Regulations on the Supervision and Administration of Securities Companies
Regulations on the Supervision and Administration of Securities Companies
Regulations on the Supervision and Administration of Securities Companies
Order of the State Council No. 522
April 23, 2008
The Regulations on the Supervision and Administration of Securities Companies, approved by the 6th Executive Meeting of the State Council on April 23, 2008, are hereby promulgated and shall be implemented as of June 1, 2008.
Premier Wen Jiabao
Appendix: Regulations on the Supervision and Administration of Securities Companies
Chapter I General Provisions
Article 1 With a view to strengthening the supervision and administration on securities companies, normalizing the behaviors of securities companies, preventing the risks of securities companies, protecting the legitimate rights and interests of clients, promoting the healthy development of the securities industry, in accordance with the Company Law of the People's Republic of China (hereinafter referred to as the Company Law) and the Securities Law of the People's Republic of China (hereinafter referred to as the Securities Law), the Regulations on the Supervision and Administration of Securities Companies is hereby formulated.
Article 2 Securities companies shall abide by laws, administrative regulations and the regulations of the securities regulatory body under the State Council, operate the business prudently and perform the obligations of good faith to clients.
Article 3 Shareholders of securities companies and persons actually controlling the companies shall not abuse their rights, impropriate the assets of the securities companies or the clients thereof, or damage the legitimate rights and interests of the securities companies or the clients.
Article 4 The state shall encourage securities companies to launch, in accordance with the laws and regulations, innovations in the modes of business operation, businesses or products, organizations, and the mechanisms of incentive and constraint.
The securities regulatory body under the State Council and the relevant authorities of the State Council shall adopt effective measures to promote the innovation activities of securities companies to be carried out in a normative and orderly manner.
Article 5 Securities companies may, in accordance with relevant state provisions, issue, transact and sell security financial products.
Article 6 The securities regulatory body under the State Council shall, in accordance with relevant provisions of laws and regulations, perform the duties of supervising and managing securities companies. Local offices of the securities regulatory body under the State Council shall, within the scope authorized by the securities regulatory body under the State Council, perform the duties of supervising and managing securities companies.
Article 7 The securities regulatory body under the State Council, the People's Bank of China and other financial regulatory authorities of the State Council shall establish an information sharing system concerning the supervision and administration on securities companies.
The securities regulatory body under the State Council and local people's governments shall establish a situation notifying system concerning securities companies.
Chapter II Establishment and Change
Article 8 The establishment of securities companies shall satisfy the conditions stipulated in the Company Law, the Securities Law and the Regulations and shall be subject to the approval of the securities regulatory body under the State Council.
Article 9 Shareholders of securities companies shall use money or non-monetary properties required for the operation of securities companies as capital contributions. The total amount of the capital contributions in non-monetary properties made by the shareholders of securities companies shall not exceed 30% of the registered capital of the securities companies.
Capital contributions of the shareholders of securities companies shall be verified by accounting firms with relevant securities or futures operation qualifications and proofs thereof shall be provided; non-monetary properties of capital contributions shall be appraised by an asset appraisal institution with relevant securities business qualifications.
During the operation of securities companies, where the creditors of securities companies convert their creditors' rights into the stock rights of securities companies, it shall not be restricted by the provisions of Paragraph 1 of this Article.
Article 10 Entities or individuals shall not become shareholders or actual controllers holding more than 5% stock rights of securities companies in any of the following circumstances:
1. Having being sentenced punishment because of intentional crimes and having served fully the penalty term, but with a discharge period of less than 3 years;
2. Net assets being less than 50% of the paid-up capital or the contingent debt reaching 50% of the net assets;
3. Being unable to repay due debts; or
4. Other circumstances as determined by the securities regulatory body under the State Council.
Other shareholders of securities companies shall satisfy relevant requirements of the securities regulatory body under the State Council.
Article 11 Securities companies shall have more than 3 senior managers who have more than 2 years of experience as senior managers in the securities industry.
Article 12 When a securities company is established, its business scope shall be compatible with its financial position, internal control system, compliance system and human resources status; during the operation of the securities company, subject to its application, the securities regulatory body under the State Council may, according to its financial position, internal control level, compliance extent, business managerial capabilities of its senior managerial personnel and the number of professional staff, adjust its business scope.
Article 13 It shall be approved by the securities regulatory body under the State Council for a securities company to change its registered capital, scope of business, company form or important clauses of the articles of association of the company, to merge or divide, to establish, acquire or revoke any of its branches within the territory of China, to change the business site of its branch within the territory of China, to establish, acquire a securities institution or purchase the shares of a securities institution outside the territory of China.
The important clauses of the articles of association of the company mentioned in the preceding paragraph refer to the clauses that stipulate the following matters:
1. The name and domicile of the securities company;
2. The organizational structure of the securities company and its formation, functions and rules of procedure;
3. The type, amount and internal examination and approval procedure of the external investment or guarantee by the securities company;
4. The reasons for dissolution of the securities company and liquidation methods; and
5. Other matters to be prescribed by the articles of association of the securities company as required by the securities regulatory body under the State Council.
A branch of the securities company mentioned in Paragraph 1 of this Article refers to an entity without legal personality subordinate to the securities company such as a filiale or a securities business outlet that engages in business operating activities.
Article 14 Any entities or individuals shall inform a securities company in advance of any of the following circumstances and the securities company shall report it to the securities regulatory body under the State Council for approval:
1. Holding the shares of no less than 5% of the registered capital of the securities company after having purchased or accepted the share rights of the securities company; or
2. Actually controlling more than 5% share rights of the securities company by means of possessing the share rights of the securities company's shareholders or otherwise.
Without the approval of the securities regulatory body under the State Council, no entity or individual may entrust others or be entrusted by others to possess or manage the share rights of the securities company. Shareholders of the securities company shall not violate relevant state provisions by stipulating that voting rights can be exercised other than in proportion to the capital contributions.
Article 15 Where a securities company merges or divides, assignment of important assets involving clients' rights and interests shall be appraised by appraisal institutions with relevant securities practice qualifications.
Where the securities company suspends its business operation, dissolves or goes bankruptcy, it shall be approved by the securities regulatory body under the State Council and shall, in accordance with relevant provisions, arrange clients and handle unsettled businesses.
Article 16 The securities regulatory body under the State Council shall examine the following applications and make a written decision on approval or disapproval within the following time limits:
1. As for the application for establishment of a securities company within the territory of China or for establishment or acquisition of a securities business institution or purchase of the shares of a securities business institution outside the territory of China, within six months as of the date of acceptance;
2. As for the application for the changes in the registered capital, merger, division or for the examination of the qualifications of shareholders or actual controllers, within three months as of the date of acceptance;
3. As for the application for the changes in the scope of business, company type, important clauses of the articles of association of the company or for the examination of the qualifications of senior managers, within 45 working days as of the date of acceptance;
4. As for the application for the establishment, acquisition or revocation of a branch within the territory of China, changes in the business site of a branch within the territory of China, or for the suspension of business, dissolution or bankruptcy, within 30 working days as of the date of acceptance; and
5. As for the application for the examination of qualifications of directors, supervisors and persons in charge of a branch within the territory of China, within 20 working days as of the date of acceptance.
When examining and approving an application for the establishment of a securities company and its branch, the securities regulatory body under the State Council shall take into consideration the development and fair competition needs of the securities market.
Article 17 The company registration authority shall, in accordance with relevant provisions of the laws and administrative regulations, register the establishment, alteration or revocation of a securities company or its branch within the territory of China upon the approval documents of the securities regulatory body under the State Council.
Having obtained a business license of a securities company or of a branch within the territory of China issued or renewed by the company registration authority, the securities company shall apply to the securities regulatory body under the State Council for issuing or renewing a license for securities business. A license for securities business shall specify the scope of securities business of the securities company or the branch within the territory of China.
Without obtaining the license for securities business, a securities company or its branch within the territory of China shall not engage in securities business.
Where a securities company suspends all the securities businesses, dissolves, goes bankruptcy or revokes the branches within the territory of China, it shall make an announcement thereof in the newspapers and periodicals designated by the securities regulatory body under the State Council and shall, in accordance with relevant provisions, submit the license for securities business to the securities regulatory body under the State Council for cancellation.
Chapter III Organizations
Article 18 A securities company shall, in accordance with the provisions of the Company Law, the Securities Law and the Regulations, establish and improve the organizations, clarify the authorities of the decision-making, implementing and supervising organizations.
Article 19 A securities company may have independent directors. An independent director of a securities company shall not assume posts outside the board of directors of the securities company or have a relationship with the securities company that may probably obstruct him or her from making an independent and objective judgement.
Article 20 Where a securities company engages in two or more of the securities brokerage business, securities assets management business, securities lending and borrowing business, and securities underwriting and recommending business, its board of directors shall establish a remuneration and nomination committee, an audit committee and a risk control committee to exercise the functions and powers stipulated by the articles of association of the company.
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