New Regulations for Law Firms' Securities Practice: Loosening Access, Strengthening Accountability

By Tiejun Shi and Shiwei Zhang, Jun He Law Offices (Beijing)
John Du, Jun He Law Offices (New York)

Among the many recent developments in China's regulation of the securities industry is one that directly affects law firms - the Measures for the Administration of the Provision of Securities Legal Services by Law Firms (the Measures), jointly issued by the China Securities Regulatory Commission (CSRC) and the Ministry of Justice of the PRC on March 9 2007, effective May 1 2007. These Measures change the previous qualification-based regulatory scheme for securities lawyers to a conduct-based regulatory mechanism of regulating the practice of securities law.

Under the previous qualification-based regulatory scheme, a lawyer was not allowed to practice securities law unless he or she had obtained prior approval from the regulatory authorities. The current Measures have abolished the prior approval on qualification, but focus on the process, content and quality of the legal services provided by securities lawyers. As a securities-related transaction is often a continually evolving process, the regulatory authorities are required to provide timely and dynamic regulation of legal service activities. The Measures have largely reflected the philosophical transition of the regulatory authorities from passive and static regulation to proactive and dynamic regulation.