Provisions on Issues Relevant to the Regulation of Controlling Interests and Equity Interests in Futures Companies

(Issued by the China Securities Regulatory Commission on May 22 2008 and effective as of June 1 2008.)

Announcement of the CSRC [2008] No.24

With a view to further clarifying regulatory requirements in respect of the shareholders of futures companies, rationalizing the equity relationships of futures companies, promoting the quality and strengthening of futures companies and guarding against problems such as the transmission of risks and the illegitimate conveyance of gains between controlling shareholders and futures companies and between affiliated futures companies, we, pursuant to relevant provisions such as the PRC Company Law, the Regulations for the Administration of Futures Trading and the Measures for the Administration of Futures Companies (Order of the CSRC No.43), hereby issue the following provisions on issues relevant to controlling interests and equity interests in futures companies:

1. At present, the number of futures companies in which one entity has a controlling interest or equity interest may not exceed two, and the number of futures companies in which it has a controlling interest may not exceed one (for the criteria on determining a controlling interest or equity interest in a futures company, see the appendix).

2. If the equity structure of an existing futures company and the controlling interest or equity interest in a futures company of a relevant investment entity do not comply with the provisions of the preceding Article, rectification shall be carried out forthwith and the regulatory requirements shall be satisfied within two years from the date of implementation hereof.

3. These Provisions shall be effective as of June 1 2008.

Appendix:

Criteria for the Determination of Controlling Interests and Equity Interests in Futures Companies

1. Controlling Interest in a Futures Company

(1) The capital contribution by an entity accounts for at least 50% of the total capital contributions to the futures company.

(2) Although the percentage accounted for by an entity's capital contribution is less than 50%, the voting rights attaching to such capital contribution are sufficient to materially affect resolutions of the shareholders' meeting of the futures company.

(3) Although the percentage accounted for by an entity's capital contribution is less than 50%, the voting rights actually controlled by the entity by way of an investment relationship, agreement or other arrangement are sufficient to materially affect resolutions of the shareholders' meeting of the futures company, or the entity is able to decide the appointment of at least half of the members of the board of directors of the futures company.

(4) Although the entity is not a shareholder of the futures company, it is nonetheless able to actually control the acts of the company by virtue of an investment relationship, agreement or other arrangement.

(5) Another circumstance as determined by the China Securities Regulatory Commission.

The phrase “sufficient to materially affect resolutions of the shareholders' meeting of the futures company” in Items (2) and (3) above means the ability to cause or block the adoption by the shareholders' meeting of resolutions on the matters specified in Article 38 of the PRC Company Law or other motions submitted by shareholders and being considered by the shareholders' meeting of the futures company.

2. Equity Interest in a Futures Company

The term “equity interest” means directly holding equity in a futures company where such holding does not constitute a controlling interest therein, or not directly holding equity in a futures company, but indirectly holding equity therein by virtue of an investment relationship, agreement or other arrangement.

3. Circumstances Not Included in the Calculation of the Number of Futures Companies in Which an Entity Has a Controlling Interest or Equity Interest

(1) Directly or indirectly holding less than 5% of the equity of a futures company.

(2) A controlling interest or equity interest in a futures company by virtue of direct or indirect equity holding in a securities company by the entity.

(3) Another circumstance as determined by the China Securities Regulatory Commission.