Legal Research Into Supervision On Offshore Bond

Offshore bond, also known as the Eurobond, refers to a kind of internationalbonds issued by the underwriting syndicate consisted of many financial institutionsin currency other than the host country to global investors in many countries. Theoffshore market is an important component of the international financial market, andit was originated in the Eurodollar market. In 1963 President John F. Kennedy issuedthe IET, which led to the appearance of Eurodollar bond. In the same year, theItalian highway authorities issued a total of 15 million U.S. dollars bond in London,which is the first Eurobond funding for highway projects. Because of the Eurobondon its own superiority and the 1970s oil crisis, the 1980s debt crisis of developingcountries, Eurobond issues over the Euro loan for the first time in 1984. Then, theEurobond market had become one of the main forms of international financing. Onthe other hand, the Eurobond soon broke the European geographical areas andEurodollar. From the mid-1960s, the deutsche mark, Swiss franc, Japanese yen andother currencies were also used; some other areas, such as Singapore, Japan, Bahrain,New York, had gradually developed into offshore financial centers outside Europe.Due to the characteristics of offshore bonds, offshore bond market is a capitalmarket short of supervision, no competitive barriers, and full of participants.Offshore bond market does not depend on any single domestic or foreign securitiesmarket. Therefore, no states can supervise offshore bonds effectively. However, theoffshore bond market is never a completely free market. In fact, the issuance andcirculation of offshore bond involve a number of countries, such as the state of theissuer, the state of currency, the host state, whose laws will have an impact on theissuance and circulation of offshore bonds, although these laws do not specificallyregulate the offshore bond market. This paper analyzes the securities laws of theUnited States and United Kingdom to offshore bond market.In United States, there are 1933 Securities Act, 1934 Securities Exchange Actand Rules issued by the United States Securities and Exchange Commission, which regulate the offshore bond market. It refers to the restricted sale of unregisteredbonds, frauds, registration of brokers and dealers, price stability and other aspects.United Kingdom regulates the issuance and exchange of offshore bond from theperspective of the location of market. The law regulating offshore bonds is the1986Financial Services Act and the London Stock Exchange listing rules. It involves inthe investment operations of the eligibility requirements, the invitation to visitwithout the prohibition of advertising restrictions and exceptions, listingmanagement, price stability, and so on.Apart from the sovereign states' regulative measures of offshore bond, theoffshore bond industry's self-regulatory organizations play a more effective role.They have established a set of rules to regulate the offshore bond market, and theserules have been widely used in practice. These international organizations includethe International Capital Markets Association, Euroclear and Cedel. Theinternational Capital Market Association is the self-regulatory organization and tradeassociation representing the financial institutions active in the international capitalmarkets worldwide. Its members are located in some 50 countries across the globe,including all the world's main financial centers, and currently number over 400 firmsin total. It has made a huge success of the regulation of offshore bonds, andestablished a set of effective rules. Euroclear and Cedel have made remarkableachievements to the clearing of offshore bonds. At present, the vast majority ofoffshore bonds are cleared by the two clearing agencies. A set of universal acceptedrules of clearing has been established, also.China's offshore bond issue began in 1985. In October, the Bank of Chinaissued a dollar-denominated currency in Tokyo stock market, and the total amount is150 million U.S. dollars in a period of 10 years. So far, China has madeachievements in offshore bond market, but there are many problems as well,especially the lack of special legislation of supervision on offshore bonds. This paperissues a number of recommendations on the regulation of offshore bonds. On January 14, 2007, according to the Notice of People's Bank of China (2007)No. 3, Mainland financial institutions were approved to issue RMB financial bondsin Hong Kong. Undoubtedly, this is an important event in the establishing ofoffshore financial market in China. The issue of establishing RMB offshore center inHong Kong becomes a heated topic again. This paper analyzes the advantages toestablish RMB offshore center in Hong Kong, as well as the existing regulatorysystem to offshore bonds, in order to provide own views of establishing RMBoffshore center in Hong Kong.