Recently, the China Securities Depository and Clearing Corporation Limited ("CSDC") and the Shenzhen Stock Exchange ("SZSE") have jointly formulated the Implementing Rules for the Pilot Program on "Full Circulation" of H-shares (for Trial Implementation) (the "Rules") which are hereby issued upon approval of the China Securities Regulatory Commission ("CSRC"), immediately effective from the issue date.
The Rules, comprising 46 articles in nine chapters, provide for the "general provisions", "accounting arrangements", "cross-border transfer registration", "maintenance of details on securities under custody and those owned by investors", "entrusted trading and order transmission", "settlement and delivery", "services of the nominal holder", "risk management" and "supplementary provisions". The Rules expressly state that, in terms of registration and custody, pilot shares, once the cross-border transfer registration has been completed, will be brought overseas into the Hong Kong settlement account system in the name of the CSDC, while the account established exclusively for the "full circulation" of H-shares will be used domestically to record the pilot shares and maintain details on such shares; as to the trading settlement, when an investor submits an order through a domestic securities company to entrust the sale of relevant shares, the pilot shares will be eventually sold at the Stock Exchange of Hong Kong ("SEHK") and the Hong Kong dollars derived from the sale will be transferred into the special fund account opened by such investor pursuant to requirements on forex administration.