New Rules Unlock Sino-foreign Securities Companies

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Last updated at: (Beijing Time) Tuesday, January 08, 2002

New Rules Unlock Sino-foreign Securities Companies

Sino-foreign securities companies to be allowed

In a bid to tighten supervision and standardizing the practices in the securities market, January 7 saw China Securities Regulatory Commission (CSRC) issue new regulations on securities companies. According to the new rules, the Sino-foreign joint-venture brokerages will be allowed if their formations follow Chinese rules and the CSRC's requirements.

According to the commitments CSRC announced, after China's entry into the WTO, overseas institutions would be allowed to establish cooperative companies to manage the investment funds in domestic securities, of which the proportion of overseas funds would be banned to exceed 33 percent in the initial period, and no more than 49 percent three years afterwards.

Also within the same period, overseas securities companies would be allowed to set up cooperative companies, with the overseas investment proportion to be limited within one third of the whole. The cooperative companies may engage in the underwriting of Chinese A-shares, the underwriting and trading of B-shares, H-shares, and government and corporate bonds, and they may even launch foundations too.

Other items of the new rules

The new rules, with altogether 47 articles of six chapters, respectively regulate the establishment, alternation and termination of securities companies as well as the control and management of the securities brokers.

Compared with the draft sorting for opinions issued in June of last year, the formal one does not has a provision on legal liability.

The CSRC will divide all securities companies into brokerages and comprehensive securities companies in line with the new regulations.

The CSRC will also question the senior managers of securities companies on their dealing and management problems and order them to rectify the problems in a given term.

In addition, the securities companies are also asked to establish a perfect management structure and a self-governed director system as well.

CSRC Announces Securities Commitments for WTO Entry

Overseas securities institutions may directly engage in transactions of Chinese B shares.

Overseas securities institutions' agents in China can become special members of all Chinese bourses.

Overseas institutions will be allowed to establish cooperative companies engaging in the management of domestic securities investment funds. The proportion of overseas funds will be limited within 33 percent initially, and no more than 49 percent within the post-entry three years.

Also within the same period, overseas securities companies will be allowed to set up cooperative companies, with the overseas investment proportion to be limited within one third of the whole.

The cooperative companies can engage in the underwriting of Chinese A-shares , the underwriting and trading of B-shares, H- shares, and government and cooperate bonds, the commission spokesman said, adding that they can even launch foundations.

The spokesman noted that the opening of the securities sector and opening of the securities market are two different concepts, and the latter is not subject to the WTO agreement.

Securities Law of the People's Republic of China
(Adopted at the 6th Meeting of the Standing Committee of the Ninth National People's Congress on December 29, 1998)
Chapter 1 General Provisions
Chapter 2 Issuing of Securities
Chapter 3 Trading of Securities
Chapter 4 Takeover of Listed Companies
Chapter 5 Stock Exchanges
Chapter 6 Securities Companies
Chapter 7 Securities Registration and Clearing Institutions
Chapter 8 Securities Trading Service Organizations
Chapter 9 The Securities Industry Association
Chapter 10 Securities Regulatory Authority
Chapter 11 Legal Liability
Chapter 12 Supplementary Provisions

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By PD Online staff member Huang Ying

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