Failure to rectify violations will result in disqualification from future bond issuance! The Shanghai Stock Exchange issues a notice to upgrade the supervision of raised funds! Over the past three months, more than 20 companies have been penalized for "reckless spending."

Financial Associated Press, February 28 (Editor: Zhang Liang, Intern: Liang Zefeng) — Regulatory authorities continue to tighten the standards for the use of funds raised in the bond market.

Recently, the Shanghai Stock Exchange website published the “Shanghai Stock Exchange Bond Lifecycle Business Guidelines No. 3 — Key Focus Areas for Fund Management (Revised 2026)” (hereinafter referred to as the “Guidelines”), which comprehensively summarizes and standardizes common issues faced by market participants such as issuers and trustees in managing raised funds.

Behind the continuous tightening of regulatory rules are frequent violations. According to data from Enterprise Warning System, over the past three months, more than 20 bond-issuing companies have been penalized by regulators for violations related to fund use.

Shanghai Stock Exchange Releases the 2026 Revised Guidelines

To prevent funds from being improperly diverted or misappropriated by entities other than the designated use parties, the Guidelines set clear requirements.

The Guidelines state that issuers should establish sound internal control systems and receive, store, and transfer funds through dedicated accounts for the raised funds. Before the funds are fully used, the dedicated accounts must not hold funds from other bond issues or be used for other purposes.

Notably, regarding common market practices such as idle funds used to supplement working capital (“temporary replenishment”), the Guidelines impose strict restrictions: if the issuer faces significant repayment pressure or excessive financing, temporary replenishment clauses should generally not be included; if temporary replenishment is compliant, funds must be recovered into the dedicated account within 12 months or before the scheduled payment date.

Additionally, the Guidelines impose strict disciplinary measures for repeat violations. It clearly states that issuers applying for a new corporate bond issuance must disclose the management and use of funds from the previous issuance in the offering memorandum. If an issuer changes the use of funds from the previous issuance without rectification, they will be barred from applying for another bond issuance.

Over 20 Companies Penalized, Some Publicly Criticized

The ongoing tightening of regulations is driven by frequent violations.

Data from Enterprise Warning System shows that in the past three months, regulatory bodies including the Shanghai Stock Exchange, Shenzhen Stock Exchange, and local securities regulatory bureaus issued 27 disciplinary decisions against bond-issuing companies with violations related to fund use, involving 23 companies such as Zhangjiajie Tianmen Tourism Economic Investment Co., Ltd., Liuzhou Investment Holding Group Co., Ltd., and Wuhan Contemporary Technology Investment Co., Ltd.

(Source: Enterprise Warning System, compiled by Financial Associated Press)

In terms of enforcement and severity, some companies with serious violations have been publicly condemned.

On December 29, 2025, Wuhan Contemporary Technology Investment Co., Ltd. and Guangxi Qinzhou Coastal Industrial Investment Group Co., Ltd. were publicly reprimanded for “failing to disclose major company events in a timely manner” or “falsifying information” combined with “illegal use of raised funds.”

Since 2026, violations and penalties continue. On February 3, 2026, Zhangjiajie Tianmen Tourism Economic Investment Co., Ltd. was publicly criticized for information disclosure violations and illegal fund use.

It is noteworthy that most companies with violations related to fund use also face issues such as “failure to disclose major company events in a timely manner” or “falsified or seriously misleading information disclosures.”

Fund Supervision System Needs Continuous Improvement

After years of exploration and development, China’s domestic bond market’s fund supervision and information disclosure systems have become increasingly完善. Financial Associated Press has summarized recent rules frameworks related to bond fund management.

At the regulatory level, on October 20, 2023, the China Securities Regulatory Commission (CSRC) issued the “Measures for the Administration of Corporate Bond Issuance and Trading,” which stipulates in Article 13 that funds raised through public issuance of corporate bonds must be used according to the purposes specified in the bond prospectus; any change in fund use requires a resolution at the bondholders’ meeting. Furthermore, the use of bond-raising funds must be disclosed in the prospectus. Issuers should disclose the use of funds and progress of the invested projects in periodic reports, if applicable.

In the interbank market, the Securities Association of China, as a self-regulatory organization, issued the “Regulations on the Use of Funds for Non-Financial Enterprise Debt Financing Instruments in the Interbank Bond Market” in November 2022. These regulations not only standardize idle fund investments in principal-protected financial products but also explicitly require companies to disclose the actual use of funds periodically as per self-regulatory rules or issuance documents, ensuring disclosures are truthful, accurate, and complete.

Li Xiaocheng, Managing Director of the Investment Banking Department at China International Capital Corporation, pointed out in the article “Simplification and Effectiveness: Bond Structural Information Disclosure Centered on Repayment Ability” published in Financial Market Research that, regarding information disclosure, stakeholders mainly focus on factors affecting the issuer’s repayment capacity, such as asset realization ability, debt structure rationality, and controllability of debt repayment cash flows. The use and repayment arrangements of raised funds can impact these factors.

Industry insiders believe that future supervision of bond fund management will face higher requirements for “substantive compliance,” emphasizing the importance of high-quality information disclosure to demonstrate issuers’ credibility and promote high-quality development of the bond market.