Securities Law of the People's Republic of China (Amended in 2014)

Securities Law of the People's Republic of China (Amended in 2014)

Order of the President of the People's Republic of China No. 14

August 31, 2014

(Adopted at the 6th Meeting of the Standing Committee of the 9th National People's Congress on December 29, 1998; amended for the first time according to the Decision on Revising the Securities Law of the People's Republic of China made at the 11th Meeting of the Standing Committee of the 10th National People's Congress on August 28, 2004; and revised at the 18th Meeting of the Standing Committee of the 10th National People's Congress on October 27, 2005; amended for the second time according to Decision of the Standing Committee of the National People's Congress on Amending 12 Laws including the Cultural Relics Protection Law of the People's Republic of China at the 3rd Meeting of the Standing Committee of the 12th National People's Congress on June 29, 2013; and amended for the third time according to Decisions of the Standing Committee of the National People's Congress on Revising the Insurance Law of the People's Republic of China and Four Other Laws on August 31, 2014)

Contents
Chapter I General Provisions
Chapter II Issuance of Securities
Chapter III Trading of Securities
Section I General Provisions
Section II Listing of Securities
Section III Ongoing Disclosure of Information
Section IV Prohibited Trading Practices
Chapter IV Acquisitions of Listed Companies
Chapter V Stock Exchanges
Chapter VI Securities Companies
Chapter VII Securities Registration and Clearing Institutions
Chapter VIII Securities Trading Service Institutions
Chapter IX Securities Industry Associations
Chapter X Securities Regulatory Bodies
Chapter XI Legal Liability
Chapter XII Supplementary Provisions

Chapter I General Provisions

Article 1 This Law is enacted for the purposes of regulating the issuance and trading of securities, protecting the lawful rights and interests of investors, safeguarding social and economic order and social and public interests, and promoting the development of the socialist market economy.

Article 2 This Law is applied to the issuance and trading of stocks, corporate bonds and other securities lawfully recognized by the State Council within the territory of the People's Republic of China. Any matter not provided for in this Law shall be governed by the provisions of the Company Law of the People's Republic of China and other relevant laws and administrative regulations.
The listing and trading of government bonds and securities investment fund units shall be governed by this Law; If otherwise provided for by any other law or administrative regulation, such provision shall apply.
The administrative measures for the issuance and trading of securities derivatives shall be prescribed by the State Council in accordance with the principles of this Law.

Article 3 The issuance or trading of securities shall be subject to the principles of openness, fairness and impartiality.

Article 4 The parties are legally equal in their issuance or trading of securities, and shall comply with the principles of voluntary participation, valuable consideration, and good faith.

Article 5 The issuance or trading of securities shall conform to all applicable laws and administrative regulations. Any fraud, insider trading or market manipulation is prohibited.

Article 6 Unless otherwise provided for by the state, the operation and management of securities shall be separated from those of banking, trustee or insurance, and securities companies shall be independently established from banking, trust or insurance institutions.
(Relevant articles: Articles 1)

Article 7 The securities regulatory authority under the State Council implements centralized, unified supervision and administration on the securities markets nationwide.
The securities regulatory authority under the State Council may, where necessary, establish dispatched agencies, which shall carry out their authorized supervision and administration responsibilities.

Article 8 Under the state's centralized, unified supervision and administration of the issuance or trading of securities, a securities industry association shall be lawfully established, and adopt self-disciplinary management.

Article 9 The audit office of the state shall audit and supervise stock exchanges, securities companies, securities registration and clearing institutions and securities regulatory bodies.

Chapter II Issuance of Securities

Article 10 Any public issuance of securities shall satisfy the requirements of the relevant laws and administrative regulations and shall be reported legally to the securities regulatory authority under the State Council or any department authorized by the State Council for examination and approval; Without legal examination and approval, no entity or individual may issue securities to the public.
It shall be deemed as a public issuance if:
1. securities are offered to unspecific objects;
2. securities are offered to a total of more than 200 specific objects; or
3. other acts of issuance specified by any law or administrative regulation are committed.
Securities issued in a non-public manner shall not be subject to any advertisement, public inducement or disguised public manner.
(Relevant articles: Legal news 1 Articles 3)

Article 11 Any issuer that files an application for a public issuance of stock or convertible corporate bonds in accordance with the law and adopts an undertaking manner in accordance with the law, or for a public issuance of any other type of securities that are subject to a sponsorship system as prescribed in any law or administrative regulation shall engage an institution with the sponsorship qualification as its sponsor.
A sponsor shall abide by operating rules and industry standards, act in good faith, perform due diligence, carry out a thorough examination of the issuer's application materials and information disclosure documents, and supervise and urge the issuer to conduct standard operation.
Sponsor qualifications and the relevant administrative measures shall be specified by the securities regulatory authority under the State Council.
(Relevant articles: Articles 1 Legislation 2)

Article 12 To make a public issuance of stock by the establishment of a joint stock limited company, the requirements prescribed in the Company Law of the People's Republic of China as well as other requirements specified by the securities regulatory authority under the State Council upon approval of the State Council shall be met, and an application to make such public issuance of stock and the following documents shall be submitted to the securities regulatory authority under the State Council:
1. the association of Articles;
2. the promoters' agreement;
3. the name(s) of the promoter(s), the number of shares subscribed for by each promoter, the category of capital contribution and the capital verification certificate;
4. the prospectus;
5. the name and address of the bank receiving payments for the subscription to capital stock on behalf of the company; and
6. the name(s) of the underwriter(s) and the relevant underwriting agreement.
Where a sponsor is engaged by this Law, the instrument of sponsorship for issuance issued by a sponsor shall be submitted.
Where an approval for the establishment of a company is required by any law or administrative regulation, the relevant approval documents shall also be submitted.
(Relevant articles: Articles 1)

Article 13 Any company that makes a public issuance of new shares shall:
1. have a sound, well-operated corporate governance structure;
2. have a sustainable profitability and sound financial status;
3. do not have any false record in the financial and accounting documents or any other major illegal activity in the previous 3 years; and
4. meet other requirements specified by the securities regulatory authority under the State Council upon approval of the State Council.
Any listed company that makes a new share issuance in a non-public manner shall satisfy the requirements specified by the securities regulatory authority under the State Council upon approval of the State Council, and shall report the same to the securities regulatory authority under the State Council for examination and approval.
(Relevant articles: Articles 1 Legislation 3)

Article 14 Any company that makes a public issuance of new shares shall submit an application for make such a issuance and the following documents to the securities regulatory authority under the State Council:
1. its business license;
2. its association of Articles;
3. the relevant resolution of the general assembly of shareholders;
4. the prospectus;
5. its financial and accounting reports;
6. the name and address of the bank receiving payments for the subscription to capital stock on behalf of the company; and
7. the name(s) of the underwriter(s) and the relevant underwriting agreement.
Where a sponsor is engaged by this Law, the instrument of sponsorship for issuance issued by a sponsor shall be submitted.
(Relevant articles: Articles 1)

Article 15 The funds raised through a public issuance of stock by a company shall be used for the purpose(s) described in the prospectus. Any use of funds for any purpose not described in the prospectus shall be subject to a resolution of the general assembly of shareholders. If a company fails to correct any unauthorized use of funds or where the general assembly of shareholders does not approve any alternative use of funds proposed, the company may not make any public issuance of new shares.
(Relevant articles: Articles 1)

Article 16 Any public issuance of corporate bonds shall satisfy the following requirements:
1. the net assets of a joint stock limited company shall be no less than CNY30 million, and that of a limited liability company shall be no less than CNY60 million;
2. the aggregated outstanding balance of bonds shall be no more than 40 % of the value of the company's net assets;
3. the company's average profits available for distribution over the previous 3 years are sufficient to cover the one-year bond interest;
4. the purpose for which the funds raised are to be used complies with the industrial policies of the state;
5. the interest rate of the bonds does not exceed the interest rate specified by the State Council; and
6. any other requirement prescribed by the State Council.
The funds raised through any public issuance of corporate bonds shall be used for the purpose(s) approved, and may not be used to cover any deficit or non-productive expenditure.
Any public issuance of convertible corporate bonds made by a listed company shall not only meet the requirements prescribed in Paragraph 1 hereof, but shall also meet the requirements of this Law on public issuances of stock, and shall be reported to the securities regulatory authority under the State Council for examination and approval.
(Relevant articles: Articles 3)

Article 17 For any application for a public issuance of corporate bonds, the following documents shall be submitted to the department authorized by the State Council or the securities regulatory authority under the State Council:
1. the company's business license;
2. the association of Articles;
3. the corporate bond offering circular;
4. an asset appraisal report and an asset valuation report; and
5. any other document prescribed by the department authorized by the State Council or by the securities regulatory authority under the State Council.
Where a sponsor is engaged by this Law, the instrument of sponsorship for issuance issued by a sponsor shall be submitted.

Article 18 No further public issuance of corporate bonds may be made if:
1. the previous public issuance corporate bonds has not been completed;
2. there is default or delay in payment of the principal and interest on the corporate bonds publicly issued or other debt, and such fact is still continuing; or
3. the funds as raised through a public issuance of corporate bonds are used not for any purpose specified in violation of this Law.

Article 19 The format and submission method of the application documents to be submitted by an issuer for filing an application for the examination and approval for an issuance of securities in accordance with the law shall be provided for by the organ or department legally responsible for such examination and approval.
(Relevant articles: Articles 1)

Article 20 The application documents for an issuance of securities lodged by the issuer with the securities regulatory authority under the State Council or with the department authorized by the State Council shall be authentic, accurate and complete.
Any securities trading service institution and the staff thereof responsible for producing the documents required for an issuance of securities shall strictly perform their statutory responsibilities, and guarantee the authenticity, accuracy and completeness of the documents so produced.

Article 21 Any issuer that files an application for an initial public offering of its stock shall, after submitting the application documents, make advance disclosure of the relevant application documents as required by the securities regulatory authority under the State Council.

Article 22 The securities regulatory authority under the State Council shall establish an issuance examination committee, which is responsible for legally examining any application to issue stock.
The issuance examination committee is composed of professionals from the securities regulatory authority under the State Council and other relevant experts from outside the authority, and shall vote on the determination of applications to issue stock, and offer examination opinions.
Specific measures on the membership, tenure of members and operating procedures of the issuance examination committee shall be provided for by the securities regulatory authority under the State Council.
(Relevant articles: Legislation 1)

Article 23 The securities regulatory authority under the State Council is responsible for the examination and approval of applications to issue stock in accordance with statutory requirements. The procedures for examination and approval shall be publicized and shall be subject to supervision in accordance with the law.
No individual involved in the examination and approval of stock issuance applications may have any interest with the issuance applicant, directly or indirectly accept any gift from any issuance applicant, hold the stock of which the issuance application is so approved or make any form of private contact with any issuance applicant.
The department authorized by the State Council shall carry out the examination and approval of applications to issue corporate bonds in accordance with the provisions of the preceding two paragraphs.
(Relevant articles: Legislation 2)

Article 24 The securities regulatory authority under the State Council or the department authorized by the State Council shall, within 3 months of accepting any application document to issue securities, decide to approve the application in accordance with statutory requirements and procedures, excluding the period of time required for an issuer to supplement or amend its application documents in accordance with the relevant requirements; if an application is declined, shall explain the reasons thereof.

Article 25 Where an application to issue securities is approved, the relevant issuer shall, in accordance with the provisions of the relevant laws and administrative regulations, publicly announce the availability of the relevant public issuance and raising documents before issuing the securities to the public, and shall make the aforesaid documents available for public inspection in the designated place(s).
No insider may publicize or reveal the information on the securities to be issued before such information is publicized legally.
No issuer may issue any securities before the availability of the public issuance and raising documents is announced.

Article 26 The securities regulatory authority under the State Council or the department authorized by the State Council shall, when discovering that any decision to approve a particular issuance of securities does not meet the relevant statutory requirements or procedures before the issuance of the relevant securities, revoke the decision and terminate the issuance. For any securities that have been issued but have not yet been listed, the decision to approve the issuance of the securities shall be revoked, and the relevant issuer shall return to the relevant securities holders the issue price plus interest thereon calculated at the bank deposit rate for the corresponding period of time; the sponsor shall, unless proved its absence of fault, bear joint and several liability with the relevant issuer; and the controlling shareholder or actual controller who is at fault shall bear joint and several liability with the relevant issuer.

Article 27 Following any legal issuance of stock, the issuer shall be responsible for any change in its operations or profitability; and the investors shall be independently responsible for any investment risk from such change.

Article 28 Where any securities issued to unspecific objects shall be underwritten by a securities company in accordance with a law or administrative regulation, the issuer shall conclude an underwriting agreement with the securities company. Issuance of securities shall be underwritten on a "best efforts" or "bought deal" basis.
The term "best efforts" refers to a form of underwriting whereby a securities company sells securities as the agent of the relevant issuer and, at the conclusion of the underwriting duration, returns all unsold securities to the relevant issuer.
The term "bought deal" refers to a form of underwriting whereby a securities company purchases all the securities issued in accordance with the underwriting agreement or purchases, at the conclusion of the underwriting duration, all the unsold securities remained after sale.
(Relevant articles: Legislation 2)

Article 29 Any issuer that offers securities to the public has the right to select at its own an underwriting securities company in accordance with the law. No securities company may solicit any securities underwriting operations by any unfair means.

Article 30 Any securities company that underwrites securities shall conclude an agreement with the relevant issuer to underwrite the securities on a best efforts basis or by way of a bought deal, stipulating the following matters:
1. the names and addresses of the parties to the agreement and the names of their legal representatives;
2. the types, quantity, total value and issuance price(s) of the securities to be underwritten on a best efforts basis or by way of a bought deal;
3. the duration of the underwriting and the opening and closing dates thereof;
4. the payment method and date for the underwriting;
5. the underwriting fees and settlement methods applicable;
6. liability for any breach of the agreement; and
7. any other matter prescribed by the securities regulatory authority under the State Council.

Article 31 Any securities company shall, in securities underwriting, verify the authenticity, accuracy and completeness of the public issuance and raising documents; if any false record, misleading statement or major omission is found, shall not conduct any sale activity; if the securities have already been sold, shall terminate such sale activity immediately and take remedial steps.

Article 32 Any securities issued to unspecific objects with a total face value in excess of CNY50 million shall be underwritten by an underwriting syndicate. An underwriting syndicate shall be composed of securities companies acting as managing and participating underwriters.

Article 33 The duration of the underwriting of securities made on a best efforts basis or by way of a bought deal shall not exceed 90 days.
A securities company shall, within the duration of the underwriting of securities made on a best efforts basis or by way of a bought deal, guarantee the priority of the relevant subscribers in the purchase of the securities so underwritten, and shall not give itself priority for the purchase of any securities underwritten on a best efforts basis or purchase in advance and hold any securities so underwritten by way of a bought deal.

Article 34 Where any stock is issued at a premium, the issuance price thereof shall be agreed on by negotiation between the relevant issuer and the underwriting securities company.
(Relevant articles: Articles 1)

Article 35 In any issuance of stock underwritten on a best efforts basis, where the quantity of stock sold to the investors fails to reach 70% of the target quantity of stock to be issued to the public at the conclusion of the underwriting duration, the issuance shall be deemed to have failed. The issuer shall return to the relevant subscribers the issuance price plus interest thereon calculated at the bank deposit rate for the corresponding period of time.

Article 36 In any public issuance of stock, at the conclusion of the duration of any offer underwritten on a best efforts basis or by way of a bought deal, the issuer shall report the relevant information on such issuance to the securities regulatory authority under the State Council for record within the prescribed period of time.

Chapter III Trading of Securities

Section I General Provisions

Article 37 Securities legally traded by the parties to any securities transaction shall be securities that have been legally issued and delivered.
No securities that have not been issued legally may be traded.
(Relevant articles: Articles 2)

Article 38 No legally issued stock, corporate bonds or other securities of which restrictive provisions on the transfer period is specified by the law may be traded within the relevant period of time.
(Relevant articles: Articles 2 Legal news 1)

Article 39 All stocks, corporate bonds and other securities that are publicly issued in accordance with the law shall be listed on a legally established stock exchange or on any other securities exchange place approved by the State Council.
(Relevant articles: Articles 2)

Article 40 The listing of securities on a stock exchange shall be subject to an open, centralized trading method or any other means approved by the securities regulatory authority under the State Council.
(Relevant articles: Articles 3)

Article 41 Securities traded by the parties to any securities trading may be made in paper or in any other form specified by the securities regulatory authority under the State Council.
(Relevant articles: Articles 2)

Article 42 Securities shall be traded on a spot basis or on any other basis specified by the State Council.
(Relevant articles: Articles 2)

Article 43 No practitioner of any stock exchange, securities company or securities registration and clearing institution, or no functionary of any securities regulatory body or any other individual who has been prohibited from engaging in any stock trading in accordance with any law or administrative regulation shall, within the term of the relevant individual's tenure or the relevant statutory term, hold or trade any stock either in his or her own name, under any assumed name or in the name of any other person, nor accept any stock from any other person by way of a gift.
Any person shall, before acting as any of the categories of person described in the preceding paragraph, legally transfer the stock he or she previously holds.
(Relevant articles: Legislation 1)

Article 44 Stock exchanges, securities companies and securities registration and clearing institutions shall maintain the confidentiality of all accounts opened for their clients in accordance with the law.

Article 45 No securities trading service institution or any of its personnel responsible for producing any documents for issuance of stock such as an audit report, asset appraisal report or legal opinion may trade any of the relevant stock within the underwriting duration or within 6 months of the expiry of the underwriting duration of the stock.
In addition to the provisions set out in the preceding paragraph, no securities trading service institution or any of the relevant personnel responsible for producing any document such as an audit report, asset appraisal report or legal opinion for a listed company may trade any of the relevant stock within the period from the day on which it accepts the appointment until the day on which the relevant document is publicized.

Article 46 The charges for any securities trading shall be reasonable.
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