China Securities Regulatory Commission, Several Questions Concerning Legal Compliance in the Provision of Securities Investment Consulting Services to the Public Circular

Issued: October 15 2001
Effective: as of date of issue

Main contents: For the purpose of preventing illegal acts arising from conflicts of interests in securities investment consulting, the Circular provides that if anyone wishes to provide, whether orally, in writing or online, to the public any analysis, forecast or advice with regard to the securities market, the market trend of particular securities or the viability of securities investment, he must first obtain a qualification certificate from the China Securities Regulatory Commission (CSRC) (Section One). Such analysis, forecast or advice must have a reasonable basis and must not be based on false information, insider information or market rumours (Section Two). One must withdraw from any such consulting activity where conflicts of interests would arise (Section Three). Any entity or person that provides a market trend forecast or investment advice in respect of any particular securities must disclose its own economic interest in the subject securities. In addition, it must file a report to CSRC every two months to disclose, among other things, the holdings of its five largest shareholders in the securities that it has recommended to the public during the reporting months (Section Four, Item Two). The Circular also urges securities companies and securities investment consulting companies to set up appropriate "firewalls" between their relevant departments (Section Five). Media are requested not to distribute securities analysis, forecast or investment advice that is not provided by a consulting source with an appropriate qualification certificate (Section Six).
Related legislation: PRC, Securities Law (Amended), Oct 27 2005, CLP 2006 No.1 p31 and Administration of Securities and Futures Investment Consultancy Tentative Procedures, Dec 25 1997, CLP 1998 No.2 p9