China Securities Regulatory Commission, Ministry of Finance and People's Bank of China, Measures for the Administration of the Securities Investor Protection Fund

Promulgated: June 30 2005
Effective: July 1 2005
Interpreting authority: China Securities Regulatory Commission, Ministry of Finance and People's Bank of China
Applicability: The term 'securities investor protection fund' (hereafter, the Fund) refers to funds that are raised and formed in accordance with these Measures to protect the interests of securities investors when preventing and handling risks of securities companies (Article 2). The wholly state-owned China Securities Investor Protection Fund Corporation Limited (hereafter, the Fund Corporation) shall be established and responsible for fund raising, management and use (Article 2). Investors suffering losses in securities investment activities caused by volatility in the securities market or changes in the value of investment products themselves shall bear such losses themselves (Article 4). Article 12 outlines the sources of the Fund, for example: (1) 20% of the transaction fees of the Shanghai and Shenzhen Stock Exchanges after the stipulated thresholds for the respective risk funds have been reached; (2) 0.5-5% of the operating revenue of each of the securities company registered in China; and (3) interest income on funds locked up for the subscription of securities being offered such as stocks and convertible bonds (Article 12). The Fund Corporation may, subject to the approval of the State Council, obtain special financing by ways such as issue of bonds (Article 14). The Fund may be used to compensate creditors in accordance with relevant state policies in the case that a securities company is banned, closed down or bankrupt, or subject to mandatory regulatory measures of the China Securities Regulatory Commission such as administrative receivership or commissioned management (Article 17). Utilization of proceeds of the Fund shall be limited to bank deposits, purchase of treasury bonds, central bank bonds (including central bank bills) and financial bonds issued by central financial institutions, as well as other ways of utilization approved by the State Council (Article 17).