Measures for the Supervision and Administration of Futures Companies
Measures for the Supervision and Administration of Futures Companies
Measures for the Supervision and Administration of Futures Companies
Order of the China Securities Regulatory Commission No.110
October 29, 2014
The Measures for the Supervision and Administration of Futures Companies, which have been adopted at the 56th executive meeting of the chairman on August 21, 2014, are hereby promulgated for implementation as of the date of promulgation.
Xiao Gang Chairman of the China Securities Regulatory Commission
Measures for the Supervision and Administration of Futures Companies
Chapter I General Provisions
Article 1 With a view to regulating the business activities of futures companies, strengthening the supervision and administration of futures companies, protecting the legitimate rights and interests of clients, and promoting the development of the futures market, the Measures for the Supervision and Administration of Futures Companies (hereinafter referred to as the "Measures") are formulated in accordance with the Company Law of the People's Republic of China (hereinafter referred to as the "Company Law"), the Administrative Regulations on Futures Trading, and other relevant laws and administrative regulations.
Article 2 The Measures apply to futures companies established within the territory of the People's Republic of China.
Article 3 A futures company shall abide by laws, administrative regulations and the provisions of the China Securities Regulatory Commission (hereinafter referred to as the "CSRC"), engage in business operations prudently, guard against conflict of interests, and fulfill fiduciary duties owed to clients.
Article 4 Shareholders, the actual controller and other affiliated parties of a futures company shall not abuse their rights, shall not occupy the assets of the futures company or misappropriate the assets of its clients, and shall not prejudice the legitimate rights and interests of the futures company and its clients.
Article 5 The CSRC and its local offices shall conduct supervision and administration of futures companies and their branches in accordance with the law.
The China Futures Association (hereinafter referred to as the "CFA") and futures exchanges shall conduct self-regulatory administration of futures companies in accordance with the rules of self-regulation.
Institutions monitoring the safe depository of futures margin shall monitor the security of the margin of clients in accordance with the law.
Chapter II Establishment, Change and Termination of Business
Article 6 To apply for the establishment of a futures company, an applicant shall, in addition to the conditions prescribed by Article 16 of the Administrative Regulations on Futures Trading, also satisfy the following conditions:
1. the applicant shall have at least 15 persons who are qualified as futures practitioners; and
2. the applicant shall have at least three senior officers who have corresponding post-holding qualifications.
Article 7 Where a shareholder holding 5% or more of the equity of a futures company is a legal person or another organization, the following conditions shall be satisfied:
1. the shareholder's paid-up capital and net assets shall both be not less than CNY30 million;
2. the shareholder's net assets shall not be less than 50% of its paid-up capital, and its contingent liabilities shall be less than 50% of the net assets. In addition, the shareholder shall be free from other risks that pose significant uncertainties on its financial position;
3. the shareholder shall not have any overdue debts in relatively large amounts;
4. the shareholder shall not have been subject to any administrative or criminal penalty over the past three years due to grave violations of laws and regulations;
5. the shareholder is not currently being put on file for investigation or is not being subject to compulsory measures by competent authorities due to alleged grave violations of laws and regulations;
6. the shareholder, in its capacity as a shareholder or the actual controller of a company (including a financial institution) over the past three years, has not committed any acts of bad faith, such as abusing its rights as a shareholder, and evading its obligations as a shareholder; and
7. the shareholder does not fall under any such other circumstances as may be deemed by the CSRC as unsuitable for holding the equity of a futures company pursuant to the principle of prudent regulation.
Article 8 An individual shareholder holding 5% or more of the equity of a futures company shall satisfy the conditions prescribed by Items 3 to 7 of Article 7 hereof, and the personal financial assets thereof shall not be less than CNY30 million.
Article 9 An overseas shareholder holding 5% or more of the equity of a futures company shall, in addition to the conditions prescribed by Article 7 hereof, also satisfy the following conditions:
1. the overseas shareholder is a financial institution that is established and in lawful existence in accordance with the law of its home country or region;
2. the financial indicators and regulatory indicators of the overseas shareholder over the past three years meet the provisions of the law and requirements of regulatory authorities in its home country or region;
3. the home country or region of the overseas shareholder has sound futures laws and regulatory systems. In addition, its futures regulatory authority has signed a memorandum of understanding for the regulatory cooperation, and has been maintaining effective regulatory partnership, with the CSRC; and
4. the cumulative shareholding ratio of, or percentage of equity as held by, including directly and indirectly, all overseas shareholders of the futures company shall not exceed the commitments made on having the futures industry of mainland China opened to foreign countries/regions, or to the Hong Kong Special Administrative Region, the Macao Special Administrative Region and the Taiwan Region.
An overseas shareholder shall make contribution in a freely convertible currency or lawfully-obtained RMB.
Article 10 Where the total shareholding ratio of affiliated shareholders of a futures company reaches 5%, the shareholder with the highest shareholding ratio shall satisfy the conditions prescribed by Articles 7 to 9 hereof.
Article 11 To apply for the establishment of a futures company, an applicant shall submit the following application materials to the CSRC:
1. a written application;
2. the draft articles of association of the proposed futures company;
3. a business plan;
4. the list of promoters, and the auditor's report or the proof of personal financial assets of each promoter;
5. the list of the proposed senior officers and practitioners, and their resumes and the relevant qualification certificates;
6. the draft texts of the futures business system, internal control system and risk management system;
7. supporting documents concerning the premises, equipment and funds of the proposed futures company;
8. written legal opinions issued by the relevant law firm; and
9. other application materials prescribed by the CSRC.
Article 12 A futures company subject to foreign ownership of equity shall, in accordance with laws and administrative regulations, apply to the competent commerce department under the State Council for the approval certificate of foreign-invested enterprises, and apply to the relevant foreign exchange administration for going through the formalities for foreign exchange registration, capital account opening and foreign exchange settlement and purchase for the relevant funds.
Article 13 A futures company established in accordance with the Measures may engage in commodity futures brokerage business in accordance with the law. Such a futures company shall obtain corresponding business qualifications if it intends to engage in financial futures brokerage business, offshore futures brokerage business or futures investment consulting business, and shall go through registration and record-filing in accordance with the law if it intends to engage in asset management business.
A futures company may engage in such other business as may be prescribed by the CSRC upon approval.
Article 14 To apply for the qualifications for financial futures brokerage business, a futures company shall satisfy the following conditions:
1. the risk regulatory indicators of the futures company shall be in compliance with the prescribed requirements on an ongoing basis during the two-month period preceding the application date;
2. the futures company shall have a sound corporate governance system, risk management system and internal control system, and shall ensure the effective implementation thereof;
3. the futures company shall satisfy the provisions of the CSRC on the monitoring of the safe depository of futures margin;
4. the business facilities and technical systems of the futures company shall be in compliance with the relevant technical specifications, and be in stable operations;
5. the senior officers of the futures company shall, over the past two years, have never been subject to any criminal penalty, have never been subject to any administrative penalty due to illegal or irregular business operations, have no unfavorable credit record, and are not currently under investigation by competent authorities for alleged illegal or irregular business operations;
6. the futures company has not been subject to any regulatory measure taken by the CSRC and its local offices in accordance with Paragraph 2 of Article 56 and Article 57 of the Administrative Regulations on Futures Trading;
7. the futures company is not currently being put on file for investigation by competent authorities for alleged violations of laws and regulations;
8. the futures company shall not have been subject to any criminal or administrative penalty over the past two years due to violations of laws and regulations, not applicable if the futures company falls under the following circumstances: its controlling shareholder or actual controller, or over 50% of its senior officers have been changed; the senior officers and persons in charge of the relevant business who are liable for the above circumstances no longer hold positions in the future company; and the futures company has completed rectification and passed the final inspection by the local office of the CSRC at its domicile;
9. the controlling shareholder of the futures company shall have no less than CNY30 million of net assets or personal financial assets; and
10. the futures company shall satisfy such other conditions as may be prescribed by the CSRC pursuant to the principle of prudent regulation.
Article 15 To apply for the qualifications for financial futures brokerage business, a futures company shall submit the following application materials to the CSRC:
1. a written application;
2. photocopies of its business license and business permit affixed with its official seal;
3. the relevant resolutions of the board of shareholders or the board of directors;
4. risk regulatory statements for the two-month period preceding the application date;
5. reports on the implementation of the corporate governance system, risk management system and internal control system;
6. reports on the operations of business facilities and technical systems;
7. the latest financial reports or proof of personal financial assets of the controlling shareholder as audited by an accounting firm qualified for securities and futures-related business;
8. written legal opinions issued by the relevant law firm;
9. where the circumstances prescribed by Item 8 of Article 14 hereof are applicable, the written opinions that the futures company has passed the rectification final inspection as issued by the local office of the CSRC at the domicile of the futures company shall also be submitted; and
10. such other application materials as may be prescribed by the CSRC.
Article 16 The conditions that shall be satisfied by futures companies for applying for launching offshore futures brokerage business, futures investment consulting business and other business approved shall be separately prescribed by the CSRC.
Article 17 Where the equity changes of a futures company fall under any of the following circumstances, the futures company shall obtain the approval of the CSRC:
1. where the futures company changes its controlling shareholder or largest shareholder;
2. where the shareholding ratio of a single shareholder or of affiliated shareholders increases to 100%; and
3. where the shareholding ratio of a single shareholder or the cumulative shareholding ratio of affiliated shareholders increases to 5% or higher, and an overseas shareholder is involved.
Save for the circumstances prescribed in the preceding paragraph, if the shareholding ratio of a single shareholder, or the cumulative shareholding ratio of affiliated shareholders, of the futures company increases to 5% or higher, the approval of the local office of the CSRC at the domicile of the futures company is required.
Article 18 Where the equity changes of a futures company fall under any of the circumstances listed in Article 17 hereof, the following conditions shall be satisfied:
1. the equity to be changed shall be free from being seized, frozen or otherwise;
2. there is no cross-shareholding between the futures company and the relevant shareholders, and the futures company shall not provide any form of financial support for equity transferees; and
3.
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