Regulations on the Supervision and Administration of Securities Companies (Revised in 2014)

Order of the State Council of the People's Republic of China [2014] No. 653

July 29, 2014

(Promulgated according to the Order of the State Council of the People's Republic of China No. 522 on April 23, 2008, and revised in accordance with the Decision of the State Council on Revising Certain Administrative Regulations on July 29, 2014.)

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 The increase in registered capital along with major adjustment to ownership structure, derease in registered capital, changes in the scope of business or important terms of articles of association, merger, separation, establishement, acquisition or revocation of a domestic branch, and establishment or acquistion of a securities business institution or purchase the shares of a securities business institution outside the territory of China by a securiteis company shall be approved by the securities regulatory body under the State Council.
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 examinew 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 increase in registered capital along with major adjustment to ownership structure, decrease in registered capital, consolidation, separation or review on the qualifications of shareholders or the actual controller, within three months as of the date of acceptance; 3. as for the application for the changes in the scope of business or important terms of articles of association 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 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 and supervisors, 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.
Where the board of directors of a securities company establishes a remuneration and nomination committee and an audit committee, the persons in charge of the committees shall be independent directors.

Article 21 A securities company shall have a secretary of the board of directors, who shall be responsible for the preparation for the meetings of shareholders and meetings of the board of directors, preservation of documents, management of the information of the company's shareholders, and he/she shall provide relevant materials, and handle the matters of reporting information or disclosing information in accordance with relevant provisions or according to the requirements of the securities regulatory body under the State Council, shareholders or individuals. The secretary of the board of directors is a senior manager of the securities company.

Article 22 Where a securities company establishes an organization of exercising the operating and managerial functions of the securities company, it shall specify its name, organization, duties and the rule of procedures in the articles of association of the company; and the members of the organization shall be senior managers of the securities company.

Article 23 A securities company shall have a person in charge of compliance, who shall be responsible for inspecting, supervising or examining the legality and compliance of the operating and managerial behaviors of the securities company. The person in charge of compliance shall be a senior manager of the securities company, whose engagement shall be decided by the board of directors and approved by the securities regulatory body under the State Council. The person in charge of compliance shall not concurrently assume a post in charge of the operation and management in the securities company.
Where the person in charge of compliance finds illegal or incompliant behaviors, he/she shall report to the organization stipulated in the articles of association of the company, and simultaneously report, in accordance with relevant provisions, to the securities regulatory body under the State Council or relevant self-regulatory organizations.
A securities company shall have justified reasons for dismissing the person in charge of compliance and shall report in writing to the securities regulatory body under the State Council the facts and reasons of dismissal within three working days from the date of dismissal.

Article 24 Directors, supervisors, senior managers of a securities company shall obtain the post-holding qualifications approved by the securities regulatory body under the State Council before assuming their posts.
A securities company shall not employ or select persons who have not obtained the post-holding qualifications to assume the posts mentioned in the preceding paragraph; where they have been employed or selected, the resolution or decision concerning the employment or selection shall be null and void.

Article 25 Where the legal representative or a senior manager of a securities company leaves his or her post, the securities company shall audit him or her and shall submit the audit report thereof to the securities regulatory body under the State Council within two months after the date of his or her leaving; where the legal representative or the chief person in charge of the operation and management of the securities company leaves his or her post, an accounting firm with relevant securities or futures practice qualifications shall be engaged to audit him or her.
Where the audit report mentioned in the preceding item has not been submitted to the securities regulatory body under the State Council, the person leaving his or her post shall not assume a post in other securities companies.

Chapter IV Business Rules and Risks Control

Section 1 General Provisions

Article 26 Where a securities company and its branch within the territory of China engage in the securities businesses prescribed in Article 125 of the Securities Law, they shall abide by the provisions of the Securities Law and the Regulations.
The businesses that a securities company and its branch within the territory of China engage in shall be subject to the approval of the securities regulatory body under the State Council and they shall not engage in the businesses that are not approved.
Where two or more securities companies are under the control of the same entity or individual or they control each other, they shall not engage in the same securities businesses, unless otherwise prescribed by the securities regulatory body under the State Council.

Article 27 A securities company shall establish and improve a risk control and internal control system based on the principle of prudential operation, thereby preventing and controlling risks.
A securities company shall manage its branches in a centralized and uniform manner and shall not cooperate with others in managing its branches by means of setting up equity joint ventures or cooperative joint ventures, neither shall it contract, lease or entrust others to operate and manage the branches.

Article 28 Where a securities company is entrusted by securities registration and clearing institutions to open securities accounts for clients, it shall, in accordance with the administrative rules for securities accounts, examine the authenticity of the names or appellations and identities that the clients declare. Names or appellations of the capital account and the securities account that the same client opens shall be consistent.
Where a securities company opens a securities account for a securities asset management client, it shall lodge with the stock exchange within three trading days after the date of opening the account.
A securities company shall not provide the capital account or the securities account of its client for others to use.


Article 29 Where a securities company engages in securities asset management business, securities lending and borrowing business or selling securities financial products, it shall, according to the stipulated procedures, figure down the identity, property and revenue status, securities investment experience and risks preference of the client and record and preserve them in paper or electronically. A securities company shall, according to the client's situation it knows, recommend appropriate products or services. The detailed rules thereof shall be formulated by the Securities Association of China.

Article 30 Where a securities company signs with the clients such business contract as concerning securities trading settlement service on commission, securities asset management or securities borrowing and lending, it shall designate special staff in advance to explain relevant business rules and contents of the contract and shall give the risks disclosure statement to the client for signature and confirmation. The prerequisite clauses of the business contracts and the standard format of the risks disclosure statement shall be formulated by the Securities Association of China and shall be reported to the securities regulatory body under the State Council for lodgement.

Article 31 Where a securities company engages in securities asset management business and securities borrowing and lending business, it shall, in accordance with relevant provisions, compile statements and send them to clients on a monthly basis. Where the securities company and its clients have stipulated otherwise about the time or methods of sending the statements, such stipulations shall prevail.

Article 32 A securities company shall establish an information inquiring system to ensure that clients can inquire any of their commission records, transaction records, securities and capital balance as well as the names, professional certificates, serial number of the certificates of securities brokers of the business operators and the securities brokers of the securities company at any time during the business hours of the securities company.
Where clients consider that relevant information records are not in accord with actual situations, they can complain to the securities company or the securities regulatory body under the State Council. The securities company shall designate special departments to handle the complaints of clients. The securities regulatory body under the State Council shall adopt corresponding measures according to the clients' complaints.

Article 33 A securities company shall not, in violation of relevant provisions, entrust other entities or individuals to engage in client solicitation, client services and product-selling activities.

Article 34 Where a securities company provides clients with investment suggestions, it shall not make a definitive judgement about the rise and fall in securities price or the market trend.
The securities company and its staff shall not seek unjustifiable rights and interests by means of providing clients with investment suggestions.

Article 35 A securities company shall establish and implement an effective managerial system to prevent their staff from holding, purchasing and selling stocks or accepting stocks that others present as a gift, directly, pseudonymously or in others' names.

Article 36 A securities company shall, in accordance with relevant provisions, withdraw general risk reserves to offset the operating losses.

Section 2 Securities Brokerage Business

Article 37 Where a securities company engages in securities brokerage business, it shall examine whether the capital and securities in a client's account are sufficient. Where the capital in the client's account is not sufficient, it shall not accept his or her buying commissions; where the securities in the client's account are not sufficient, it shall not accept his or her selling commissions.

Article 38 Where a securities company engages in securities brokerage business, it may entrust a person other than their staff as a securities broker to act as its agent to engage in the activities such as client solicitation and client services. Securities brokers shall have securities occupational qualifications.
The securities company shall sign a commission contract with the securities brokers who accept the commissions, issue the certificate of securities brokers, specify the scope of authorizing the securities brokers and supervise the practising activities of the securities brokers.
A securities broker shall engage in businesses within the scope authorized by the securities company and shall present to clients the certificate of securities brokers.

Article 39 A securities broker shall abide by the managerial regulations on the staff of securities companies. As for his or her behaviors within the scope authorized by the securities company, the corresponding legal liabilities thereof shall be assumed by the securities company in accordance with the law; as for the behaviors beyond the authorized scope, the securities broker shall, in accordance with the law, assume corresponding legal liabilities.
A securities broker can accept the commission of only one securities company to engage in the activities such as client solicitation and client services.
A securities broker shall not handle the matters for clients such as securities acquisition and transaction.

Article 40 Where a securities company charges a client for securities transaction, it shall conform to relevant state provisions and shall make an announcement of the charging items and charging standards at the prominent position of the business site.

Section 3 Self-operated Securities Business

Article 41 The self-operated securities businesses that a securities company may engage in shall be restricted to buying and selling the stocks, bonds, warrants and securities investment funds that are publicly traded in accordance with the law, or other securities approved by the securities regulatory body under the State Council.

Article 42 Where a securities company engages in self-operated securities business, it shall use autonymous self-operated securities accounts.
The self-operated securities account of the securities company shall be reported to the stock exchange for lodgement within three trading days from the date of opening the account.

Article 43 A securities company shall not commit any of the following acts when engaging in self-operated securities business:
1. Purchasing, in violation of the Regulations, the securities of the shares-controlling shareholders of the securities company or the securities that are issued by the issuers having other substantial stakes in the securities company;
2. Entrusting, in violation of relevant provisions, others to act as agents to purchase and sell securities;
3. Purchasing and selling securities or manipulating the securities market by utilizing inside information; and
4. Other behaviors that are prohibited by relevant laws, administrative regulations or the securities regulatory body under the State Council.

Article 44 Where a securities company engages in self-operated securities businesses, the risks-controlling index such as the ratio of the total amount of self-operated securities to the company's net capital, the ratio of the value of one type of securities it holds to the company's net capital and the ratio of the amount of one type of securities it holds to the total amount of the securities issued shall conform to the stipulations of the securities regulatory body under the State Council.

Section 4 Securities Asset Management Business

Article 45 A securities company may, in accordance with the stipulations of the Securities Law and the Regulations, engage in the securities asset management businesses of accepting the commission of a client and using the asset thereof to make an investment. The profits obtained from the investment shall be enjoyed by the client and the losses shall be assumed by the client, whereas the securities company may charge managerial fees in light of the agreements.
Where a securities company engages in securities asset management businesses, it shall sign a securities asset management contract with the client to stipulate the matters such as the investment scope, investment ratio, managerial time limits and managerial fees.

Article 46 A securities company shall not commit any of the following acts when engaging in securities asset management businesses:
1. Making a promise to the client of ensuring that his or her capital principal will not suffer losses or of ensuring that he or she will obtain the minimum profits;
2. Accepting a single commission of one client whose asset value is below the minimum quota stipulated by the securities regulatory body under the State Council;
3. Using the client's asset for unnecessary securities transactions;
4. Making transactions between the self-operated securities accounts and the securities asset management accounts or between different securities asset management accounts, without adequate evidence to prove that it has, in accordance with the law, made effective separation; or
5. Other behaviors that are prohibited by relevant laws, administrative regulations or the securities regulatory body under the State Council.

Article 47 Where a securities company uses the assets of one or more clients to make collective investment, it shall conform to the laws, administrative regulations and the relevant provisions of the securities regulatory body under the State Council.

Section 5 Securities Borrowing and Lending Business

Article 48 The securities borrowing and lending business mentioned in the Regulations refers to, among the securities transactions conducted at the stock exchange or other securities trading sites approved by the State Council, the operating activities that a securities company lends a client the capital for him or her to purchase securities or lends him or her the securities for him or her to sell securities and the client provides the corresponding guaranty.

Article 49 A securities company shall satisfy the following conditions to engage in the securities borrowing and lending business:
1. The securities company has a sound governance structure and effective internal control;
2. The risks control index conforms to relevant provisions, and the financial position and compliance status are good;
3. It has professional staff, technical conditions, capital and securities required for engaging in the securities borrowing and lending business;
4. It has a perfect managerial system and implementation scheme of securities borrowing and lending business; and
5. Other conditions stipulated by the securities regulatory body under the State Council.

Article 50 Where a securities company engages in the securities credit business, it shall sign a securities borrowing and lending contract with the client and shall, in accordance with the provisions of the securities regulatory body under the State Council, in the name of the securities company, open a client's securities guarantee account at a securities registration and clearing institution and open a client's capital guarantee account at the designated commercial banks. The capital in the client's capital guarantee account shall be managed in accordance with the provisions of Article 57 of the Regulations.
In the client securities guarantee account and client capital guarantee account opened in the name of the securities company, a credit account shall be separately opened for each client.

Article 51 Where a securities company lends loans to clients, it shall use its own capital or the capital that is legally raised; when lending securities to clients, it shall use its own securities or the securities for which it has obtained the legitimate right of disposition.

Article 52 Where a securities company provides the services of securities credit to clients, the clients shall deposit earnest money of a certain percentage. The earnest money can be offset with securities.
The earnest money deposited by the client as well as all the securities purchased through securities borrowing and lending transactions and all the capital obtained from selling the securities are all the guaranty to the securities company, which shall be deposited into the client's securities guarantee account or the client's capital guarantee account of the securities company and be recorded into the client's credit account.

Article 53 The securities in the client's securities guarantee account and the capital in the client's capital guarantee account are both the trust property. The securities company shall not, in violation of the trustee's obligations, misappropriate the securities or capital in the client guarantee accounts. Except for the circumstances stipulated in Article 54 of the Regulations or unless otherwise agreed by the securities company and the client in accordance with the law, the securities company shall not impropriate the securities or capital in the client guarantee accounts.


Article 54 The securities company shall calculate the proportion of the value of the client's guaranty to his or her debts on a daily basis. Where the proportion is below the stipulated minimum guaranty maintenance proportion, the securities company shall inform the client to pay the balance with certain time limit. Where the client fails to pay in full the balance on time or to repay the due securities borrowing and lending debts, the securities company shall immediately dispose of the guaranty thereof in accordance with the agreement.

Article 55 The proportion of the earnest money that the client deposits in accordance with the provisions of Paragraph 1 of Article 52 of the Regulations shall be stipulated by the entities authorized by the securities regulatory body under the State Council.
The type of the securities that a securities company may lend to clients and that may be purchased by the lent capital, the type of the negotiable securities that may offset earnest money and the conversation rate thereof, the securities borrowing and lending term, the minimum guaranty maintenance proportion and the time limit of paying the balance shall be stipulated by the stock exchange.
The relevant stipulations made by the authorized entities or the stock exchange as stipulated in Paragraph 1 and Paragraph 2 of this Article shall be lodged with the securities regulatory body under the State Council and shall not violate the state monetary policies.

Article 56 Where a securities company engages in securities borrowing and lending business and its own capital or securities are not sufficient, it may borrow capital or securities from the securities finance companies. The establishment and dissolution of securities finance companies shall be determined by the State Council.

Chapter V Protection of Clients' Assets

Article 57 Where a securities company engages in securities brokerage business, the securities trading settlement funds of its clients shall be deposited in the designated commercial banks and be managed by means of separately opening an account in the name of every client.
The designated commercial banks shall sign a custody contract of clients' transaction settlement funds with the securities company and its clients, make an agreement concerning the matters such as the deposit and withdrawl, transfer, inquiry of client trading settlement funds and shall, according to the securities trading netting and the delivery versus payment (DVP) requirements, open a summary account of clients' trading settlement funds for the securities company.
The deposit and withdrawl of clients' trading settlement funds shall be handled through the designated commercial banks. The designated commercial banks shall ensure that clients can inquire the balance and change of clients' trading settlement funds at any time.
The list of the designated commercial banks shall be determined and announced by the securities regulatory body under the State Council in conjunction with the banking regulatory body under the State Council.

Article 58 Where a securities company engages in securities asset management business, it shall hand the asset entrusted by clients to the designated commercial banks stipulated in Paragraph 4 of Article 57 of the Regulations or other asset custody institutions approved by the securities regulatory body under the State Council for custody.
The asset custody institutions shall, in accordance with the provisions of the securities regulatory body under the State Council and the stipulations of the securities asset management contract, perform the duties of safely keeping the asset entrusted by clients, handling the collection and payment of funds and supervising the investment behaviors of the securities companies.

Article 59 The clients' trading settlement funds and the asset entrusted by the securities asset management clients shall belong to the clients and shall be independent from the uncommitted assets of the securities companies, designated commercial banks and the asset custody institutions and be separately managed. Apart from the client's own debts or other circumstances stipulated by the law, no entities or individuals may apply for sealing up, freezing or compulsorily executing the clients' trading settlement funds and entrusted assets.

Article 60 Except for the following circumstances, clients' trading settlement funds or entrust funds shall not be employed:
1. The securities purchase, securities trading settlement or withdrawl made by clients;
2. Payment for commissions, fees or taxes made by clients; and
3. Other circumstances stipulated by the law.

Article 61 A securities company shall not use the assets of securities brokerage clients or securities asset management clients for providing financing or guarantee for others. No entities or individuals may force, instigate, assist or permit the securities company to use the assets of its securities brokerage clients or securities asset management clients for providing financing or guarantee.

Article 62 The designated commercial banks, asset custody institutions and securities registration and clearing institutions shall supervise the usage of clients' trading settlement funds, entrusted funds, and funds and securities in client guarantee accounts deposited in the institutions and shall, in accordance with relevant provisions, periodically report to the securities regulatory body under the State Council the relevant data concerning the custody or usage of clients' trading settlement funds, entrusted funds, and funds and securities in client guarantee accounts.
The designated commercial banks, asset custody institutions and securities registration and clearing institutions shall refuse the applications and instructions of using clients' trading settlement funds, entrusted funds, and funds and securities in client guarantee accounts outside the scope stipulated in Articles 53, 54 and 60 of the Regulations. Upon finding that the clients' trading settlement funds, entrusted funds, and funds and securities in client guarantee accounts are used illegally or have other abnormal situations, they shall immediately report it to the securities regulatory body under the State Council and send copies thereof to the relevant regulatory authorities.

Chapter VI Supervisory and Managerial Measures

Article 63 A securities company shall submit annual reports to the securities regulatory body under the State Council within four months from the end of every fiscal year and submit monthly reports within seven working days from the end of every month.
Where significant events occur that have influenced or will probably influence the business operation, financial position, risks control index or the safety of clients' assets of the securities company, the securities company shall immediately send an interim report to the securities regulatory body under the State Council to explain the causes, current state, possible consequences of the events and the corresponding measures intended to be adopted.

Article 64 The financial report, risks control index report of the securities company's annual reports as well as other special reports stipulated by the securities regulatory body under the State Council shall be audited by accounting firms with relevant securities and futures professional qualifications. The annual reports of the securities company shall be appended by the internal control review report issued by the accounting firm.
Directors and senior managers of the securities company shall sign confirmatory opinions on the annual reports of the securities company; the person in charge of the operation and management and the person in charge of financial affairs shall sign confirmatory opinions on the monthly reports. Persons who signed on the annual reports and the monthly reports of the securities company shall ensure the authenticity, accuracy and integrity of the contents of the reports; those dissenting from the contents of the reports shall specify their opinions and reasons.

Article 65 The securities regulatory body under the State Council shall designate special staff to examine the annual reports and monthly reports submitted by the securities company and shall formulate the examination report. The person examining the reports shall sign on the examination report. Where problems are found in the examination, the securities regulatory body under the State Council shall adopt corresponding measures in a timely manner.
The securities regulatory body under the State Council shall contrast and examine the relevant data concerning the clients' trading settlement funds, entrusted capital and the capital and securities in the client guarantee accounts submitted by the relevant institutions and shall discover in a timely manner any illegal use of the capital or securities.

Article 66 The securities company shall, in accordance with the law, make a public disclosure of its basic information, the shares participating and shares controlling status, debts and contingent debts, the operating and managing status, the financial revenues and expenses status, the salary of senior managers and other relevant information. The detailed measures thereof shall be formulated by the securities regulatory body under the State Council.

Article 67 The securities regulatory body under the State Council can require the following entities or individuals to provide the materials and information related to the operation and management, and the financial position of the securities company within the stipulated time limit:
1. The securities company and its directors, supervisors and staff;
2. The shareholders and actual controllers of the securities company;
3. The enterprise of which the securities company controls the shares or which it actually controls;
4. The deposit bank, the designated commercial bank, the asset custody institution, the stock exchange and the securities registration and clearing institution of the securities company; and
5. The securities service institution that provides the securities company with services.

Article 68 The securities regulatory body under the State Council shall have the right to adopt the following measures to examine the business activities, financial position and operating and management situation of the securities company:
1. Inquiring the directors, supervisors or staff of the securities company and require them to make an explanation of the relevant examined matters;
2. Entering the offices or business sites of the securities company to conduct examination;
3. Looking up and copying the documents and materials related to the examined matters and sealing up the documents, materials or electronic devices that may be probably transferred, concealed or destroyed; and
4. Examining the computer information management system of the securities company and copy the relevant data materials.
For the purpose of investigating thoroughly the business situation and the financial position of the securities company, subject to the approval of the person in charge of the securities regulatory body under the State Council, the securities regulatory body under the State Council can inquire the bank accounts of the securities company and of the enterprise that has a shares-controlling or actual controlling relationship with the securities company.

Article 69 The materials and information disclosed, submitted and reported or provided by the securities company as well as the relevant entities and individuals shall be genuine, accurate and complete, and shall not contain false records, misleading statement or significant omission.

Article 70 As for the securities company with unsound governance structure, incomplete internal control, messy operation and management, or concealing accounts or operation outside the accouts, refusing to enforce the regulatory decision or violating the laws and regulations, the securities regulatory body under the State Council shall order it to make rectification within the specified time limit and may adopt the following measures:
1. Ordering it to increase the number of internal compliance examinations and submit the compliance examination report;
2. Reprimanding the securities company and its relevant directors, supervisors, senior managers or the person in charge of the branch within the territory of China;
3. Ordering to punish the relevant liable persons and reporting the results thereof;
4. Ordering it to change its directors, supervisors and senior managers or restricting their rights;
5. Temporarily taking over the securities company and conducting an all-round inspection; and
6. Ordering to suspend part or all the business of the securities company or of its branch within the territory of China or to revoke the branch within the territory of China within the specified time limit.
Where a securities company has ordered to suspend business or revoke the branch within the territory of China within the specified time limit, it shall arrange clients and handle unsettled business in accordance with relevant provisions.
As for the illegal and incompliant behaviors of the securities company, provided that the person in charge of the compliance has performed the duties of inhibiting and reporting them, he or she shall be exempt from liabilities.


Article 71 The securities regulatory body under the State Council shall order any entities or individuals to make rectification within the specified time limit that have possessed or actually controlled more than 5% share rights of the securities company without the approval. Prior to the rectification, the entities or individuals holding the corresponding share rights shall not have the voting right.

Article 72 The securities regulatory body under the State Council shall order any person to stop exercising their authorities who, without obtaining post-holding qualifications, actually exercises the authorities of a director, supervisor, senior manager or the person in charge of the branch within the territory of China, shall make an announcement thereof and may adopt the measure of prohibiting them from entering the securities market in accordance with the regulations.

Article 73 As for any director, supervisor, senior manager or the person in charge of the branch within the territory of China who no longer possesses the post-holding qualifications, the securities company shall dismiss him/her from the post and report it to the securities regulatory body under the State Council. Where the securities company fails to dismiss him/her from the post, the securities regulatory body under the State Council shall order it to do so.

Article 74 Where the securities company engages or dismisses an accounting firm, it shall lodge with the securities regulatory body under the State Council within three working days from the date of making the decision thereof; and it shall explain the reasons when dismissing the accounting firm.

Article 75 Where an accounting firm audits the securities company or its relevant staff, it may look up or copy the client's information related to the auditing matters or other relevant documents and materials of the securities company, and may get relevant data information in the computer information management system of the securities company.
The accounting firm shall keep confidential the information it knows, unless otherwise prescribed by relevant laws and administrative regulations.

Article 76 The stock exchange shall make a real-time monitoring of the trading behaviors of the self-operated securities accounts and the securities asset management accounts of the securities company. In case of any exceptional situations, it shall deal with them in a timely manner in accordance with the transaction rules and members management rules and report to the securities regulatory body under the State Council.

Chapter VII Legal Liability

Article 77 A securities company shall be punished in accordance with the stipulations of Article 198 of the Securities Law in any of the following circumstances:
1. Engaging a person without post-holding qualifications as the person in charge of the branch within the territory of China; or
2. Failing to dismiss the directors, supervisors, senior managers or the person in charge of the branch within the territory of China from their posts who no longer possess the post-holding qualifications in accordance with the decisions made by the securities regulatory body under the State Council according to law.

Article 78 When engaging in securities brokerage business, a securities company shall be punished in accordance with the stipulations of Article 205 of the Securities Law provided that it accepts the purchase commission of clients when their funds are not sufficient or it accepts the sale commission thereof when their securities are not sufficient.

Article 79 A securities company shall be punished in accordance with the stipulations of Article 208 of the Securities Law if it provides clients' capital accounts or securities accounts for others to use.

Article 80 A securities company shall be punished in accordance with the stipulations of Article 210 of the Securities Law provided that it induces the client to conduct unnecessary securities transactions or uses the client's assets to conduct unnecessary securities transactions when engaging in securities asset management business.

Article 81 A securities company or its domestic branch shall be punished in accordance with the provisions of Article 219 of the Securities Law in case of performing operations beyond the scope of business approved by the securities regulatory body under the State Council.

Article 82 A securities company shall be punished in accordance with the stipulations of Article 220 of the Securities Law if it conducts transactions between the self-operated securities accounts and the securities asset management accounts or between different securities asset management accounts, without adequate evidence to prove that it has made effective separation in accordance with the law.

Article 83 A securities company in violation of the stipulations of the Regulations shall be ordered to make rectification, imposed upon a sanction of warning or have their illegal gains confiscated, and shall be concurrently punished with a fine of one time up to five times the illegal gains in any of the following circumstances. The company without illegal gains or with illegal gains of less than CNY100,000 shall be imposed upon a fine of CNY100,000 up to CNY300,000. Provided that the circumstance is serious, its license for relevant securities business shall be suspended or revoked. The person in charge who shall assume the direct responsibility and other persons who shall assume the direct responsibility shall be imposed upon a sanction of warning and a fine of CNY30,000 up to CNY100,000. Provided that the circumstance is serious, their post-holding qualifications or securities practice qualifications shall be revoked:
1. Entrusting, in violation of the regulations, other entities or individuals to engage in client solicitation, client services or products-selling activities;
2. When providing clients with investment suggestions, making a definitive judgement about the rise and fall in securities price or the market trend;
3. Entrusting, in violation of relevant provisions, others to act as agents to purchase and sell securities;
4. When engaging in self-operated securities business or securities asset management business, its investment scope or investment proportion violates the regulations; or
5. When engaging in securities asset management business, accepting a single commission of one client whose asset value is below the stipulated minimum quota.


Article 84 A securities company in violation of the stipulations of the Regulations shall be ordered to make rectification and imposed upon a sanction of warning or have their illegal gains confiscated, and shall be concurrently punished with a fine of one time up to five times the illegal gains in any of the following circumstances. The company without illegal gains or with illegal gains of less than CNY30,000 shall be punished with a fine of CNY30,000 up to CNY300,000. The person in charge who shall assume the direct responsibility and other persons who shall assume the direct responsibility shall be, individually or concurrently, imposed upon a sanction of warning and a fine of CNY30,000 up to CNY100,000. Provided that the circumstance is serious, their post-holding qualifications or securities practice qualifications shall be revoked:
1. Failing to audit the legal representative or senior managers leaving their posts and submit the audit reports in accordance with the regulations;
2. Cooperating with others in managing its branches by means of setting up equity joint ventures or cooperative joint ventures, or contracting, leasing or entrusting others to operate and manage the branches;
3. Failing to report the self-operated securities account and the securities account of securities asset management clients to the stock exchange for lodgment in accordance with the regulations;
4. Failing to figure down the identity, property and revenue status, securities investment experience and risks preference of the client according to the stipulated procedures;
5. Recommended products or services failing to be compatible with the information of clients known;
6. Failing to designate special staff to explain to the clients the relevant business rules and contents of the contract and disclose the investment risks to them in writing in accordance with the regulations;
7. Failing to sign business contracts with clients or include the stipulated prerequisite clauses in the business contracts singed with clients in accordance with the regulations;
8. Failing to compile and send the statements to clients in accordance with the regulations or failing to establish and effectively implement the information inquiring system in accordance with the regulations;
9 Failing to designate the special department to handle clients' complaints in accordance with the regulations;
10. Failing to withdraw general risk reserves in accordance with the regulations;
11. Failing to deposit and manage clients' trading settlement funds, entrusted funds and the capital and the securities in clients guarantee accounts in accordance with the regulations; or
12. When engaging or dismissing the accounting firm, failing to lodge with the securities regulatory body under the State Council in accordance with the regulations and failing to explain the reasons of dismissing the accounting firm.


Article 85 A securities company shall be ordered to make rectification for failing to open the account for a client in accordance with the regulations. Where the circumstance is serious, it shall be punished with a fine of CNY200,000 up to CNY500,000, and the directors, senior mangers in charge who shall assume the direct responsibility and other persons who shall assume the direct responsibility shall be punished with a fine of CNY10,000 up to CNY50,000.

Article 86 A securities company in violation of the stipulations of the Regulations shall be ordered to make rectification, imposed upon a sanction of warning or have their illegal gains confiscated, and shall be concurrently punished with a fine of one time up to five times the illegal gains in any of the following circumstances. The company without illegal gains or with illegal gains of less than CNY100,000 shall be punished with a fine of CNY100,000 up to CNY600,000. Provided that the circumstance is serious, its license for relevant securities business shall be revoked. The person in charge who shall assume the direct responsibility and other persons who shall assume the direct responsibility shall be imposed upon a sanction of warning, their post-holding qualifications or securities practice qualifications shall be revoked, and they shall be concurrently punished with a fine of CNY30,000 up to CNY300,000:
1. Without the approval, entrusting others or being entrusted by others to possess or manage the share rights of the securities company, or purchasing, accepting or actually controlling the share rights of the securities company;
2. The shareholders and actual controllers of the securities company force, instigate, assist or permit the securities company to provide financing or guarantee by using the assets of securities brokerage clients or securities asset management clients;
3. The securities company, the assets custody institution and the securities registration and clearing institution, in violation of the Regulations, use the client's trading settlement funds, entrusted funds and the capital and securities in the client guarantee accounts;
4. The assets custody institution and the securities registration and clearing institution agree to or implement the application or instruction of using the entrusted capital and the capital and securities in the client guarantee accounts in violation of the regulations; or
5. Where the assets custody institution and the securities registration and clearing institution find the entrusted capital and the capital and securities in the client guarantee accounts are used illegally, failing to report to the securities regulatory body under the State Council.

Article 87 A designated commercial bank shall be ordered to make rectification, imposed upon a sanction of warning or have its illegal gains confiscated, and shall be concurrently punished with a fine of one time up to five times the illegal gains by the securities regulatory body under the State Council in any of the following circumstances. The bank without illegal gains or with illegal gains of less than CNY100,000 shall be punished with a fine of CNY100,000 up to CNY600,000. The person in charge who shall assume the direct responsibility and other persons who shall assume the direct responsibility shall be imposed upon a sanction of warning, and concurrently be punished with a fine of CNY30,000 up to CNY300,000:
1. Using the client's trading settlement funds in violation of the regulations;
2. Agreeing to or implementing the application or instruction of using the client's trading settlement funds in violation of the regulations; or
3. When finding that the client's trading settlement funds are illegally used, failing to report to the securities regulatory body under the State Council.
Where the designated commercial bank commits any of the acts stipulated in the preceding item, and where the circumstance is serious, the securities regulatory body under the State Council, in conjunction with the banking regulatory body under the State Council, shall order it to suspend or terminate the deposit and management business of the client's trading settlement funds. As for the person in charge who shall assume the direct responsibility and other persons who shall assume the direct responsibility, the securities regulatory body under the State Council may advise the banking regulatory body under the State Council to make punishment in accordance with the law.

Article 88 A securities company in violation of the stipulations of the Regulations shall be ordered to make rectification and imposed upon a sanction of warning and concurrently punished with a fine of CNY30,000 up to CNY200,000 in any of the following circumstances. The person in charge who shall assume the direct responsibility and other persons who shall assume the direct responsibility shall be imposed upon a sanction of warning and can be punished with a fine of less than CNY30,000:
1. The securities company fails to, in accordance with the stipulations of Article 66 of the Regulations, publicly disclose the relevant information, or the information publicly disclosed contains false records, misleading statement or significant omission; or
2. The enterprise, the asset custody institution and the securities service institution of which the securities company controls the shares or which it actually controls fails to submit and report to the securities regulatory body under the State Council or provide it with relevant information or materials in accordance with the regulations, or the information and materials submitted and reported or provided contain false records, misleading statement or significant omission.

Article 89 A person in violation of the stipulations of the Regulation shall be ordered to make rectification and imposed a sanction of warning, their illegal gains shall be confiscated, and they shall be concurrently punished with a fine equal to the amount of illegal gains in any of the following circumstances. The person without illegal gains or with illegal gains of less than CNY30,000 shall be punished with a fine of less than CNY30,000. Provided that the circumstance is serious, his or her post-holding qualifications or securities practice qualifications shall be revoked:
1. The person in charge of the compliance fails to report the illegal and incompliant behaviors to the securities regulatory body under the State Council or the relevant self-regulatory organizations in accordance with the regulations;
2. The securities broker fails to present the certificate of securities brokers when engaging in the business;
3. The securities broker simultaneously accepts the commission of more than one securities companies to engage in the activities such as clients solicitation and clients services; or
4. The securities broker accepts the clients' commission to handle the matters such as securities purchase or transaction for them.

Article 90 A securities company charging fees in violation of the regulations shall be punished by relevant competent authorities in accordance with relevant laws and regulations.

Chapter VIII Supplementary Provisions

Article 91 Where a securities company fails to conform to the stipulations of Paragraph 3 of Article 26 of the Regulations in operating securities businesses, it shall meet the requirements within the time limit stipulated by the securities regulatory body under the State Council.

Article 92 Where the custody method of clients' trading settlement funds of the securities company fails to conform to the stipulations of Article 57 of the Regulations, the securities regulatory body under the State Council shall order it to make adjustment within the specified time limit.
The custody method of clients' trading settlement funds of the securities company shall satisfy the requirements of the provisions within one year after the implementation of the Regulations.

Article 93 A securities company may borrow from shareholders or other entities debts whose repayment priority is behind ordinary debts. The detailed measures for the administration thereof shall be formulated by the securities regulatory body under the State Council.

Article 94 The business scope, foreign shareholders' qualification conditions and proportions of capital contributions of foreign-invested securities companies shall be prescribed by the securities regulatory body under the State Council and submitted to the State Council for approval.

Article 95 Where a securities institution outside the territory of China operates securities business or establish a representative institution within the territory of China, it shall be subject to approval by the securities regulatory body under the State Council. The detailed measures thereof shall be formulated by the securities regulatory body under the State Council and submitted to the State Council for approval.

Article 96 The securities registration and clearing institution mentioned in the Regulations refers to the securities registration and clearing institution stipulated in Article 155 of the Securities Law.

Article 97 The Regulations shall be implemented as of June 1, 2008.