C14. Corporate Bonds and Sukuk for Retail Investors Flashcards
Does Guidelines on Issuance of Corporate Bonds and Sukuk to Retail Investors apply to seasoned corporate bonds or sukuk?
Do not apply to seasoned corporate bonds or sukuk. it’ll be covered by Guidelines on Seasoned Corporate Bonds and Sukuk
Guidelines on Seasoned Corporate Bonds and Sukuk supersedes
(a) Guidelines on Private Debt Securities
(b) Guidelines on Sukuk
how do u define a responsible party?
Responsible party as defined in the Guidelines means any person who is accountable or responsible, whether solely or jointly with other persons in the lifecycle of the corporate/sukuk
responsible party includes:
a) The issuer
b) Person licensed or registered with the SC
c) Any person whose profession provides authority for a statement to be made by him or is responsible or accountable for having prepared or certified any opinion or statement or report for use in connection with the corporate bonds or sukuk
d) Any other persons identified by the issuer as having:
(i). Authority over, makes or has substantial influence in making decisions that affect the whole or a part of the lifecycle of the corporate bonds or sukuk
(ii). A significant role, function, accountability or responsibility in relation to a corporate bond or sukuk
what are the roles and responsibilities of the responsible person?
a) Must set out and carry out its roles and responsibilities in relation to the corporate bond or sukuk.
b) Discharge its functions with integrity, due care, knowledge, skill and diligence.
c) Declare any conflict of interest and effectively manage them in the interest of the bondholder.
d) Have in place policies and processes to identify, monitor, manage and mitigate conflict of interest, and to review them regularly.
e) To inform the principal adviser or lead arranger of any change or inaccurate info contained in the documents submitted to the SC or to bondholders & to make necessary revision.
f) Principal adviser must identify a new responsible party if an existing one ceases to be accountable or responsible for the issue.
g) An issuer, principal adviser and lead arranger must disclose material information to enable investors to make informed decision.
eligible issuers include:
a) A public company whose shares are listed and quoted on a stock exchange,
b) A licensed bank, licensed investment bank or licensed Islamic bank,
c) Cagamas Berhad,
d) Danajamin Berhad
e) Khazanah Nasional Bhd
f) A non-listed public company provided
(i). the corporate bonds or sukuk are irrevocably and unconditionally guaranteed in full by any entity in (a)–(e) above or the Credit Guarantee and Investment Facility
(ii). the sukuk are issued by a public company established by any of the entities referred to above in (a) – (e), with full recourse to the establishing entity in its capacity as obligor
what are the characteristics of a Corporate Bond or Sukuk?
A Corporate Bond or Sukuk must have the following characteristics:
a) Denominated in RM
b) A tenure of more than 1 year
c) Fixed term with principal and any interest/return/profit payable at maturity
d) Fixed or variable rate of return
e) Specified periodic interest payment
f) Rank at least equally with other unsecured and unsubordinated creditors
g) No embedded swap or option, except convertible or exchangeable private debt securities (PDS)-sukuk where:
(i) The option is to convert or exchange the corporate bond or sukuk into shares
(ii) The option is at the discretion of the investors
(iii) The underlying shares are listed on a stock exchange
All corporate bond or sukuk issued under the Guidelines must be rated by a rating agency registered with the SC.
The final rating for the bonds must be included as part of the submission to the SC for approval.
An indicating rating is to be submitted in case the final rating is not available.
Note that this requirement only applies to corporate bonds and sukuk issued to retail investors.
Credit ratings are not mandatory for corporate bonds and sukuk issued to sophisticated investors under the Guidelines On Unlisted Capital Market Products Under The Lodge And Launch Framework.
The issuer must obtain prior consent of bondholders to replace an appointed rating agency & inform the principal adviser.
The issuer must also provide all relevant information to the rating agency and any new or additional information previously not available.
The issuer must ensure a credit rating report is published at least 7 business days prior to the issuance.
In the case where the issuer decides to rely on more than one credit rating for a PDS or sukuk for the purposes of offering the corporate bonds or sukuk, the issuer must disclose such credit ratings in its application for approval to the SC.
