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CSRC to solicit public comments on the Administrative Measures for Foreign-Invested Securities Companies
09-03-2018

  The 19th CPC National Congress made the decision to "significantly ease market access, further open the service sector"with specific requirements laid out in the State Council Circular on Several Measures for Expanding Opening Up and Vigorously Using Foreign Capital (No. 5 [2017] of the State Council) and State Council Circular on Several Measures for Promoting Growth of Foreign Investment (No. 39 [2017] of the State Council). To implement the aforementioned decisions, as well as to fulfill China's commitment to further open up the securities industry, the CSRC has made amendments to the earlier Rules for the Formation of Securities Companies with Foreign Shareholders in order to promote high-quality development of the capital markets. The CSRC plans to release the revised rules in the name of Administrative Measures for Foreign-Invested Securities Companies (for public comment) (hereinafter referred to as the Measures). The revised version is now open for public comments.

  Amendments made to the Measures cover the following aspects. First, to allow foreign investors to be controlling shareholders in joint-venture securities companies. Domestic shareholders in JV securities companies are subject to the same requirements as in a general securities company. The earlier Rules for the Formation of Securities Companies with Foreign Shareholders is renamed as Administrative Measures for Foreign-Invested Securities Companies to reflect the paradigm shift that foreign investors can take controlling stakes in the JV.

  Second, to gradually expand business scope for JV securities companies. The new rules will allow new JV securities companies to apply for securities-related business licenses compatible with their own conditions. Initial business scope shall be consistent with the experiences of the controlling shareholder or the largest shareholder.

  Third, to unify the limits on foreign ownership in both listed and unlisted securities companies. According to the new rule, the aggregate foreign ownership in any listed domestic securities company shall conform to "not exceeding the overall opening-up commitment of the Chinese domestic securities industry".

  Fourth, to relax ownership restrictions on a single foreign investor in a listed securities company.  The new rule requires that "holding of issued shares of a listed securities company by one single foreign investor through securities tradings on stock exchanges or agreement purchase, or joint holdings of such shares with other investors through agreement or other arrangements, shall not exceed 30%."

  Fifth, to further expand the conditions that foreign shareholders shall qualify for. The new rule requires that foreign shareholders must be financial institutions with good international reputation and leading business performance in scale, revenue, and profit in the last three years. Meanwhile, the foreign shareholders shall enjoy high long-term credit ratings for the recent three years.

  Sixth, to clarify the policies applicable to the circumstance where the nature of a domestic securities company changes as a result of nationality changes of its actual controller.

  We welcome valuable opinions from all market sectors on the Measures. The CSRC will further revise the Measures based on the feedback from public consultation. After fulfilling necessary procedures, the CSRC will release and implement the revised Measures as soon as possible and accept applications to establish joint venture securities companies in accordance with the law.

 

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