Announcement of the China Securities Regulatory Commission [2008] No.20
The China Securities Regulatory Commission (CSRC) hereby announces the “Rules of Supervision over Securities Companies’ Branches (Trial)”, which shall be effective as of the announcement day.
May 13, 2008
Rules of Supervision over Securities Companies' Branches (Trial)
Article 1 The Rules are formulated in accordance with the “Company Law”, the “Securities Law” and the "Rules on Supervision over Securities Companies", in order to adapt to requirements of the securities companies’ independent operation and organization improvement and regulate the establishment and operation of securities companies’ branches.
Article 2 The branches in the Rules refer to the institutions (other than securities business departments) undertaking business operations established by securities companies in line with the “Company Law”, the “Securities Law” and the "Rules on Supervision over Securities Companies".
Article 3 Securities companies shall gain approval from the CSRC before establishing branches. The branches shall not be legal persons, and their legal liabilities shall be assumed by securities companies.
Article 4 The branches shall operate business within the authorization scope of the securities companies. Overstepping the authorization scope shall be prohibited.
Securities companies may authorize their branches to operate the following business:
1. management of securities companies’ business departments in certain areas;
2. operation of securities companies’ securities underwriting and sponsorship in certain areas;
3. operation of securities proprietary business as securities companies’ special institutions for proprietary business;
4. operation of securities assets management business as securities companies’ special institutions for securities assets management business; and
5. securities companies’ other business approved by the CSRC.
Article 5 The branches shall not directly operate business of securities business departments. Those branches which are authorized to operate securities proprietary business or securities assets management business shall not operate other business.
A securities company shall not authorize same branch to operate different businesses with conflicting interests. If a securities company authorizes its branch to operate securities proprietary business or securities assets management business, the company’s headquarters shall no longer operate or authorize other branches to operate such business.
Article 6 A securities company’s application for branch establishment shall be in accordance with the following prudent requirements:
1. with sound corporate governance structure, complete risk management system and internal control mechanism;
2. the establishment of its branches shall be in accordance with the business scale, management capability, capital power and human resources, and shall be reasonable and feasible;
3. a securities company has no serious violation of laws and regulations, or not under investigation due to being suspected of violation of laws and regulation in the past 2 years;
4. with such conditions as operational capital, offices, business and management personnel, technological conditions and safety measures in accordance with the business scope of the to-be-established branch;
5. the person-in-charge to be appointed has obtained professional qualification as the head of a securities company’s branch; and
6. the CSRC’s other requirements.
Article 7 A securities company shall apply to the CSRC for branch establishment and submit application materials to the securities regulatory bureaus in the places where its domicile and to-be-established branch are respectively located for records. The CSRC shall accept and examine the application and make decisions in accordance with the“Law of the People's Republic of China on Administrative Licenses”, the “Securities Law”, the "Rules on Supervision over Securities Companies", other laws and administrative rules as well as the CSRC’s relevant rules.
Upon approval of the branch establishment application, the securities company shall apply for the registration of establishment within 30 days to the company registration authority, complete the preparatory work within 6 months and apply for check and acceptance to the securities regulatory bureau in the place where the branch is located. If the securities company fails to apply for check and acceptance within the stipulated term or fails to go through the check and acceptance, the approval documents are invalid automatically. If the securities company goes through the check and acceptance, it shall apply to the CSRC for the license for securities business and submit, within 10 working days since it obtains the license for securities business, the photocopies of the license for securities business and the business license to the securities regulatory bureaus in the places where its domicile and branch are respectively located for records.
Article 8 A securities company shall obtain approval from the CSRC if it acquires, revokes its branch or changes its branch’s business scope according to requirements of its business development and management.
If a branch relocates outside the jurisdiction area of the securities regulatory bureau in the place where it is located, it shall be approved by the CSRC. If a branch relocates within the jurisdiction area of the securities regulatory bureau in the place where it is located, it shall be approved by the local securities regulatory bureau.
A securities company shall meet the conditions of branch establishment in Article 6 of the Rules when it acquires a branch. The relevant transferor must be a securities company that transfers business of all or some areas related to the underlying branch based on development strategy adjustment and business integration.
If a securities company applies for cancellation of a branch or is ordered to cancel a branch according to the law, it shall work out a disposal plan as well as a staff & clients allocation plan, and report them to the CSRC for records.
Article 9 A securities company shall conduct centralized and unified management of its branches’ business activities and information technology systems, establish specific, clear and reasonable systems of authorization, inspection and accountability upon branches as well as a real-time supervision system of risk control index conforming to the securities company’s practical conditions, and reinforce the branches’ risk control, auditing and compliance management.
A branch shall hang the license for securities business and the business license at a predominant place of its business places and publicly notify the basic information, phone numbers of complaints, fax numbers, email boxes and other relevant information of the securities company and the branch.
Article 10 A branch’ business activities and its persons in charge shall be under the supervision by the securities regulatory bureau in the place where the branch is located. The branch shall submit its operation management information and materials including business, finance and persons in charge to the securities regulatory bureau in the place where the branch is located. The relevant local bureau shall input the branch’s supervisory information into the comprehensive information system of institution supervision.
A securities company’s risk control, auditing and compliance management on its branches shall be under the supervision by the securities regulatory bureau in the place where its domicile is located.
The securities regulatory bureaus in the places where a securities company’s domicile and its branch are respectively located shall establish an effective system of information exchange and supervision cooperation, to prevent, defuse and settle operation risks, significant abnormalities and emergencies of the branch, and cooperate in the examination, investigation and check of relevant branch.
Article 11 Before the issuance of the Rules, various institutions engaging in operational activities that have been established by a securities company outside its domicile, including business headquarters, management headquarters and business centers, and the branches of which establishment has been approved shall be regulated according to the requirements of the Rules since its issuance. And those who fail to meet the requirements within the stipulated term shall be cancelled in time.
Article 12 If a securities company has established such institutions as representative offices and offices engaging in non-operational activities including liaison, research, market survey or information technology management outside its domicile, it shall report to the securities regulatory bureaus in the places where its domicile and such institutions are respectively located for records. Such institutions shall not engage in any operational activities.
Article 13 Major offices of a securities company shall be set up in its domicile registered at the company registration authority according to the law, and meet the following supervision requirements at least:
1. offices of the board of directors, the board of supervisors, the board chairman, the chairman of board of supervisors and the senior management shall be set up in the company’s domicile;
2. departments of finance, check, audit, compliance and risk control shall be set up in the company’s domicile;
3. account books shall be set up, generated and kept in the company’s domicile; and
4. complete information and materials of business and finance shall be collected and kept in the company’s domicile.
Article 14 If a securities company and its branch fail to conform to the Article 11, 12 and 13 of the Rules, they shall rectify timely and meet relevant requirements within 1 year since the issuance of the Rules.
Article 15 If a securities company violates the Rules, the CSRC and the securities regulatory bureau in the place where the securities company’s domicile is located shall take regulatory measures according to the law.
Article 16 The securities regulatory bureau in the place where a branch is located shall implement supervision over the branch according to the law.
Article 17 The Rules shall be effective as of the announcement day. Should any disparity occur between the CSRC’s previous provisions on the supervision over securities companies’ branches and the Rules, the Rules shall prevail.
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