BIZCHINA / Finance
Securities Law of the People's Republic of China (revised in 2005)
Updated: 2006-04-18 08:56
Article 128 The securities regulatory authority under the State Council
shall, within 6 months as of accepting an application for establishing a
securities company, carry out an examination according to the statutory
requirements and procedures and on the basis of the principle of prudent
supervision, make a decision on approval or disapproval and thereafter,
notify the relevant applicant. In the case of disapproval, an explanation
shall be given. Where an application for establishing a securities
company has been approved, an applicant shall, within the prescribed
period, apply for registration of establishment with the organ in charge
of corporation registration and collect its business license therefrom. A
securities company shall, within 15 days as of collecting its business
license, file an application for the Securities Business Permit with the
securities regulatory authority under the State Council. Without a
Securities Business Permit, a securities company may not engage in any
business operation of securities.
Article 129 Where a securities company establishes, purchases or cancels
a branch, alters its business scope or registered capital, alters its
shareholders or actual controllers who hold more than 5% of its stock
rights, alters any important article of its constitution, has any merger
or spilt-up, alters its form of corporation, suspends its business, goes
through dissolution or bankruptcy, it shall be subject to the approval of
the securities regulatory authority under the State Council. Where a
securities company establishes, purchases a securities operation
institution abroad or purchases the shares of any securities operational
institution abroad, it shall be subject to the approval of the securities
regulatory authority under the State Council.
Article 130 The securities regulatory authority under the State Council
shall formulate provisions on the risk control indicators of a securities
company such as net capital, the ratio between net capital and
liabilities, the ratio between net capital and net assets, the ratio
between net capital and operational scale of self-operation, underwriting
and asset management, the ratio between liabilities and net asset as well
as the ratio between current assets and current liabilities. A securities
company may not provide any financing or guaranty for its shareholders or
any related person thereof.
Article 131 The directors, supervisors and senior managers of a
securities company shall be honest and integrate, have good moral grade,
be familiar with the laws and administrative regulations on securities
and have the ability of operation and management as required by the
performance of their functions and duties, and shall have obtained the
post-holding qualification as verified by the securities regulatory
authority under the State Council before assuming his post. Anyone who is
under any circumstance as prescribed in Article 147 of the Corporation
Law of the People's Republic of China or is under any of the following
circumstances may not hold the post of director, supervisor or senior
manager of a securities company:
(1) Where a person-in-charge of a stock exchange or securities
registration and clearing institution or a director, supervisor or senior
manager of a securities company has been removed from his post for his
irregularity or disciplinary breach and if it has been within 5 years as
of the day when he is removed from his post; and
(2) Where a professional of a law firm, accounting firm or investment
consulting organization, financial advising organization, credit rating
institution, asset appraisal institution or asset verification
institution has been disqualified for his irregularity or disciplinary
breach and if it has been within 5 years as of the day when he is removed
from his post.
Article 132 A practitioner of a stock exchange, securities registration
and clearing institution, securities trading service institution or
securities company or any functionary of the state organ, who has been
dismissed for his irregularity or disciplinary breach, may not be
employed as a practitioner of a stock exchange.
Article 133 A functionary of the state organ and any other personnel as
prohibited by laws and administrative regulations from taking any job in
a company on a part-time basis may not take any job in a securities
company on a part-time basis.
Article 134 The state shall establish the securities investor protection
fund. The securities investor protection fund shall be composed of the
capital as paid by securities companies and any other capital as lawfully
raised. The specific measures for financing, administration and use of
the foregoing fund shall be formulated by the State Council.
Article 135 A securities company shall withdraw a trading risk reserve
from its annual after-tax profits to cover any loss from securities
transaction. The specific proportion for withdrawal shall be prescribed
by the securities regulatory authority under the State Council.
Article 136 A securities company shall establish and improve an internal
control system, adopt an effective measures of separation so as to
prevent any interest conflict between the company and its clients or
between different clients thereof. A securities company shall undertake
its operations of securities brokerage, underwriting, self-operation and
asset management in a separate manner but not in a mixed manner.
Article 137 A securities company shall undertake its self-operation in
its own name and may not make use of any other person's name or in an
individual's name. A securities company shall undertake its
self-operation by using its own capital and funds as lawfully raised. A
securities company may not lend its self-operation account to any other
person.
Article 138 A securities company may enjoy its right of independent
management according to law and its legal operation may not be interfered.
Article 139 The trading settlement funds of the clients of a securities
company shall be deposited in a commercial bank and be managed through
accounts as separately opened in the name of each client. The specific
measures and implementation procedures shall be formulated by the State
Council. A securities company may not incorporate any trading settlement
funds or securities of its clients into its own assets. Any entity or
individual is prohibited from misusing any trading settlement funds or
securities of its/his clients in any form. Where a securities company
goes bankruptcy or goes through liquidation. The trading settlement funds
or securities of its client may not be defined as its insolvent assets or
liquidation assets. Under any other circumstance as irrelevant to the
liabilities of its clients or under any other circumstance as prescribed
by law, the trading settlement funds or securities of its clients may not
be sealed-up, frozen, deducted or enforced compulsorily.
Article 140 Where a securities company engages in any brokerage business,
it shall arrange a uniformly formulated the power of attorney of
securities transactions for the entrusting party. Where any other means
of entrustment is adopted, the relevant entrustment records shall be
made. For an entrustment of securities transaction as made by a client,
whether the transaction is concluded or not, the entrustment records
shall be kept in the relevant securities company within the prescribed
period.
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