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Our Ref: No.105 [2004] CSRC
August 30, 2004
To: securities companies
With a view to implementing the Measures for the Administration of Transaction Settlement Funds of Clients (Decree No. 3 of China Securities Regulatory Commission (the CSRC)) and the Circular on Several Opinions Concerning the Implementation of the Measures for the Administration of Transaction Settlement Funds of Clients (No.121 [2001] CSRC, hereinafter referred to as Decree No.3 and its Circular), and further strengthening the administration of the transaction settlement funds of clients, the related matters with respect to separate administration of settlement reserve accounts of securities companies are hereby notified as follows:
1. A securities company shall separately open a provision account for the clearance of self-support business and a provision account for the clearance of client business with the China Securities Depository and Clearing Corporation Ltd. (hereinafter referred to as the CSDCC) to respectively conduct the clearance of self-support business and agency service.
2. A securities company shall designate its seats on Shanghai United Assets and Equity Exchange and Shenzhen Stock Exchange as seats for self-support and non-self-support businesses, and submit to the CSDCC such designation and accounts used for self-support business, which shall be carbon copied to stock exchanges as mentioned above and Department of Intermediary Supervision of the CSRC simultaneously.
3. A securities company shall arrange two major seats named self–support business and client business for self-support bonds spot and repurchase trading so as to conduct respective clearance.
4. After the establishment of seats and provision accounts of two kinds have been completed, a securities company shall strictly distinguish its various businesses based on such two categories as self-support business and client business, and conduct transaction and clearance separately according to the corresponding seats and provision accounts.
5. A securities companies shall, upon the completion of ledger clearance of self-support business and client business, bear liability for the final settlement of any and all transactions, unless otherwise prescribed by the CSRC.
Should the settlement of funds for self-support business of a securities company be found to breach contract, the CSDCC may withhold the bonds at the seat for self-support business of such company so as to prevent risks, instead of detaining the bonds and provisions at the seat for client business of the same company. As to the breach of contract found in the settlement of clients’ funds, the CSDCC may execute deductions from the provision account for self-support business of the said company in order to complete settlement. For a securities company, whether or not in whose self-support business or client business, the breach of contract is severely persisting, the CSDCC may limit or cease the transaction of seat for the self-support business of such securities company through negotiation with stock exchanges.
6. A securities company shall notify the CSDCC of the proportion of commission collection, and shall file an application to the CSDCC for any and all commissions, spreads and other clearing adjustment that is required to be made from the provision for the clearance of client business to the provision for the clearance of self-support business, and such application shall be completed after examined by the CSDCC; As to the transfer in violation of Decree No.3 and its Circular, the CSDCC shall refuse the payment of such transfer.
7. Various securities companies shall, as of the date of promulgation of this Circular, do their best to well deal with preparation for provision ledger, and submit the designation of seats and accounts used for self-support business to the CSDCC since October 1, 2004.
The China Securities Regulatory Commission
(This English version by Shenzhen Securities Information Co., Ltd. is for your reference only. In case any discrepancy exists between the Chinese and English context, the Chinese version shall prevail.) | 
