Measures for the Administration of the Provision of Securities-related Legal Services by Law Firms

(Promulgated by the China Securities Regulatory Commission and Ministry of Justice on March 9 2007 and effective as of May 1 2007.)

Order of CSRC and MOJ No.41

PART ONE: GENERAL PROVISIONS

Article 1: These Measures have been formulated pursuant to the Securities Law and Lawyers Law in order to strengthen regulation of the provision of securities-related legal services by law firms, regulate the professional acts of lawyers in the course of activities, such as securities offerings, listings and trading, enhance the mechanism for guarding against legal risks, maintain order in the securities market and protect the lawful rights and interests of investors.

Article 2: These Measures shall govern the provision of securities-related legal services by law firms and the lawyers assigned by them.

For the purposes of the preceding paragraph, the term "securities-related legal services" means the legal services provided by a law firm appointed by a concerned party that consists of preparing and issuing legal opinions and other such documents for securities activities of the concerned party, such as a securities offering, listing and trading.

Article 3: When a law firm and the lawyers assigned by it provide securities-related legal services, they shall comply with laws, administrative regulations and relevant provisions, abide by the principles of honesty, trustworthiness, independence, diligence and responsibility, adhere to lawyers' professional ethics and professional discipline, strictly perform their legal duties and vouch for the truthfulness, accuracy and completeness of the documents they issue.

Article 4: A law firm shall establish a sound risk control system, strengthen its management of the provision of securities-related legal services by its lawyers and improve the level of Securities Law practice of its lawyers.

Article 5: The China Securities Regulatory Commission (CSRC) and its agencies, and the Ministry of Justice and local judicial administrative authorities shall regulate the provision of securities-related legal services by law firms in accordance with the law.

Lawyers' associations shall regulate the provision of securities-related legal services by law firms in accordance with their charters and legal industry standards.

PART TWO: SCOPE OF SERVICES

Article 6: When providing securities-related legal services, a law firm may issue legal opinions in respect of the following matters:

(1) initial public offerings and listings of shares;

(2) securities offerings and listings by listed companies;

(3) takeovers, material asset reorganizations and share buybacks of listed companies;

(4) the implementation of equity incentive plans by listed companies;

(5) the convening of shareholders' general meetings by listed companies;

(6) the direct or indirect offerings of securities abroad by domestic enterprises and the listing and trading abroad of such securities;

(7) the establishment, dissolution and termination of business of, as well as changes in, securities companies, securities investment fund management companies and their branches;

(8) the offering of securities investment funds and the establishment by securities companies of pooled asset management plans;

(9) offerings and listings of securities derivatives; and

(10) other matters as specified by the CSRC.

Article 7: A law firm may accept an appointment by a concerned party to arrange for the preparation of legal documents relating to securities business activities.

Article 8: Law firms that satisfy the following conditions are encouraged to provide securities-related legal services:

(1) having compliant internal management, a sound risk control system, high standards of practice and a good reputation;

(2) having at least 20 practising lawyers, of whom at least five have experience in securities-related legal services;

(3) having valid practice liability insurance; and

(4) not having been subjected to administrative penalties during the most recent two years for illegal practice.

Article 9: Lawyers who meet any of the following conditions and have not been subjected to administrative penalties during the most recent two years for illegal practice are encouraged to provide securities-related legal services:

(1) having provided securities-related legal services during the most recent three years;

(2) having been in practice continuously during the most recent three years and the lawyer(s) with whom they intend to jointly practise has/have provided securities-related legal services during the most recent three years; or

(3) having continuously engaged in teaching or research in the field of securities law during the most recent three years or having received training in Securities Law practice.

Article 10: A lawyer who has had his practice certificate revoked may never again provide securities-related legal services.

A lawyer who has been banned from the securities market by the CSRC or suspended by the judicial administrative authority may not provide securities-related legal services during his ban or while suspended.

Article 11: A law firm may not issue legal opinions for both the issuer, on the one hand, and the sponsor and underwriting securities company, on the other hand, in a securities offering, or issue legal opinions for both the acquirer and the target listed company in a takeover or issue legal opinions for different materially interested parties in a securities business activity.

If a lawyer serves as a director, supervisor or member of the senior management personnel of a company or an affiliate thereof, or if another circumstance exists that prejudices his independence, his law firm may not accept an appointment from that company to provide it securities-related legal services.

PART THREE: SERVICE RULES

Article 12: When a law firm and the lawyers assigned by it provide securities-related legal services, they shall perform their review and verification obligations diligently and prudently in accordance with legally formulated practice rules.

When carrying out a review and verification, a lawyer may do so by means, such as a face to face interview, examination of written materials, onsite investigation, inquiry, verification by letter, calculation and checking.

Article 13: When a law firm and the lawyers assigned by it provide securities-related legal services, they shall review and verify in accordance with the law the truthfulness, accuracy and completeness of the documents and information on which they are relying. Prior to carrying out the review and verification, they shall prepare a review and verification plan to clarify the matters that require review and verification and appropriately revise the same in light of the progress in the matter.

Article 14: When a lawyer is to issue a legal opinion, he shall perform his obligation of special attention as a legal professional in respect of law related matters and, in respect of other matters, perform his obligation of general attention as an ordinary person. The documents that he prepares and issues may not contain false or misleading statements or material omissions.

Article 15: A lawyer may use the documents directly obtained from state authorities, organizations whose function includes administration of public affairs, accounting firms, asset appraisal institutions, credit rating agencies and notary offices (hereinafter referred to as "Public Institutions") as the basis for issuing his legal opinion, provided that he performs his obligation of attention specified in Article 14 hereof and gives an explanation thereof. Documents not directly obtained from a Public Institution may only be used as a basis for issuing a legal opinion after review and verification.

The copies and duplicates that a lawyer has made of materials from a Public Institution may serve as a basis for issuing a legal opinion after the same have been confirmed by the institution, and provided that the lawyer performs his obligation of attention specified in Article 14 hereof and gives an explanation thereof. If such a copy or reproduction has not been confirmed by the institution, it may only serve as a basis for issuing a legal opinion after review and verification of the relevant information.

Article 16: When a lawyer is conducting a review and verification, and requires a determination by a securities service institution, such as an accounting firm and asset appraisal institution, he/she shall himself/herself engage or require the client to engage such securities service institution to issue an opinion.

Article 17: When a lawyer practices Securities Law, the client shall provide him/her true and complete relevant materials and may not refuse to provide or conceal the same or provide false information.

If a lawyer discovers that the materials provided to him by the client contain false or misleading statements or material omissions, or that the client has committed a major violation of the law, he shall require the client to correct and supplement such materials. If the client refuses to correct or supplement the materials, the lawyer may refuse to continue the appointment and, in accordance with provisions, shall perform his/her obligation of reporting to the relevant authorities.

Article 18: A lawyer shall classify and collate the work records generated in the course of the review and verification and the materials obtained, provide an explanation of the facts and relevant state provisions on which his/her specific opinions expressed in the legal opinion or other such document is based as well as of his/her analysis and judgment, and fashion the same into a clear working draft.

Article 19: The working draft shall be preserved by the law firm that issued the legal opinion for a period of not less than seven years. If the CSRC provides otherwise in respect of the preservation period, such provisions shall prevail.

PART FOUR: LEGAL OPINIONS

Article 20: A legal opinion is a clear and conclusive opinion issued by a law firm and the lawyers assigned by it concerning the lawfulness of the matters for which they were appointed by the client and is an important basis on which the client, investors, the CSRC and its agencies confirm whether the relevant matters are lawful. A legal opinion shall be issued by a lawyer based on the truthfulness, accuracy and completeness of the documents and information that he/she reviewed and verified, and in accordance with laws, administrative regulations and relevant provisions.

Article 21: A legal opinion shall set forth the relevant materials, facts, specific review and verification results, relevant state provisions and conclusive opinions.

Vague terms and phrases, such as "basically complies with", "did not discover", etc., may not be used in legal opinions.

Article 22: In the event any of the following circumstances exists, the lawyer shall give an explanation thereof in his legal opinion and fully disclose its effect on, and risks to, the relevant matters:

(1) all or part of the client's matters fail to comply with CSRC provisions;

(2) facts are unclear and materials are insufficient rendering them incapable of fully reflecting the circumstances of the client;

(3) the scope of the review and verification was restricted by objective conditions, making the obtaining of evidence that ought to have been available impossible;

(4) the lawyer requested that the client correct or supplement the materials but the client failed to do so;

(5) the lawyer performed his obligation of diligence and due care but remains unable to arrive at an accurate determination of all or part of the matters; or

(6) other circumstances that the lawyer deems as requiring an explanation.

Article 23: The opinion to be issued by a lawyer who provides securities-related legal services as specified in Article 6 hereof shall be discussed and checked by his law firm, and the relevant record thereof shall be made and kept as a working draft.

Article 24: The opinion to be issued by a lawyer who provides securities-related legal services as specified in Article 6 hereof shall be signed by two practising lawyers and the person in charge of his/her law firm, and bear the stamp of the law firm and the signing date.

Article 25: The specific contents and format of a legal opinion shall comply with the relevant provisions of the CSRC.

Article 26: If a material matter arises or the lawyer discovers that he/she needs to supplement his/her opinions after the legal opinion or other such document was submitted to the CSRC or its agency, he/she shall promptly submit a supplementary opinion.

PART FIVE: REGULATION

Article 27: If, while providing securities-related legal services, a lawyer or his/her law firm has a case opened against him/her/it and is investigated by the relevant authorities due to suspicion of having committed a violation of the law, he/she/it shall truthfully notify the client thereof in a timely manner and expressly warn the client of the possible legal consequences.

Article 28: When a lawyer or law firm issues a legal opinion to a client, he/she/it shall, in accordance with provisions, additionally submit relevant information on his/her/its past provision of securities-related legal services. When the client submits its documents including the legal opinion to the CSRC and its agency, it shall, in accordance with provisions, additionally submit relevant information on the past provision of securities-related legal services of the lawyer and law firm.

Article 29: The CSRC and its agencies, the judicial administrative authority and the lawyers' association shall establish a database and open integrity files for lawyers who provide securities-related legal services to record the penalties, etc., incurred by lawyers and law firms that provide securities-related legal services and shall disclose the same in accordance with provisions.

Article 30: If the CSRC or its agency, when reviewing the legal opinion issued by a lawyer, has any doubts as to its truthfulness, accuracy or completeness, it may require him/her to give an explanation and/or supplement the opinion, or require production of the working draft for its review. The lawyer and law firm shall cooperate

Article 31: The CSRC or its agency may take measures, such as ordering rectification, giving a regulatory discussion and issuing a written warning if a lawyer or his/her law firm, in the course of providing securities-related legal services, are characterized by any of the following circumstances:

(1) he/she/it failed to act with due diligence in accordance with Article 12 hereof when reviewing and verifying the truthfulness, accuracy and completeness of the documents and information on which they relied;

(2) he/she/it failed to prepare a review and verification plan in accordance with Article 13 hereof;

(3) he/she/it failed to require the client to correct or supplement the materials or to perform their reporting obligation in accordance with Article 17 hereof;

(4) he/she/it failed to provide explanations in a legal opinion in accordance with Article 22 hereof;

(5) he/she/it failed to discuss and check a legal opinion in accordance with Article 23 hereof;

(6) he/she/it failed to perform their notification obligation in accordance with Article 27 hereof;

(7) the basis of the legal opinion is inappropriate or insufficient, or the legal analysis is clearly erroneous;

(8) the conclusion reached in the legal opinion is ambiguous or is inconsistent with the review and verification results;

(9) he/she/it failed to prepare a working draft in accordance with Article 18 hereof;

(10) he/she/it failed to preserve the working draft in accordance with Article 19 hereof;

(11) the legal opinion fails to comply with the specified contents or format;

(12) the legal opinion or other such document contains document quality problems, such as serious typographical errors; or

(13) another instance of a violation of service rules exists.

Article 32: If the CSRC or its agency renders a decision to give a regulatory discussion, it shall notify the lawyer or the person in charge of the law firm in writing of the target, reasons, time, place, etc., of or for the regulatory discussion. The lawyer or person in charge of the law firm shall submit to the regulatory discussion as required by the notice.

When the CSRC or its agent is to give a lawyer or the person in charge of the law firm a regulatory discussion, it may do so in conjunction with the judicial administrative authority or may entrust the judicial administrative authority to give the discussion.

When a regulatory discussion is given, at least two members of the working personnel shall be present and a written record of the regulatory discussion shall be made.

Article 33: If the CSRC, its agency or the judicial administrative authority takes measures, such as ordering rectification, giving a regulatory discussion or issuing a written warning against a lawyer or the person in charge of the law firm, the lawyer or the law firm shall correct the problem as required and improve his/her/its level of securities-related legal services.

Article 34: If a lawyer or the person in charge of the law firm fails to subject himself/herself to a regulatory discussion, or fails to rectify the problem as required, the CSRC, its agency or the judicial administrative authority may order him/her to undergo rectification within a specified period of time.

Article 35: If a lawyer or law firm has a case opened against him/her/it and is investigated by the CSRC, its agency or the judicial administrative authority or is ordered to undergo rectification, the CSRC and its agency will not accept and review legal opinions and other such documents issued by the lawyer or law firm while he/she/it is being investigated or is undergoing rectification.

PART SIX: LEGAL LIABILITY

Article 36: If a law firm and the lawyers whom it assigns violate the Securities Law or administrative regulations on securities administration in their provision of securities-related legal services and ought to be subjected to administrative penalties, such penalties shall be imposed by the CSRC in accordance with the Securities Law and administrative regulations on securities administration. If the penalty of ordering the law firm to suspend operations and undergo rectification, and the penalty of ordering the lawyer to suspend practice or revoking his/her practice certificate ought to be imposed, such penalties shall be imposed by the judicial administrative authority in accordance with the law.

Article 37: If a law firm that provides securities-related legal services fails to act with due diligence, resulting in the documents prepared and issued by it containing false or misleading statements or material omissions, the CSRC shall impose penalties in accordance with Article 223 of the Securities Law.

Article 38: If a law firm that provides securities-related legal services fails to preserve working drafts in accordance with Article 19 hereof, the CSRC shall impose penalties in accordance with Article 225 of the Securities Law.

Article 39: If a law firm that provides securities-related legal services is characterized by any of the circumstances specified in Items (1) to (8) of Article 31 hereof, the CSRC shall impose penalties in accordance with the third paragraph of Article 226 of the Securities Law.

Article 40: If a lawyer who provides securities-related legal services violates the Securities Law, relevant administrative regulations or these Measures and the circumstances are serious, the CSRC may take the measure of banning him/her from the securities market in accordance with Article 233 of the Securities Law.

Article 41: If a law firm and the lawyers whom it assigns, in their provision of securities-related legal services, violate the Lawyers Law or provisions on the administration of practice by lawyers, the judicial administrative authority shall impose the concomitant administrative penalties.

If a law firm and the lawyers whom it assigns violate legal industry standards in their provision of securities-related legal services, the lawyers' association shall impose the concomitant industry penalties.

Article 42: If a law firm and the lawyers whom it assigns provide securities-related legal services in violation of relevant provisions, which violation is suspected of establishing a criminal offence, the case shall be transferred, in accordance with the law, to the judicial authority for handling.

Article 43: In investigating violations of the law by law firms and lawyers that provide securities-related legal services, the CSRC and its agency and the judicial administrative authority shall mutually cooperate, exchange information and establish a coordination and consulting mechanism. In a case where penalties ought to be imposed by the other party in accordance with the law, the case shall be transferred to the other party for handling in a timely manner. Once a party has imposed penalties, it shall notify the other party in writing of the penalty results, with a copy to the lawyers' association.

PART SEVEN: SUPPLEMENTARY PROVISIONS

Article 44: The provision of futures-related legal services by law firms and the lawyers assigned by them shall, mutatis mutandis, be handled in accordance with these Measures.

Article 45: These Measures shall be effective as of May 1 2007. The China Securities Regulatory Commission, Circular on Strengthening Administration of the Provision of Securities-related Legal Services by Lawyers (Zheng Jian Fa Zi [1998] No.1) shall be repealed simultaneously.