CHINA Law and Practice Contributed by: Borong Liu, Xiaoli Liu, Jingyi Lu and Zhijie Zhang, Zhong Lun Law Firm
ing an order to correct, a warning letter, or an order for public explanation. 4.4 Periodic Reporting Requirements Regarding Periodic Reporting The disclosure regulations for each type of secu - ritisation (see 4.1 Specific Disclosure Laws or Regulations ) include particular requirements for periodic reporting. Generally speaking, the trustee/plan manager shall provide reports to investors at a frequency that matches that of the payment of the securities, and it shall disclose an audited annual report for the life cycle of the securities. These reports often include the status of the underlying asset pool, information on the principal and interest payments of each class of the securities, statistics on the asset pool, rein - vestment of the assets (if a revolving structure is involved), and the disposal of defaulted loans. The rating agencies shall also disclose an annual monitoring report to the investors, which must include information on the changes in the under - lying asset pool and credit risk analysis. The SSE Guidelines on the Periodic Report Content and Format of Asset-Backed Securities and the SZSE Guidelines on the Periodic Report Content and Format of Asset-Backed Securi - ties stipulate the compilation of an annual asset management report and annual fund custodian report, as well as the disclosure requirements for these reports. This is intended to make infor - mation disclosure more targeted and effective, thus helping investors to make better investment decisions. Regulators and Penalties for Non-Compliance The disclosure activities in the CIBM are subject to self-regulatory management by NAFMII and supervision by the PBOC. NAFMII may impose sanctions on non-compliant information dis - closers. These include public denouncements,
orders to correct misconduct, orders to attend mandatory training, and suspension of relevant business. Serious violations may be handed over to the PBOC. The disclosure activities in exchange market securitisations are subject to self-regulatory management by the exchanges, the Securities Association of China (SAC) and the AMAC, and supervision by the CSRC and its local agencies. For misconduct in the disclosure of information regarding exchange market securitisations, the CSRC and its local agencies may impose regula - tory measures such as orders to correct, warning letters, orders for public explanation and orders to make periodic reports. AMAC may impose disciplinary sanctions on misconduct, such as written warnings, orders to correct, public con - demnations, or cancellation of membership. In addition, the SSE and SZSE have the power to impose disciplinary measures in response to dis - closure violations, and may prudently process subsequent applications by the relevant parties. 4.5 Activities of Rating Agencies Regulations on Rating Agencies’ Activities Rating services provided by rating agencies (RAs) are regulated by the regulatory authorities of the respective markets and the professional self-regulatory organisations (SROs). The sub - stantive regulations may be divided into the fol - lowing three categories: • market entry regulations, including rules for the entrance of different markets and different products; • requirements relating to business processes, methods and prevention of conflicts of inter - est; and • requirements on the disclosure of rating reports.
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