Several Provisions on the Stock-selling by Shareholders, Directors, Supervisors and Senior Management of Listed Companies

Announcement of the China Securities Regulatory Commission [2017] No.9

May 26, 2017

The Several Provisions on the Stock-selling by Shareholders, Directors, Supervisors and Senior Management of Listed Companies are hereby promulgated for implementation as of the date of implementation.

Several Provisions on the Stock-selling by Shareholders, Directors, Supervisors and Senior Management of Listed Companies

Article 1 The Several Provisions on the Stock-selling by Shareholders, Directors, Supervisors and Senior Management of Listed Companies (hereinafter referred to as the "Provisions") are formulated in accordance with the relevant provisions of the Company Law and the Securities Law, in order to standardize the stock-selling behaviors of shareholders, directors, supervisors and senior management of listed companies and promote the long-term stable and healthy development of the securities market.

Article 2 The Provisions shall apply to the stock-selling by controlling shareholders and shareholders holding 5% or above stocks (hereinafter collectively referred to as the "major shareholders") and directors, supervisors and senior management of listed companies, as well as the sale by shareholders of pre-initial public offering (IPO) stocks of companies and privately issued stocks of listed companies.
The Provisions shall not apply to the sale of stocks of listed companies bought through call auction on stock exchanges.

Article 3 Shareholders, directors, supervisors and senior management of listed companies shall abide by the Company Law, the Securities Law and the relevant laws and regulations, the rules and normative documents of the China Securities Regulatory Commission, as well as the restrictive provisions on the transfer of stocks in the rules of stock exchanges.
Shareholders, directors, supervisors and senior management of listed companies shall strictly abide by the promises they make, if any, in respect of restrictions on the transfer of stocks.

Article 4 Shareholders, directors, supervisors and senior management of listed companies may sell stocks through securities transactions on stock exchanges, and transfer them by agreement or other means as permitted by laws and regulations.
Stock-selling due to judicial enforcement, execution of equity pledge agreements, gifts, exchangeable debt equity swaps, stocks equity swaps or other reasons shall be subject to the Provisions.

Article 5 A shareholder, director, supervisor or senior management member of a listed company who intends to sell stocks shall, in accordance with laws, regulations and the Provisions, as well as the rules of the relevant stock exchange, perform the information disclosure obligation in an authentic, accurate, complete and timely manner.

Article 6 Under any of the following circumstances, a major shareholder of a listed company shall not sell stocks:
1. the listed company or the major shareholder is under investigation by the China Securities Regulatory Commission or judicial organs due to suspected illegality and crimes in relation to securities and futures, and it has been less than six months since the administrative penalty decision or criminal judgment was rendered;
2. it has been less than three months since the major shareholder was subject to public censure by a stock exchange due to the violation of the rules of the stock exchange; and
3. other circumstances required by the China Securities Regulatory Commission.

Article 7 Under any of the following circumstances, a director, supervisor or senior management member of a listed company shall not sell stocks:
1. the director, supervisor and senior management member is under investigation by the China Securities Regulatory Commission or judicial organs due to suspected illegality and crimes in relation to securities and futures, and it has been less than six months since the administrative penalty decision or criminal judgment was rendered;
2. it has been less than three months since the director, supervisor or senior management member was subject to public censure by a stock exchange due to the violation of the rules of the stock exchange; and
3. other circumstances required by the China Securities Regulatory Commission.

Article 8 A major shareholder, director, supervisor or senior management member of a listed company who plans to sell stocks through call auction on a stock exchange shall, 15 trading days prior to the initial sale, report to the relevant stock exchange and disclose the stock-selling plan in advance, which shall be recorded by the stock exchange.
The content of the aforesaid plan shall include but is not limited to: the quantity and source of stocks to be sold, the time interval and method of stock-selling, the price range of the stocks and reasons for stock-selling. The time interval of stock-selling shall comply with the provisions of the relevant stock exchange.
Within the time interval of stock-selling disclosed in advance, a major shareholder, director, supervisor or senior management member shall disclose the progress of stock-selling in accordance with the provisions of the relevant stock exchange. After the completion of the implementation of the stock-selling plan, a major shareholder, director, supervisor or senior management member shall, within two trading days, report to the relevant stock exchange and release an announcement; within the time interval disclosed in advance, where stock-selling is not implemented or the stock-selling plan has not been completely implemented, the major shareholder, director, supervisor or senior management member shall, within two trading days upon expiration of the time interval of stock-selling, report to the relevant stock exchange and release an announcement.

Article 9 The total stocks sold by a major shareholder of a listed company through call auction on a stock exchange within three months shall not exceed 1% of the total stocks of the company.
Where a shareholder sells pre-IPO stocks of a company or stocks privately issued of a listed company held by the shareholder through call auction on a stock exchange, the stocks shall be subject to the restrictions on proportion as prescribed in the preceding paragraph.
Where a shareholder holds the stocks privately issued of a listed company, the amount of the stocks sold through call auction within 12 months upon expiration of the restricted stock trading period shall also be subject to restrictions on proportion as prescribed by the relevant stock exchange.
When the preceding three paragraphs are applied, the amount of stocks held by a major shareholder of a listed company and persons acting in concert therewith shall be added up.

Article 10 Where stocks are sold through transfer by agreement, leading to the loss of the transferor's status as a major shareholder of a listed company, the transferor and the transferee of the stocks shall continue to abide by Article 8 and Paragraph 1 of Article 9 hereof within six months after the stock-selling.
Where a shareholder sells pre-IPO stocks of a company or stocks privately issued of a listed company held by the shareholder through transfer by agreement, the transferor and the transferee of the stocks shall continue to abide by Paragraph 2 of Article 9 hereof within six months after the stock-selling.

Article 11 Where a major shareholder of a listed company sells stocks through block trading, or a shareholder sells pre-IPO stocks of a company or privately issued stocks of a listed company held by such shareholder through block trading, the transferor and the transferee of the stocks shall abide by the provisions on the quantity of stocks so sold, the period of holding the stocks and other matters of the relevant stock exchange.
When the preceding paragraph is applied, the amount of stocks held by a major shareholder of a listed company and persons acting in concert therewith shall be added up.

Article 12 Where the equity of a major shareholder of a listed company is pledged, the shareholder shall notify the listed company within two days as of the date when the fact occurs, and release an announcement.
China Securities Depository and Clearing Co., Ltd. shall uniformly formulate the standards for registration elements on equity pledge in floor trading and over-the-counter trading, and is responsible for collecting the relevant information. A stock exchange shall clarify information disclosures such as the equity pledge registration by major shareholders of listed companies, the risk of unwinding and the lifting of an equity pledge.
Where the stocks of a major shareholder of a listed company are sold due to the execution of an equity pledge agreement, the Provisions shall apply.

Article 13 Where a shareholder, director, supervisor or senior management member of a listed company fails to sell stocks in accordance with the Provisions and the rules of a stock exchange, the stock exchange shall, depending on the circumstances, take regulatory measures, such as giving a written warning, and disciplinary measures, such as circulating a notice of criticism and public censure; if the circumstances are serious, the stock exchange shall, through the disposal measure of restricting restrictions, ban the stock-selling in the relevant securities account for 6 or 12 months.
In order to prevent major market fluctuations from affecting the market trading order or damaging the interests of investors, avoid market risks, and guide the orderly stock-selling, a stock exchange may, according to market conditions, and in accordance with laws and trading rules, take measures such as restricting transactions against the behaviors that constitute abnormal transactions.

Article 14 Where a shareholder, director, supervisor or senior management member of a listed company fails to sell stocks in accordance with the Provisions and the rules of a stock exchange, the China Securities Regulatory Commission shall take regulatory measures such as ordering the violator to make corrections in accordance with the relevant provisions.

Article 15 Where a shareholder, director, supervisor or senior management member of a listed company fails to disclose information in accordance with the Provisions and the rules of a stock exchange, or there is any false record, misleading statement or material omission, the China Securities Regulatory Commission shall impose an administrative penalty in accordance with Article 193 of the Securities Law.

Article 16 Where a shareholder, director, supervisor or senior management member of a listed company sells stocks beyond the proportion specified in laws and regulations, the rules and normative documents of the China Securities Regulatory Commission, as well as the rules of a stock exchange, such shareholder, director, supervisor or senior management member shall be investigated and punished in accordance with the law.

Article 17 Where a shareholder, director, supervisor or senior management member of a listed company fails to sell stocks in accordance with the Provisions and the rules of a stock exchange, thus constituting fraud, insider trading and market manipulation, such shareholder, director, supervisor or senior management member shall be investigated and punished in accordance with the law.

Article 18 Where a shareholder, director, supervisor or senior management member of a listed company sells stocks in violation of the Provisions and the rules of a stock exchange, if the circumstances are serious, the China Securities Regulatory Commission may impose a ban on securities market entry in accordance with the law.

Article 19 The Provisions shall come into force as of the date of promulgation. The Several Provisions on the Stock-selling by Major Shareholders, Directors, Supervisors and Senior Management of Listed Companies (Announcement of the China Securities Regulatory Commission [2016] No.1) shall be repealed simultaneously.