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CSRC Officially Released Administrative Measures for Foreign-Invested Securities Companies
29-04-2018

   To implement the directives of the 19th National Congress of the Communist Party of China on the principle to “substantially ease market access and further open the service sector” and the 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 further expand the opening-up of the securities industry and to achieve high-quality development of capital markets, upon the approval of the State Council, the China Securities Regulatory Commission (CSRC) officially issued the Administrative Measures for Foreign-Invested Securities Companies (hereinafter referred to as the "Foreign Investment Measures").
  In accordance with the requirements of relevant legislative procedures, the CSRC has solicited public comments on its official website and the “Government Legal Information Website” (chinalaw.gov.cn) on the Foreign Investment Measures since March 9, 2018. A total of 52 pieces of feedbacks were received from 11 institutions (5 domestic or foreign financial institutions, 3 industry organizations, 2 government agencies, and 1 law firm) and 5 individuals. In general, all parties are eager for the release of the Foreign Investment Measures as soon as possible to put opening-up policy into action, so as to bring in advanced experience and professional expertise from foreign institutions and create healthy competition, all of which will contribute to the improvement of service standards and the steady and healthy development of the securities industry. At the same time, the parties concerned also put forward specific suggestions for amendments. The CSRC has carefully studied and adopted reasonable and feasible opinions and suggestions, and accordingly revised and improved the Foreign Investment Measures.
  The revision of the Foreign Investment Measures mainly involves five 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. To reflect the status change of foreign shareholders from minority interest to controlling shareholders, the earlier Rules for the Formation of Securities Companies with Foreign Shareholders is renamed as Administrative Measures for Foreign-Invested Securities Companies.
  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 caps 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 further expand the conditions that foreign shareholders shall qualify for. 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.
  Fifth, 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.
  After the release of the Foreign Investment Measures, the CSRC will update the service guidelines for applications on the establishment of securities companies and other administrative licensing matters. Eligible foreign investors can submit applications for setting up joint venture securities companies in accordance with Foreign Investment Measures and service guidelines.



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