State Council, Regulations for the Oversight of Securities Companies
国务院证券公司监督管理条例
July 09, 2008 | BY
clpstaff &clp articles &State Council regulations pave the way for margin trading and short sale of securities.
Promulgated: April 23 2008
Effective: June 1 2008
Applicability: The “business of margin trading and short sale of securities” refers to the securities companies' business activities of lending funds to clients for purchase of securities or lending securities to clients for selling, and the provision of the corresponding collateral by clients, in the course of securities transactions conducted in stock exchanges or other stock trading premises approved by the State Council (Article 48).
Main Contents: Shareholders of securities companies shall make capital contributions in currency or in non-currency property required for business operations by the company. The total amount of capital contributions of the shareholders in the form of non-currency property may not exceed 30% of the company's registered capital. The aforementioned provision shall not apply to the conversion of claims of the company's creditors to company equity in the course of the company's operations. Capital contributions of the shareholders shall be verified by an accounting firm with securities- and futures-related business qualifications, which shall issue a certificate. The non-currency property contributed shall be valued by an asset valuation institution with securities-related business qualifications (Article 9).
A work unit or individual shall notify the securities company in advance, and the securities company shall report the same to the State Council's securities regulatory authority for approval if:
(1) its/his/her shareholding will reach 5% of the company's registered capital after subscribing for or acquiring equity of the company; or
(2) it/he/she will have de facto control of 5% or more of the company's equity by means of holding the equity of the company's shareholders or other means.
Without the approval of the State Council's securities regulatory authority, no work unit or individual may appoint others or accept the appointment of others to hold or manage the equity of a securities company (Article 14).
Securities companies may engage in securities brokerage business, securities business for its own account, securities asset management business, and the business of margin trading and short sale of securities (Sections Two to Five, Part Four). A securities company that engages in the business of margin trading and short sale of securities shall conclude a contract for margin trading or short sale of securities with its client, and open a securities collateral account for the client at the securities depository and clearing institution in the name of the company, and open a funds collateral account for the client at the designated commercial bank in accordance with the provisions of the State Council's securities regulatory authority (Article 50). A securities company that engages in securities brokerage business shall deposit the transaction settlement funds of its clients into the designated commercial bank, and manage the funds in separate accounts in the name of each client (Article 57).
Subject to the approval of the State Council's securities regulatory authority, a securities company may borrow from shareholders or other work units debts that shall be repaid after ordinary debts in the order of repayment. The specific administrative measures shall be formulated by the State Council's securities regulatory authority (Article 93). The business scope of foreign-invested securities companies, and the qualifications and capital contribution ratio of overseas shareholders shall be stipulated by the State Council's securities regulatory authority and submitted to the State Council for approval (Article 94). The operation of securities business or establishment of representative offices in China by overseas securities business organizations shall be subject to the approval of the State Council's securities regulatory authority. The specific measures shall be formulated by the State Council's securities regulatory authority and submitted to the State Council for approval (Article 95).
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:3700/08.04.23(1)promulgated:2008-04-23effective:2008-06-01This premium content is reserved for
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