Shanghai Stock Exchange, Implementing Rules for Securities Trading by Qualified Foreign Institutional Investors and Renminbi Qualified Foreign Institutional Investors

Issued: March 19 2014
Effective: as of date of issuance

Main contents: The Rules broaden the investment scope of qualified foreign institutional investors and renminbi qualified foreign institutional investors (collectively referred to as “QFIIs”), adding new products such as preference shares, policy financial bonds, asset-backed securities and advance offerings of treasury bonds (Article 12). The Rules also increase the aggregate shareholding limit for foreign investors in A shares of a listed company from 20% to 30% of the total number of shares of the listed company, whereas that for a single foreign investor remains unchanged (Article 15). Strategic investments in listed companies by foreign investors are not subject to such limits (Article 22).

Additionally, the Rules permit QFIIs to open multiple securities accounts to facilitate account management. The Rules permit them to appoint a maximum of three qualified securities companies in China to handle relevant securities trading matters, and each securities account may only be designated to one securities company in China (Article 6). If an irregular trading act that could affect the normal trading order occurs, the Shanghai Stock Exchange may demand that a QFII report on the securities trading and shareholding of the actual investors under its name in a timely manner (Article 11). Article 7 of the Rules further clarifies the management responsibilities of securities companies in respect of the trading acts of QFIIs done in violation of provisions, and requires securities companies to specify in their appointed agent agreements with QFIIs the methods of dealing with irregular trading.