Measures for the Administration of Foreign-invested Securities Companies

(Promulgated by the China Securities Regulatory Commission on, and effective as of, April 28, 2018.)

Order of the CSRC No.140

Article 1: These Measures have been formulated in accordance with relevant provisions of the PRC Company Law (the Company Law) and the PRC Securities Law (the Securities Law) in order to adapt to the needs of opening the securities markets to foreign investors, strengthen and improve the regulation of foreign-invested securities companies and expressly set forth the conditions and procedure for the establishment of foreign-invested securities companies.

Article 2: For the purposes of these Measures, the term “foreign-invested securities company” (FISC) means:

(1) a securities company jointly invested in and established by a foreign shareholder and a domestic shareholder in accordance with the law;

(2) a securities company changed from a Chinese-invested securities company in accordance with the law by virtue of a foreign investor acquiring or subscribing for equity therein; or

(3) a securities company changed from a Chinese-invested securities company in accordance with the law by virtue of a foreign investor becoming the de facto controller of a shareholder thereof.

Article 3: The China Securities Regulatory Commission (the CSRC) is charged with the examination, approval and regulation of FISCs.

Article 4: An FISC's name, form of organization, registered capital, scope of business, establishment and the duties of its internal organs as well as its shareholders, directors, supervisors, senior management personnel, etc. shall comply with laws and regulations such as the Company Law and the Securities Law, and relevant CSRC provisions.

Article 5: In addition to complying with the conditions for the establishment of securities companies set forth in the Company Law, the Securities Law, the Regulations for the Oversight of Securities Companies and those specified by the CSRC as approved by the State Council, the establishment of an FISC shall comply with the following conditions:

(1) the foreign shareholder satisfying the qualification conditions specified herein, and its capital contribution percentage and method complying with the provisions hereof;

(2) its initial scope of business being consistent with the experience of the controlling shareholder or the largest shareholder in securities business; and

(3) satisfying other prudential conditions as specified by the CSRC.

Article 6: A foreign shareholder of an FISC shall satisfy the following conditions:

(1) its home country or region having sound securities laws and regulatory system, and the relevant financial regulator having executed a memorandum of understanding on securities regulatory cooperation with the CSRC or an institution recognized by the CSRC and maintaining an effective regulatory cooperative relationship therewith;

(2) being a financial institution lawfully established in its home country or region and its financial indicators during the last three years complying with the laws of its home country or region and the requirements of the regulator;

(3) having been continuously engaging in securities business for at least five years, not having been assessed a major penalty by the regulator or an administrative or judicial authority of its home country or region and not having been placed under investigation by a relevant authority for suspicion of having committed a major violation of laws or regulations;

(4) having sound internal control systems;

(5) having a good international reputation and business track record, its business ranking being among the top internationally in terms of size, revenue and profits during the last three years and its long-term credit having maintained a high level during the last three years; and

(6) satisfying other prudential conditions as specified by the CSRC.

Article 7: A foreign shareholder shall make its capital contribution in a freely convertible currency.

The percentage of the equity of the FISC held (including directly held and indirectly controlled) by foreign shareholders in the aggregate shall comply with the state's arrangement for the opening of the securities industry to foreign investors.

Article 8: When applying to establish an FISC, a representative jointly designated or an agent jointly appointed by all of the shareholders shall submit the following documents to the CSRC:

(1) an application form jointly signed by the legal representatives or authorized representatives of the domestic and foreign shareholders;

(2) a draft contract and articles of association for the establishment of the FISC;

(3) the résumés of the proposed chairman of the board, general manager and compliance officer of the FISC;

(4) photocopies of the shareholders' business licenses or registration certificates and securities business qualification certificates;

(5) the audited financial statements of the domestic and foreign shareholders for the three years prior to the application;

(6) a letter of explanation issued by the relevant regulator of the foreign shareholder's home country or region or by a foreign organization recognized by the CSRC as to whether such foreign shareholder satisfies the conditions set forth in Items (2) and (3) of Article 6 hereof;

(7) documentation evidencing that the foreign shareholder has a good international reputation and business track record, that its business has ranked among the top internationally in terms of size, revenue and profits during the last three years, and evidencing its long-term credit situation during the last three years;

(8) a legal opinion issued by a law firm in China; and

(9) other documents as required by the CSRC.

Article 9: The CSRC will conduct a review of the application documents specified in Article 8 hereof in accordance with relevant laws, administrative regulations and these Measures, and render a decision on whether to grant approval and notify the applicant in writing within the specified period of time. If it withholds approval, it will give the reasons therefor in writing.

Article 10: Shareholders shall pay in their capital contributions in full or provide the conditions of cooperation agreed upon, elect the directors and supervisors, engage the senior management personnel and apply to the company registrar for the registration of establishment and collect the business license within six months from the date of issuance of the CSRC approval document.

Article 11: An FISC shall submit the following documents to the CSRC to apply for a securities business permit within 15 working days from the date of issuance of its business license:

(1) a photocopy of the duplicate of its business license;

(2) its articles of association;

(3) a capital verification report issued by a domestic accounting firm with securities-related business qualifications;

(4) a list of the directors, supervisors, senior management personnel and main business personnel, the documents evidencing their qualifications for their positions and the documents evidencing their securities business qualifications;

(5) a copy of its internal control systems;

(6) an account of the details of its place of business and business facilities; and

(7) other documents as required by the CSRC.

Article 12: The CSRC will conduct a review of the application documents specified in Article 11 hereof in accordance with relevant laws, administrative regulations and these Measures, and render a decision within 15 working days from the date of receipt of the compliant application documents. Where the application satisfies the specified conditions, it will issue a securities business permit. Where the application does not satisfy the requirements, it will not issue a permit and will give the reasons therefor in writing.

Article 13: An FISC may not commence operations and may not engage in securities business without securing a securities business permit issued by the CSRC.

Article 14: A Chinese-invested securities company that applies to change to an FISC shall satisfy the conditions set forth in Article 5 hereof.

A foreign investor that acquires or takes an equity interest in a Chinese-invested securities company shall satisfy the conditions set forth in Article 6 hereof and the percentage of the equity or capital contribution that it acquires shall comply with Article 7 hereof.

If the de facto controller of a shareholder of a Chinese-invested securities company is changed to a foreign investor, it shall satisfy the conditions set forth in Article 6 hereof and the percentage of the equity of the securities company indirectly controlled by it shall comply with Article 7 hereof. Where the conditions are not satisfied or the percentage of the equity of the securities company indirectly controlled is not compliant, rectification to compliance shall be completed within three months.

Article 15: A Chinese-invested securities company that applies to change to an FISC shall submit the following documents to the CSRC:

(1) an application form signed by its legal representative;

(2) the resolution of the shareholders' (general) meeting concerning the change into an FISC;

(3) the draft amended articles of association;

(4) the equity transfer agreement or capital contribution agreement (share subscription agreement);

(5) the proposed list and résumés of the persons appointed by the foreign investor that are to take up a position with the securities company and the documents evidencing their business qualifications and the documents evidencing their qualifications for their positions;

(6) photocopies of the foreign shareholder's business license or registration certificate and relevant business qualification certificate;

(7) the foreign shareholder's audited financial statements for the three years prior to the application;

(8) a letter of explanation issued by the relevant regulator of the foreign shareholder's home country or region or by a foreign organization recognized by the CSRC as to whether such foreign shareholder satisfies the conditions set forth in Items (2) and (3) of Article 6 hereof;

(9) documentation evidencing that the foreign shareholder has a good international reputation and business track record, that its business has ranked among the top internationally in terms of size, revenue and profits during the last three years, and evidencing its long-term credit situation during the last three years;

(10) a legal opinion issued by a law firm in China; and

(11) other documents as required by the CSRC.

Article 16: The CSRC will conduct a review of the application documents specified in Article 15 hereof in accordance with relevant laws, administrative regulations and these Measures, and render a decision on whether to grant approval and notify the applicant in writing within the specified period of time. If it withholds approval, it will give the reasons therefor in writing.

Article 17: A securities company that receives approval to change shall carry out the equity transfer or capital increase, apply for amendment of registration to the company registrar and collect its new business license within six months from the date of issuance of the CSRC's approval document.

Article 18: A securities company that receives approval to change shall submit the following documents to the CSRC to apply for a new securities business permit within 15 working days from the date of amendment of registration:

(1) a photocopy of the duplicate of its business license;

(2) the articles of association of the FISC;

(3) the company's existing securities business permit and the duplicates thereof;

(4) a capital verification report issued by a domestic accounting firm with securities related business qualifications; and

(5) other documents as required by the CSRC.

Article 19: The CSRC will conduct a review of the application documents specified in Article 18 hereof in accordance with relevant laws, administrative regulations and these Measures, and render a decision within 15 working days from the date of receipt of the compliant application documents. Where the application satisfies the conditions, it will issue a new securities business permit; where the application does not satisfy the requirements, it will not issue a new permit and will give the reasons therefor in writing.

Article 20: The newly established or surviving securities company after the merger of FISCs or the merger of an FISC and a Chineseinvested securities company shall satisfy the conditions for the establishment of an FISC set forth herein; and the percentage of its equity held by the foreign shareholder(s) shall comply herewith.

If one of the shareholders of a securities company established after the division of an FISC is a foreign shareholder, the percentage of the equity it holds shall comply herewith.

Article 21: A foreign investor may hold shares in a listed Chinese-invested securities company through securities trading on a securities exchange in accordance with the law, or by establishing a strategic cooperative relationship therewith and securing the approval of the CSRC to hold shares thereof.

If a foreign investor holds at least 5 percent of the shares of a listed Chinese-invested securities company by virtue of securities trading on a securities exchange in accordance with the law or through an agreement or other arrangement holds at least 5 percent of its shares together with a third party, it shall satisfy the conditions set forth in Article 6 hereof and comply with the Securities Law and relevant CSRC provisions on the acquisition of listed companies and approval of changes in securities companies.

Article 22: The application documents and information submitted to the CSRC in accordance herewith must be in the Chinese language. If a document or information issued by a foreign shareholder or the relevant regulator of its home country or region or a foreign organization recognized by the CSRC is in a foreign language, it shall be accompanied by a Chinese translation the contents of which are consistent with the original document.

If the documents and materials submitted by an applicant fail to give a full account of its situation, the CSRC may require the applicant to provide further explanation.

Article 23: Where an FISC involves a national security review, the same shall be handled in accordance with relevant state regulations.

Article 24: These Measures shall apply mutatis mutandis to investments in securities companies by investors from the Hong Kong Special Administrative Region, the Macao Special Administrative Region and Taiwan. Where the state provides otherwise, such provisions shall be complied with.

Article 25: Where these Measures are silent on matters relevant to the establishment, change, termination, business activities and regulation of FISCs, other relevant CSRC provisions shall apply.

Article 26: These Measures shall be effective as of the date of promulgation. The Rules for the Establishment of Securities Companies with Foreign Equity Participation shall be repealed simultaneously.