staff;
(5) Documents to demonstrate information technology facility, technical support staff, and rules for information system management, which are needed for bond trading and settlement services, are in place;
(6) Copies of certificates to prove relevant personnel, including heads and professional staff of the agent bond trading and settlement unit, have attended the training programs relevant to the inter-bank bond market investment;
(7) A statement on no violation of laws nor serious incompliance of rules and regulations in preceding three years;
(8) Commitment that the submitted materials are true, accurate and complete, without false records, misleading statements or major omissions, and the obligation of examining the overseas institutional investor’s qualifications have been acknowledged and performed; and
(9) Other documents required by the PBC.
Article 6 When a settlement agent is entrusted to provide asset custody service for an overseas institutional investor for the first time, the following complementary documents shall be submitted to the PBC Shanghai Head Office:
(1) Documents to illustrate the business scope, governance structure, internal auditing and surveillance system, and risk control mechanism of the company;
(2) Documents to clarify whether an independent business unit has been established with required capacity for asset custody, and whether proprietary assets are strictly separated from the assets under custody, which are subject to separated accounting, auditing and valuation operations;
(3) Regulations and principles for the asset custody business, including but not limited to administrative measures for asset custody, operational guidelines, risk control mechanism, code of conduct for staff and rules of accounting;
(4) Documents to prove necessary technical facilities for asset custody, staff of technical support and rules for information system management are in place;
(5) Copies of certificates to prove relevant personnel, including the senior manager responsible for asset custody business, head and professional staff of the asset custody unit have attended the training programs relevant to the inter-bank bond market;
(6) A statement on no violation of laws nor serious incompliance of rules and regulations in the preceding three years;
(7) Commitment that the submitted materials are true, accurate and complete, without false records, misleading statements or major omissions; and
(8) Other documents required by the PBC.
Article 7 Within 20 business days after accepting the registration application, the PBC Shanghai Head Office shall issue a Registration Notice, according to required conditions and procedures. The Registration Notice is valid for three months from the date of issuance. If a registration is reapplied, an explanation document shall be submitted.
Article 8 If the investment fund transferred by an overseas institutional investor within nine months since the issuance of the Registration Notice is less than 50 percent of the anticipated investment volume on record, a report of the information on anticipated investment volume shall be submitted. When an overseas institutional investor needs to change recorded information or exit the inter-bank bond market, the entrusted settlement agent shall submit the application and related materials to the PBC Shanghai Head Office in time.
Article 9 An overseas institutional investor shall invest in the inter-bank bond market in accordance with laws and regulations, as requested by the Notice.
Article 10 A settlement agent shall keep the registration-related materials properly and perform the duities as requested. The information of an overseas institutional investor and its investments in the month before shall be reported to the PBC Shanghai Head Office within the first 5 business days of each month. Any major issues or abnormal activities shall be promptly reported to the PBC Shanghai Head Office.
Article 11 The National Inter-bank Funding Center and the institution for bond registration, custody and settlement shall, in line with their respective responsibilities, make efforts to provide related services and monitor investment activities. Within the first 5 business days of each month, the investment activities of an overseas institutional investor in the month before shall be reported to the PBC Shanghai Head Office.
Article 12 The PBC Shanghai Head Office is entitled to supervising related business activities of the overseas institutional investors and the settlement agents, by means of interviews, on-site inspections, etc. The supervision covers:
(1) The legal compliance of an overseas institutional investor’s investment activities in the inter-bank bond market;
(2) Registration on behalf of overseas institutional investors and other services provided by an entrusted settlement agent, especially its performance of the duties listed in Article 14 of the Notice;
(3) Cooperation of an overseas institutional investor and a settlement agent in working with the supervisors; and the monthly report or report on major issues or abnormal activities are reported in a timely, accurate and complete manner.
Article 13 Any violation of laws or regulations by an overseas institutional investor or a settlement agent shall be reported by the PBC Shanghai Head Office to the PBC Headquarter. Regulatory measures and administrative penalties such as admonishing talks, warning notices, business suspension, or exit shall imposed accordingly in accordance with the law.
Article 14 The PBC Shanghai Head Office will study and improve the registration and supervision by organizing meetings on an irregular basis or by other means. Related recommendations will be reported to the PBC Headquarter in time.
Article 15 The PBC Shanghai Head Office shall be responsible for interpretation and revision of the Implementation Rules.
Article 16 The Implementation Rules shall come into force on the date of its release.
Supporting Documents:
