Announcement of the China Securities Regulatory Commission [2008] No.30
The China Securities Regulatory Commission (CSRC) hereby announces the “Trial Provisions on Compliance Management of Securities Companies”, which shall be effective as of August 1, 2008.
July 14, 2008
Trial Provisions on Compliance Management of Securities Companies
Article 1 The Regulations are formulated in accordance with the “Securities Law” and the "Rules on Supervision over Securities Companies", in order to promote the internal compliance management of securities companies and strengthen the self-restraint ability for sustainable development.
Article 2 Securities companies within the People’s Republic of China shall implement compliance management according to the Provisions.
The compliance management in the Provisions refers to securities companies’ formulation and implementation of compliance management mechanism, as well as breeding of compliance culture and prevention from compliance risks.
The compliance in the Provisions refers to that operation management and practices of securities companies and their staff shall conform to laws, regulations, rules and other regulatory documents, trade regulations, self-regulation rules and companies’ internal laws and regulations, as well as professional virtue and code of practice well-acknowledged in the industry (hereinafter jointly referred to as the “laws, regulations and rules”).
The compliance risks refer to that legal punishment, supervision measures, property loss or reputation loss are imposed on securities companies, due to securities companies and their staff’s violation of the “laws, regulations and rules” in the operation management or practices.
Article 3 The compliance management of securities companies shall, covering all the businesses, departments, branches and staff, be applied to decision-making, implementation, supervision and feedback.
Article 4 Securities companies shall set up the concept of “compliance operation, staff’s compliance and starting from senior management’s compliance”, advocate and promote the compliance culture, and breed the compliance awareness of the staff.
Article 5 A securities company shall formulate a fundamental system of compliance management and implement it upon examination by the directorate. The fundamental system of compliance management shall cover the goal, basic principle, organizational structure and responsibilities of compliance management, as well as the reporting, disposal and accountability of incompliance.
Article 6 A securities company’s directorate, board of supervisors and senior management shall, in accordance with laws, regulations and the “Articles of Association”, perform their duties in the compliance management and assume responsibilities for an effective compliance management.
Heads from all departments and branches of securities companies shall strengthen supervision over the compliance of their staff’s practices and assume responsibilities for an effective compliance management.
A securities company’s staff shall know well about laws, regulations and rules, positively identify and control compliance risks and assume responsibilities.
Article 7 A securities company shall, according to requirements, organize relevant internal institutions and departments or authorize external professional institutions to evaluate the effectiveness of companies’ compliance management to timely solve the problems in the compliance management. One comprehensive evaluation on the effectiveness of compliance management shall be conducted at least every year.
Article 8 A securities company shall have chief compliance officer, the head of compliance, to examine, supervise and check compliance of operation management and practices by the company and its staff. The chief compliance supervisor shall neither hold the concurrent positions incompatible with responsibilities of compliance management nor take charge of similar departments.
A securities company’s “Articles of Association” shall specify the status, responsibility, appointment and dismissal conditions and procedures of chief compliance officer.
Article 9 The chief compliance officer shall meet the following qualifications:
(1) having acquired the qualification of senior management of securities companies;
(2) good command of securities business, securities laws and regulations, with expertise of the compliance management; and
(3) having engaged in the securities business for 5 years or above and passed relevant professional examinations, or engaged in law business for 8 years or above; or having been in charge of professional supervision in securities supervision authorities for 8 years or above.
The professional examinations in the preceding paragraph refer to compliance management competence examination of securities companies organized by the Securities Association of China (SAC), national judicial examination and bar examination.
Article 10 Provided that a securities company engage its chief compliance officer, it shall submit the resume of the to-be-engaged and relevant certificates to the securities regulatory bureau in the place where its domicile is located. The chief compliance officer can hold the position upon approved by the securities regulatory bureau.
Provided that a securities company dismisses its chief compliance officer, it shall, within 3 working days since the dismissal day, provide good reasons and submit written reports on the dismissal and reasons to the securities regulatory authorities in the place where its domicile is located.
Article 11 Provided that a chief compliance officer can not perform his/her duty or the post is vacant, the securities company concerned shall appoint a senior management to perform the duty, and submit written report to the securities regulatory authorities in the place where its domicile is located within 3 working days since the appointment day.
The person performing the duty of chief compliance officer can not take charge of departments incompatible with responsibilities of compliance management, with the performance time not exceeding 6 months.
Provided that the post of chief compliance officer is vacant, the securities company concerned shall appoint the person conforming to Article 9 herein within 6 months.
Article 12 Chief compliance officer shall carry out compliance examination to internal management system, significant decisions, new product and business plan, and issue a written opinion on compliance examination.
Chief compliance officer shall carry out compliance examination to the application materials or reports submitted by companies according to the securities regulatory authorities, and confirm in the written applications or reports.
Article 13 Chief compliance officer shall adopt effective measures to supervise over the compliance of companies and the employees’ operation management and practices, and hold periodical and non-periodical examinations according to requirements of the securities regulatory authorities and regulations of the companies.
Chief compliance officer shall implement the system of anti-money laundering and information isolation, provide compliance consultation and training for senior management, each department and branch according to companies’ regulations, and deal with complaints and tips related to violation of laws and regulations of companies and the employees.
Article 14 Chief compliance officer, discovering companies’ violation of laws and regulations or compliance hidden risks, shall timely report to internal institutions stipulated in the "Articles of Association", as well as to the securities regulatory authorities in the place where its domicile is located; if there’s violation of the industrial standard and self-regulation rules, chief compliance officer shall also report to relevant self-regulatory organizations.
As to violation of laws and regulations or compliance hidden risks, chief compliance officer shall timely put forward determent and treatment opinions to relevant institutions department and urge them to rectify. Companies shall report the rectification result to the securities regulatory authorities in the place where its domicile is located; if necessary, companies shall file a copy to self-regulation organizations.
Article 15 Provided that laws, regulations and rules are changed, chief compliance officer shall suggest, supervise and guide companies’ directorate or senior management to evaluate the impact on companies’ compliance management, modify and perfect relevant management system and business procedures.
Article 16 Chief compliance officer shall keep in touch with securities regulatory authorities and self-regulation organizations and positively cooperate with their work.
Chief compliance officer shall timely deal with the investigation required by the securities regulatory authorities and self-regulatory organizations, cooperate with their examination and investigation to the company, track and evaluate the implementation of regulatory opinions and requirements.
If the chief compliance officer has difficult in judging the compliance of the securities company and its staff’s operation management and practices due to indefinite laws, regulations and rules, he/she could consult the securities regulatory authorities and self-regulatory organizations. The securities regulatory authorities and self-regulatory organizations shall make timely reply.
Article 17 Chief compliance officer shall file duty-performance-related documents including compliance examination opinions, compliance consultation opinions, signed company documents and working paper of compliance examination for ready reference, and record the circumstance of duty performance.
Article 18 A securities company shall safeguard independence of the chief compliance officer and give full right to know and investigation right as required in duty performance.
The chief compliance officer is entitled to participate in or attend meeting related to duty performance, obtain and exam relevant documents and information and ask companies’ relevant staff to present statement on related issues.
Shareholders, directors and senior management shall not violate stipulated duties and procedures to directly give orders to the chief compliance officer or interfere in the work; directors, supervisors, senior management, departments and branches of securities companies shall cooperate with the chief compliance officer’s work. Besides, they shall not confine or interfere in the chief compliance officer’s duty performance with any reason.
Article 19 A securities company shall provide necessary human resource, material resource, financial resource and technical support to the duty performance of its chief compliance officer.
A securities company shall, in accordance with circumstances including companies’ business scope, business scale and organization structure, set up compliance department or designate relevant department (hereinafter referred to as the compliance department) to assist the chief compliance officer’s work, and equip the compliance department with adequate compliance management personnel who possess relevant expertise.
The chief compliance officer, if necessary, can engage external professional institutions or staff to assist the work in the name of the securities company.
Article 20 The compliance department shall, led by its chief compliance officer, fulfill the compliance management according to the companies’ regulations and the compliance officer’s arrangement. Other duties assumed by the compliance department shall not be incompatible with the responsibilities of compliance management.
A securities company shall define respective duties of compliance department and other internal control department, and establish coordinate and interactive mechanism in each internal control department.
Article 21 A securities company shall set up reporting system of incompliance to ensure every employee’s right to inform violation of laws and regulations.
Each department, branch and staff of companies, when discovering violation of laws and regulations or compliance hidden risks, shall positively and timely report to the chief compliance officer.
Article 22 Securities companies shall bring the effectiveness of compliance management and compliance of practices into the performance evaluation scope of senior management, each department and branch and the staff.
Securities companies shall evaluate the performance of chief compliance officer and manager, with the salary decided based on the evaluation. If the chief compliance officer and manager are competent, the salary shall be no lower than the average of manager’s at same level of companies.
Article 23 Securities companies shall submit mid-term compliance report to the securities regulatory authorities in the place where its domicile is located before August 31; and submit the annual compliance report of previous year before April 30. The compliance report, approved by the directorate of companies, shall cover the following contents:
(1) basic information of companies’ compliance management;
(2) duty performance of chief compliance officer;
(3) discovery and rectification of companies’ violation of laws and regulations and compliance risks;
(4) evaluation and rectification of compliance management; and
(5) other content required by the securities regulation authorities or companies.
Directorate and senior management of securities companies shall confirm in writing the compliance report stipulated in the preceding paragraph and ensure authenticity, accuracy and integrity of the report; and shall specify the opinions and reasons if they have any dissent against the content of the reports
Article 24 The CSRC will evaluate the effectiveness of securities companies’ compliance management, and the evaluation will be taken as important basis for securities companies’ implementation of clarification supervision.
Article 25 Securities companies, who, by effective compliance management, positively discover violation of laws and regulations, actively dispose and implement the responsibilities, improve internal control system and business procedure and timely report to the securities regulatory bureau where its domicile is located, shall be exempt from responsibilities or punished less severely or with a lighter punishment.
Concerning the securities company’s violation of law and regulations, chief compliance officer who has performed the deterring and reporting duties according to the regulation shall be exempted from liabilities.
Article 26 Securities companies, with ineffective implementation of the compliance management, imperfect internal control and violation of laws and regulations, shall, according to law, take supervision measures over the companies, directors, senior management and other employees who assume the responsibilities or investigate legal responsibility.
If the chief compliance officer bolster and connive at violation of laws and regulations, or fail to fulfill the responsibilities including deterring and reporting according to the regulation without proper reasons, he/she shall, according to law, be imposed on supervision measures or investigated legal responsibility.
Article 27 The Rules shall be effective as of August 1, 2008. | 
