China Securities Regulatory Commission, Trial Provisions for the Establishment of Subsidiaries by Securities Companies

中国证券监督管理委员会证券公司设立子公司试行规定

January 31, 2008 | BY

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Parent securities companies not allowed to compete with their subsidiaries.

Clp Reference: 3700/07.12.28 Promulgated: 2007-12-28 Effective: 2008-01-01

Issued: December 28 2007
Effective: January 1 2008

Applicability: For the purposes of these Provisions, the term "subsidiary" means a securities company established in accordance with the Company Law and the Securities Law, engaging in one or more securities businesses approved by the China Securities Regulatory Commission (the CSRC) and controlled by a securities company (Article 2).

Main Contents: With the approval of the CSRC, a securities company may establish a wholly-owned subsidiary or, alternatively, invest in and establish a subsidiary together with another investor that satisfies the conditions for being a shareholder of a securities company as specified in the Securities Law (Article 4).

A securities company and a subsidiary thereof, or two subsidiaries controlled by one securities company may not engage in a business that would give rise to a conflict of interest between them or would have them competing against each other (Article 3).

To establish a subsidiary, a securities company shall satisfy the following prudential conditions:

(1) its risk control indicators for the most recent 12 months have continuously been in compliance with the prescribed standards, and its net assets during the previous year have not been less than Rmb1.2 billion;

(2) it has relatively strong operation and management capabilities; if the proposed subsidiary is to engage in securities brokerage, securities underwriting and sponsorship or securities asset management, the securities company's market share in such business during the previous year shall not be less than a medium level in the industry;

(3) it has a sound corporate governance structure, sound risk management system and internal control mechanisms that are able to effectively guard against risk transmission and conflicts of interest between it and its subsidiary; and

(4) other requirements of the CSRC (Article 5).

Related Legislation:PRC Company Law (Amended), Oct 27 2005, CLP 2005 No.10 p.21; and PRC Securities Law (Amended), Oct 27 2005, CLP 2006 No.1 p.31

clp reference:3700/07.12.28 (2)prc reference:证监机构字 [2007] 345号promulgated:2007-12-28effective:2008-01-01

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