To strengthen the supervision of listed securities companies, the China Securities Regulatory Commission has formulated the “Regulations on Consolidating Supervision over Listed Securities Companies” according to the “Securities Law” and the “Regulations on Supervision and Administration of Securities Companies”. It hereby makes an announcement on the captioned regulations and implements it from the announcement day onwards.

 

April 3, 2009

 

Regulations on Consolidating Supervision over Listed Securities Companies

Listed securities companies have dual attributes of securities companies and listed companies. They should conform to relevant laws and regulations on supervision over securities companies and those on supervision over listing and issuance of listed companies. To better coordinate and connect with relevant laws and regulations, the supervision over listed securities companies should be consolidated, with the specific regulations as follows:

 

1. Securities companies’ re-financing including initial public offering (IPO), new shares issuance and convertible bonds issuance after listing should comply with the conditions for issuance and change of registered capital as prescribed by administrative admission involved in laws and regulations such as the “Securities Law”, the “Regulations on Supervision and Administration of Securities Companies”, the “Administrative Measures for Initial Public Offering and Listing of Stocks” and the “Administrative Measures for Issuance of Securities by Listed Companies”. Securities companies should apply for the letter of regulatory opinions to regulatory authorities and provide relevant application as well as examination and verification materials including the letter of regulatory opinions. If IPO and re-financing involve a change of shareholders and actual controllers holding over 5% equity of securities companies, examination and verification materials for relevant shareholders’ qualifications should be filed as well.

 

2. Listed securities companies, which have significant assets reorganization and involve a change of shareholders and actual controllers holding more than 5% equity of securities companies, should submit examination and verification materials for relevant shareholders’ qualifications as well.

 

3. Listed securities companies should specify in the articles of association according to relevant regulations in the “Regulations on Supervision and Administration of Securities Companies” that any unit and individual, who holds or actually controls more than 5% equity of securities companies without approval by the supervision and administration authority of the State Council, should correct it within time limit; before the correction, the corresponding equity has no voting right.

 

4. A listed securities company should compile the annual report of listed company and the annual regulation report of securities company according to regulations such as the “No.2 Rules on Contents and Format of Information Disclosure by Companies Publicly Issuing Securities -- Contents and Format of Annual Reports” of the China Securities Regulatory Commission (CSRC) and the “Rules on Contents and Format for Annual Reports of Securities Companies”. A listed securities company should disclose the annual report of listed company according to requirements within the prescribed time limit, file the annual regulation report of securities company to regulatory authorities and publish the audit report and the audited accounting statement and annotations on the websites of the Securities Association of China and the company as required. If there is significant discrepancy in the data between the annual report disclosed to the public and that filed to the regulatory authorities, the listed securities company should promptly disclose and explain the reasons for the discrepancy by way of special report.

 

5. According to the regulation in the “No.2 Rules on Contents and Format of Information Disclosure by Companies Publicly Issuing Securities -- Contents and Format of Annual Reports”, a listed company should disclose its holding of shares in other listed companies. If it is inconvenient to disclose those involved in trade secret of the listed securities company, the company can apply for exemption to the exchange according to regulations.

 

6. According to the regulations on the transactions that should be disclosed in the listing rules of the Shanghai Stock Exchange and the Shenzhen Stock Exchange, concerning significant outward investment including the proprietary trading which exceeds specific lines and needs to be disclosed timely and submitted to the shareholders’ meetings for discussion, a listed securities company can discuss it at the shareholders’ meetings yearly and disclose the total amount of proprietary trading. If the situation changes in the implementation of proprietary trading, the shareholders’ meeting can authorize the directorate to vote and make announcements in accordance with the articles of association.

 

7. According to regulations in the “Rules for Governance of Securities Companies (Trial)” and the “Administrative Measures for Risk Control Indicators of Securities Companies”, all shareholders should be notified in written form when there occur the circumstances in a securities company as follows: the company or its senior management is suspected of illegal activities; the financial situation deteriorates; chairman of directorate, general manager and chairman of board of supervisors are planned to be changed; specific changes occur in risk control indicators. The listed securities company should promptly announce the aforesaid information on designated media for disclosure to fulfill the obligation of informing all shareholders in written form.

 

8. According to Article 10 of the “Rules for Governance of Securities Companies (Trial)”, a securities company’s shareholders should promptly notify the securities company of certain circumstances. The above provision is applicable to shareholders and actual controllers holding more than 5% equity of the listed securities company.

 

9. According to Article 26 of the “Regulations on Supervision and Administration of Securities Companies” and Article 5 of the “Interim Provisions for Examination and Approval of Business Scope of Securities Companies”, a securities company’s development of new business and operation of innovative business should be approved by the CSRC. When announcing the resolution of the directorate and the shareholders’ meeting on planning to develop new business or operate innovative business, the listed securities company should make risk alert to investors and show that it still needs the verification and approval by regulatory authorities before actual development of relevant business, and there exists the possibility of failure to be verified and approved by regulatory authorities for not meeting the requirements of laws and regulation as well as regulation.

 

10. Listed securities companies should disclose significant events including change in risk control indicators and the adopted regulation measures according to the “Administrative Measures on Information Disclosure by Listed Companies”.

(1) a listed securities company should disclose all risk control indicators in the annual reports and semi-annual reports. In its daily operation, when the risk control indicators do not meet the standards in the “Administrative Measures for Risk Control Indicators of Securities Companies”, they should be disclosed by way of special announcement in time, and give reasons, current status and potential influence.

(2) a listed securities company, whose management are influenced and may greatly influence market prices due to significant regulatory measures and risk disposal, should confirm the significant events and make special announcements in time as well as disclosure in the semi-annual reports and the annual reports. These measures include but are not limited to those for significant regulation and risk disposal such as business restriction, ordering to suspend some businesses, ceasing of approving new business, ceasing of approving addition establishment and purchase of operational branches, limitation on dividend distribution, limitation on paying remuneration and providing welfare to the senior management, directors and supervisors, revocation on business permit, ordering to transfer controlling shareholders’ equity or restrict shareholders’ rights, temporary hand-over of the company.

 

11. Listed securities companies should strictly implement the laws and regulations on supervision over securities companies and listed companies such as the “Rules for Governance of Securities Companies (Trial)” and the “Code of Corporate Governance for Listed Companies” so as to perfect the structure of corporate governance and improve the level of corporate governance.

 

12. The Regulations shall come into effect as of the announcement day.