China Securities Regulatory Commission, Trial Measures for the Regulation of the Re-lending Business

中国证券监督管理委员会转融通业务监督管理试行办法

December 06, 2011 | BY

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Securities and money lending to facilitate margin trading and short selling.

Clp Reference: 3700/11.10.26 Promulgated: 2011-10-26 Effective: 2011-10-26

Promulgated: October 26 2011
Effective: as of date of promulgation

Applicability: The term “re-lending business” refers to the business activities whereby securities finance companies lend their own funds or funds that are raised in accordance with the law, and securities to securities companies for their engagement in margin trading and short sale of securities (Article 2).

Main contents: Securities finance companies shall take the form of companies limited by shares and have registered capital of at least Rmb6 billion (Article 7). The margins collected by securities finance companies that engage in re-lending from securities companies may be in the form of securities, but the percentage of the margin receivable accounted for by monetary capital may not be less than 15% (Article 20). Securities finance companies that engage in re-lending may use their own funds and securities; funds and securities borrowed through the business platforms of stock exchanges; and funds borrowed through the business platform of the company itself (Article 27). Securities finance companies may also issue corporate bonds and borrow subordinated bonds from shareholders or other specific investors (Articles 28 and 29).

Securities finance companies shall comply with the following risk control criteria:

(1) the proportion of the net capital to the total of all types of risk capital reserves may not be less than 100%;

(2) the balance of securities and loans lent to a single securities company may not exceed 50% of the securities company's net capital;

(3) the balance of each type of securities lent may not exceed 10% of the market value of the tradable shares of such type of securities; and

(4) the balance of each type of securities that serves as margins may not exceed 15% of the total market value of such type of securities (Article 41).

Related legislation: PRC Securities Law (Amended), Oct 27 2005, CLP 2006 No.1 p.31; and Regulations for the Oversight of Securities Companies, Apr 23 2008, CLP 2008 No.6 p.45

clp reference:3700/11.10.26promulgated:2011-10-26effective:2011-10-26

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