Provisions for the Regulation of Branches of Securities Companies (Trial Implementation)

(Issued by the China Securities Regulatory Commission on, and effective as of, May 13 2008.)

Announcement of the CSRC [2008] No.20

Article 1: These Provisions have been formulated pursuant to the Company Law, the Securities Law and the Regulations for the Oversight of Securities Companies in order to meet the requirements of securities companies operating at their own discretion and enhancement of the organizational system and to regulate the establishment and operation of branches of securities companies.

Article 2: For the purposes of these Provisions, the term “branch” means an establishment, other than a securities business office, engaging in business activities that is established by a securities company in accordance with the Company Law, the Securities Law and the Regulations for the Oversight of Securities Companies.

Article 3: When a securities company is to establish a branch, it shall require the approval of the China Securities Regulatory Commission (CSRC). A branch shall not have legal personality and its legal liability shall be borne by the securities company.

Article 4: A branch shall engage in business within the scope authorized by the securities company, and may not operate beyond its authorized scope.

A securities company may authorize a branch to engage in the following business:

(1) managing the securities company's securities business offices within a certain territory;

(2) operating the securities company's securities underwriting and sponsorship business within a certain territory;

(3) as the securities company's dedicated establishment engaging in securities business for own account, engaging in securities business for the securities company's own account;

(4) as the securities company's dedicated securities asset management establishment, engaging in securities asset management business; and

(5) other securities company businesses as approved by the CSRC.

Article 5: A branch may not directly engage in the business of a securities business office. A branch that has been authorized to engage in securities business for the account of the securities company or securities asset management business may not engage in other businesses.

A securities company may not authorize one branch to engage in different businesses that present a conflict of interest. If a securities company authorizes a branch to engage in securities business for the securities company's own account or in securities asset management business, the head office of the company may no longer engage in such business or authorize another branch to do so.

Article 6: A securities company applying to establish a branch shall satisfy the following prudent requirements:

(1) having a sound corporate governance structure, and sound risk management systems and internal control mechanisms;

(2) the establishment of the branch being appropriate to the company's business scale, management capabilities, capital strength and human resources, and being fully rational and feasible;

(3) not having committed any major violations of laws or regulations during the most recent two years, and not having had a case opened against it and being under investigation for a suspected violation of a law or regulation;

(4) having the operating capital, office premises, business and management personnel, technical resources, security assurance measures and other resources appropriate to the scope of business of the proposed branch;

(5) the proposed person in charge having the qualifications to serve as the person in charge of an establishment of a securities company; and

(6) other requirements of the CSRC.

Article 7: A securities company wishing to establish a branch shall submit an application to the CSRC and additionally submit the application materials to the securities regulatory bureaux of the place where it is domiciled and of the place where the proposed branch is to be located for the record. The CSRC shall accept the application, carry out the examination and render its decision in accordance with laws and administrative regulations such as the Administrative Licensing Law, the Securities Law and the Regulations for the Oversight of Securities Companies, and relevant CSRC provisions.

Once an application for the establishment of a branch has been approved, the securities company shall apply to the company registration authority for registration of establishment within 30 days, and, within six months, complete the preparations for establishment and apply to the securities regulatory bureau of the place where the branch is located for an acceptance check. If it fails to apply for the acceptance check by the deadline or if the branch fails to pass the acceptance check, the original approval document shall automatically become null and void. If the branch passes the acceptance check, an application shall be made to the CSRC for the issuance of a permit to engage in securities business and, within 10 working days from the date on which such permit is received, photocopies of such permit and the business licence shall be submitted to the securities regulatory bureaux of the place where the securities company is domiciled and of the place where the branch is located for the record.

Article 8: If a securities company, in line with business growth and management requirements, wishes to acquire or close down a branch or modify the scope of business of a branch, it shall require the approval of the CSRC.

If a branch is to be relocated out of the jurisdiction of the securities regulatory bureau of the place where it is located, the approval of the CSRC shall be required. If such a relocation is to take place within the jurisdiction of the securities regulatory bureau of the place where the branch is located, the approval of such bureau shall be required.

If a securities company is to acquire a branch, it shall satisfy the conditions of Article 6 hereof on the establishment of a branch. The relevant transferor must be a securities company that is transferring all of the business or the business within a specific territory that relates to the subject branch based on an adjustment of its growth strategy and the requirements of a business rationalization that it is carrying out.

If a securities company applies to close down a branch or is ordered to close down a branch in accordance with the law, it shall prepare a disposal proposal and a personnel and customer settlement plan and submit the same to the CSRC for the record.

Article 9: A securities company shall centrally manage the business activities and information technology systems of its branches, establish specific, clear and rational systems for the authorization, inspection and accountability of its branches and a real-time risk control indicator monitoring system appropriate to the securities company's actual circumstances and strengthen the risk control, auditing and compliance management of its branches.

A branch shall display in a prominent location on its business premises its permit to engage in securities business and business licence, and the securities company's and the branch's basic particulars, its telephone number, fax number and e-mail for complaints, and other relevant information.

Article 10: The business activities and the person in charge of a branch shall be subject to the regulation of the securities regulatory bureau of the place where the branch is located. A branch shall submit operation and management information and data, such as that on its business, finances and person in charge to the securities regulatory bureau of the place where it is located in accordance with regulatory requirements. The securities regulatory bureau of the place where the branch is located shall be responsible for entering the regulatory information on the branch into the comprehensive information system for the regulation of establishments.

The risk control, auditing and compliance management, etc. of a branch carried out by a securities company shall be subject to the regulation of the securities regulatory bureau of the place where the securities company is domiciled.

The securities regulatory bureaux of the place where a branch is located and of the place where the securities company is domiciled shall establish an effective information communication and regulatory cooperation mechanism, effectively guard against, mitigate and deal with the business risks, material irregularities and contingencies of the branch and cooperate in duly inspecting, investigating and auditing the relevant branch.

Article 11: The business headquarters, management headquarters, business centres and other such establishments engaging in business activities established outside the domicile of a securities company and branches the establishment of which was approved prior to the issuance hereof shall be made compliant in accordance with the requirements hereof after the issuance hereof. Those that fail to satisfy the requirements by the deadline shall be promptly closed down.

Article 12: The representative offices, offices and other establishments engaging in non-business activities, such as liaison, research, market surveys or information technology management established by a securities company outside its domicile shall be reported to the securities regulatory bureaux of the place where the securities company is domiciled and of the places where the establishments are located for the record. Such establishments may not engage in any business-type activities.

Article 13: The main office of a securities company shall be established in accordance with the law in its corporate domicile registered by the company registration authority and shall, at minimum, satisfy the following regulatory requirements:

(1) the regular office premises of the company's board of directors and supervisory board and the place of work of the company's chairman of the board, chairman of the supervisory board and senior management personnel shall be in the corporate domicile;

(2) the company's finance, audit, compliance and risk control departments shall operate in the corporate domicile;

(3) the company's account books shall be kept, made and retained in the corporate domicile; and

(4) the company's complete business and financial information and data shall be collated and retained at the corporate domicile.

Article 14: If a securities company and a branch thereof do not comply with Article 11, 12 or 13 hereof, they shall carry out rectification in a timely manner and shall satisfy the relevant requirements hereof within one year from the date of issuance hereof.

Article 15: If a securities company violates these Provisions, the CSRC and the securities regulatory bureau of the place where the securities company is domiciled will take regulatory measures against it in accordance with the law.

Article 16: The securities regulatory bureaux of the places where branches are located shall regulate such branches in accordance with the law.

Article 17: These Provisions shall be effective as of the date of issuance. In the event of an inconsistency between these Provisions and provisions on the regulation of branches previously issued by the CSRC, these Provisions shall prevail.