Regulation on Supervision and Administration of Securities Firms

Article 5 By obeying national regulations, securities firms can issue, trade and sell securities financial products.

Other shareholders of securities firms should comply with the related requirements of the securities regulatory agency under the State Council.

Article 15 The listed company shall retain such securities service organs as independent financial consultants, law firms and accounting firms with qualification for securities business to give opinions regarding the material assets reorganization.

A reporting mechanism about securities firms relating status between securities regulatory agency under the State Council and local people's government should be established.

(3) Where any securities broker accepts entrustments of many securities firms at the same time and undertakes activities including client solicitation and client service

The profit forecast report shall be examined by accounting firms with qualification for securities business.

The non monetary property amount shall not exceed 30 of registered capital of securities firms.

Article 3 Shareholders and actual controllers of securities firms shall not abuse their rights, occupy assets of the securities firm or customers, or impair the legal rights of the securities firm or its customers.

Capital contribution from shareholder of securities firms should be verified with evidence by accounting firm with related qualification of securities and futures the nonmonetary property should be evaluated by assets evaluation agency with securities related qualification.

Article 48 Securities lending and borrowing referred to in this article means that in the securities trading at the stock exchange or other securities trading places that have been approved by the State Council, securities firms lend capital or securities to customers for them to buy or sell securities based on the corresponding collaterals provided by the customers.

Article 2 Securities firms should follow the law, administrative regulation and prescription of the securities regulatory agency under the State Council, run business prudently, and perform fiduciary duties to customers.

If two or more securities firms are controlled by one agency or person, or have controlling relationship with each other, they shall not run the same securities business, except for otherwise prescribed by the securities regulatory agency under the State Council.

The securities regulatory agency under the State Council and related departments of the State Council should take effective measures for facilitating the standardization and orderly proceed of innovative activities of securities firms.

Article 7 The securities regulatory agency under the State Council, the People's Bank of China and other financial regulatory authorities under the State Council should establish information sharing mechanism of supervision and administration over securities firms.

Has this name been circulated to non banking financial institutions, i.e., pension, insurance and financial leasing companies, foreign exchange bureaus, securities firms and credit unions?

Article 1 This Regulation is formulated with the purpose of strengthening supervision and administration of securities firms, standardize their behaviors, prevent their risks, protect legal rights and interests of customers, and promote healthy development of the securities industry according to the Company Law of People s Republic of China (hereinafter referred to as the Company Law) and the Securities Law of People s Republic of China (hereinafter referred to as the Securities Law).

Examples of non banking financial institutions to which the List should be transmitted include pension, insurance and financial leasing companies, foreign exchange bureaux, money transmitters, securities firms and credit unions.

The securities firm should sign entrustment contracts with securities brokers who accept such entrustment, issue securities broker certificate, define authorized scope of securities broker and supervise working behavior of securities broker.

Without securities business license, the securities firm and its domestic branch shall not run securities business.

The securities broker should have securities working qualification.

Article 4 Securities firms are encouraged by the country to carry out innovations of operation approach, business, product, organization as well as stimulating and restraining mechanism in the premise of controlling risk properly.

Whereas the average return on FDI in China was 33 for American firms in 2008, the average return on China s investment in US government securities was a mere 3 4 . So, why does China invest its savings so heavily in low return US government securities, rather than in high return domestic projects?

While China has attracted a large amount of foreign direct investment, it has bought an even larger amount of US government securities. Whereas the average return on FDI in China was 33 for American firms in 2008, the average return on China s investment in US government securities was a mere 3 4 .

Securities brokers should work within authorized scope of the securities firm and show securities broker certificates to customer.

Article 56 Where a securities firm carries out securities lending and borrowing but does not have sufficient funds or securities, it can borrow from the securities financial companies.

3 Trade securities or maneuver securities market with insider information

(5) Securities service agencies provided services for a securities firm.

Article 41 A securities firm engaged in securities business for its own account is limited to trading of legally issued stocks, bonds, warrants, securities investment funds or other securities recognized by the securities regulatory agency under the State Council.

Securities brokers shall not handle securities subscription or trading for customers.

How can an enterprise being restructured, say, find a way to issue securities for financing if it cannot meet conventional standards such as profitability and net asset value, as required by the Company Law and the Securities Law? The law must contain specific provisions regarding such matters in order to ensure successful listing of restructuring firms.

Article 20 If a securities firm has two or more kinds of securities brokerage business, securities assets management business, financing with capital and securities, securities underwriting, securities sponsors, its board should set up remuneration and nomination committee, auditing committee and risk control committee to perform rights prescribed in company regulation.

1 Illegally buying securities issued by shareholder of the securities firm or other issuer with major relationship to securities firm against regulation

1 Customers purchase of securities, settlement of securities trading or customers withdrawal

Article 32 A securities firm should establish information inquiring system to ensure customers inquiring entrustment record, trading record, securities and balance during business hours of the securities firm, as well as other information such as name, practice license of the business operator and securities broker of the securities firm, certificate number of securities broker, etc.

Article 26 If a securities firm and its domestic branch are engaged in securities business prescribed in Article 125 of the Securities Law, they should follow the Securities Law and provisions of this Regulation.

Article 38 If a securities firm is engaged in securities brokerage business, it can entrust staff outside of the securities firm as securities broker, engaging in attracting and providing service for customers as agent.

Securities account opened by the securities firm for securities assets management customer should be submitted to stock exchange for filing within 3 trading days.

Article 44 If a securities firm is engaged in self run securities business, its risk controlling indicators such as ratio of total securities value and company net capital, ratio of value of one type of securities and net corporate capital, and ratio of quantity of one type of securities and total issuing quantity of this type of securities should comply with prescription of the securities regulatory agency under the State Council.

Article 50 A securities firm that carries out securities lending and borrowing business shall sign a securities lending and borrowing contract with the customer, and shall open a customer securities guarantee account with the securities registration and settlement organs, and a customer funds guarantee account with the designated commercial bank in the name of the securities firm in accordance with the provisions of the securities regulatory agency under the State Council.

We need firms. The firms have gone away.

Article 28 When the securities firm is entrusted by securities registration settlement agency to open securities account for customers, it should audit name and identity authenticity declared by customers according to management rule of securities account.

The securities firm shall not provide customer s capital account and securities account to others.

If the securities firm closes all securities business, disbands, goes bankruptcy or revokes domestic branch, it should publicize in newspaper appointed by the securities regulatory agency under the State Council and submit securities business license to the securities regulatory agency under the State Council for deregistration based on regulation.

(ii) Securities Act