Laws of the People's Republic of China

The China Securities Regulatory Commission

Circular of the China Securities Regulatory Commission on Issueing "Interim Provisions on the Administration of Qualifications of Domestic and Overseas Securities Institutions Dealing in Shares for the Purchase of Overseas Investors"

ZhengJian [1996] No.5

October 23, 1996

All the securities regulatory commissions of various provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed on the State plan:

With a view to standardizing the operation of domestic and overseas securities institutions in terms of shares specially for purchase by overseas investors and protecting the legal rights and interests of investors of such shares in accordance with relevant State laws and regulations, the China Securities Regulatory Commission drew the "Interim Provisions on the Administration of Qualifications of Domestic and Overseas Securities Institutions Dealing in Shares for the Purchase of Overseas Investors" and is hereby promulgated. Attachment:Interim Provisions on the Administration of Qualifications of Domestic and Overseas Securities Institutions Dealing in Shares for the Purchase of Overseas Investors

Chapter I General Provisions

Article 1

This set of Provisions is formulated with a view to standardizing the operation of domestic and overseas securities institutions in terms of shares specially for purchase by overseas investors (hereinafter referred to as shares for overseas investors) and protecting the legal rights and interests of investors of such shares in accordance with relevant State laws and regulations.

Article 2

For dealing with shares for overseas investors, the domestic and overseas securities institutions should, in line with this set of Provisions, acquire "The Qualifications Certificate in Dealing in Shares for Overseas Investors" (hereinafter referred to as the QC) issued by the China Securities Regulatory Commission (hereinafter referred to as CSRC).

The shares for overseas investors referred to in the preceding clause include the shares listed both domestically and overseas specially for purchases by overseas investors.

Article 3

The domestic securities institutions referred to in this set of Provisions are the securities firms and trust and investment companies that are registered within Chinese territory and may deal in securities business with the approval of the competent departments according to law and have the qualifications of an independent legal person.

The securities institutions referred to in this set of Provisions are the securities firms referred to in the preceding clause and the concurrent securities institutions referred to in this set of Provisions are the trust and investment companies referred to in the preceding clause.

Article 4

The overseas securities institutions referred to in this set of Provisions are the investment banks, securities firms and other financial institutions that are registered outside of the Chinese territory and that may deal in securities business according to the law of their localities and have the qualifications of an independent legal person.

Chapter II Conditions for Dealing in Shares for Overseas Investors

Article 5

Domestic securities institutions which apply for the qualifications of being stock brokerage for overseas investors should have the following conditions:

(1)

Securities institutions should have a total net assets of no less than RMB50 million while trust and investment companies should have an operation fund of no less than RMB50 million;

(2)

They have been authorized by the State Administrations of Foreign Exchange (SAFE) to engage in foreign exchange business;

(3)

They must have sufficient facilities such as communications, trading sites, and equipment to guarantee the normal operation of the overseas related stock business;

(4)

They must have at least five special personnel of overseas stock trading;

(5)

They must abide by relevant State laws and regulations and have not been revoked of their qualifications certificates in the recent two years;

(6)

Concurrent securities institutions must have separated the operation and account of the stock trading with that of other business operations; and

(7)

They should have conditions as required by CSRC.

Article 6

Overseas securities institutions which apply for qualification of being brokerage for overseas investors in trading of stocks through signing agency agreement with domestic securities institutions or other ways as stipulated by the stock exchange should have the following conditions:

(1)

They are qualified to deal in stock brokerage business according to the laws of their localities;

(2)

They are under effective supervision of the local securities supervision departments;

(3)

They must have a net total assets of equivalent to no less than RMB50 million, or are qualified to provide guarantee according to overseas laws and have the guarantee issued by an organ authorized by CSRC;

(4)

They should have the experience of trading in international stock business for more than two years;

(5)

Their financial indicators in the recent two years accord with the requirements for risk control set by local CSRCs;

(6)

They are accommodated with extensive grid points for business;

(7)

Executive directors and other senior management personnel should have more than five years' experience in stock trading in addition to good profession ethics;

(8)

They have not received any punishment by overseas securities supervision and regulatory agencies because of serious violations of relevant laws or regulations in recent two years;

(9)

They abide by relevant laws and regulations of the People's Republic of China;

(10)

They have at least two specialists who are familiar with China's securities market and relevant policies and laws; and

(11)

Other conditions as required by CSRC.

Article 7

Domestic securities institutions which apply for underwriting of stocks for overseas investors should have the following conditions:

(1)

Securities institutions must have a net total assets of no less than RMB80 million, and concurrent securities institutions must have an operation fund of no less than RMB80 million;

(2)

They have already acquired the qualifications for stock underwriting according to "The Measures on the Management of Stock Underwriting by Securities Institutions";

(3)

They have been authorized by the State Administrations of Foreign Exchange (SAFE) to do foreign exchange business;

(4)

They must have sufficient facilities, such as communications, business sites and equipment to guarantee the normal operations of overseas stock business;

(5)

They must have at least 10 personnel who have the experience of securities underwriting, including at least one who is familiar with each of the following: international financial business, accounting and corresponding laws;

(6)

They must have at least one year of experience in securities underwriting or joining in the underwriting of at least one stock; and

(7)

Other conditions as required by CSRC.

Article 8

Domestic securities institutions which apply to be chief underwriters of stocks for overseas investors or coordinators of domestic affairs should have the following conditions apart from those set in the preceding article:

(1)

Securities institutions must have a net total assets of no less than RMB 120 million, and the concurrent securities institutions must have an operation fund of no less than RMB 120 million;

(2)

They have acquired the qualifications for a chief underwriter according to "The Measures on the Management of Stock Underwriting by Securities Institutions";

(3)

They should have at least 20 specialists with underwriting experience, including at least two who are familiar with each of the following: international financial business, accounting and corresponding laws;

(4)

They should have the experiences of taking part in the underwriting of stocks for overseas investors; and

(5)

Other conditions as required by CSRC.

Article 9

Overseas securities institutions which act as the chief underwriters and assistant chief underwriters of domestic B-shares for overseas investors and act as coordinators of international affairs should have the following conditions apart from the conditions set in Article 6 of this set of Provisions:

(1)

They are qualified to engage in stock underwriting business according to their local laws;

(2)

Their net total assets are of no less than an equivalent of RMB 120 million or, according to overseas laws, they may provide guarantee and have guarantee provided by organs authorized by CSRC;

(3)

They have not suspended their stock underwriting at the international market in the recent two years before they file their applications;

(4)

They have at least three specialists who are familiar with China's securities market and relevant policies and laws; and

(5)

Other conditions as required by CSRC.

Article 10

When an overseas securities institution acts as the chief underwriter of stocks for overseas investors listed overseas, it may appoint a domestic securities institution as its coordinator of the domestic affairs.

Chapter III Application and Maintenance of Qualifications

Article 11

In applying for a qualifications certificate, a domestic securities institution should submit the following documents to CSRC:

(1)

"Application Form for Qualifications for Dealing in Shares for Overseas Investors" printed by CSRC;

(2)

"Monetary Business License (duplicate)" issued by competent department for approving the establishment of organs, and "Foreign Exchange Business License (duplicate)" issued by the State Administrations of Foreign Exchange;

(3)

"Business License for Enterprise Legal Person (duplicate)" issued by administrations for industry and commerce;

(4)

Articles of Association of the company checked and approved by competent departments for approving the establishment of organs;

(5)

Balance sheets, profit and loss statements and statements of changes in financial position in the recent two years as audited by a certified accountants' firm qualified for trading stocks;

(6)

"Qualifications Certificate for Securities Business" or resumes and profession certificates of the legal representative, leading responsible person and main business employees;

(7)

Statements about condition of securities business in the recent two years; and

(8)

Other documents as required by CSRC.

Article 12

In applying for a qualifications certificate, an overseas securities institution should submit the following documents to CSRC:

(1)

"Application Form for Qualifications for Dealing in Shares for Overseas Investors" printed by CSRC;

(2)

Business license issued by their local securities regulatory departments;

(3)

Articles of association of the company;

(4)

Academic credentials, qualifications certificates and other professional certificates of senior managerial personnel and main employees;

(5)

Capital certificates provided by certified accountants;

(6)

Financial statements in the recent two years as audited by certified accountants;

(7)

Briefings on the underwriting in the recent two years;

(8)

Statements about condition of securities business of the company in China; and

(9)

Other documents as required by CSRC.

CSRC may ask overseas securities institutions hand in relevant certificates provided by their local securities regulatory departments if necessary.

Article 13

CSRC undertakes to examine all the application documents in line with this set of Provisions after it receives all the required documents. A qualifications certificate shall be issued by CSRC if the documents submitted are found in accordance with the conditions set by this set of Provisions, otherwise a certificate shall not be issued and applications of the same institution shall not be handled within six months of the first application.

Article 14

A qualifications certificate is valid for two years beginning from the date of issuance by CSRC and becomes invalid automatically afterwards. If the securities institutions need to maintain their qualifications to deal in shares for overseas investors, they should send their applications to CSRC within three months before the qualifications certificate becomes invalid along with the recent two years' financial reports, statements of their business conditions and other documents as required by CSRC, and the certificate concerned shall be extended should all documents pass the examinations.

Article 15

Domestic and overseas securities institutions which have obtained qualifications certificates must deal in relevant business in line with what is set in the certificates concerned, institutions which have not obtained the qualifications certificates or their qualifications certificates have become invalid must not deal in the shares for overseas investors as set in this set of Provisions.

Article 16

Domestic and overseas securities institutions which have obtained the qualifications certificates should submit a report to the CSRC on the underwriting and brokerage for overseas investors in the preceding year before January 31 of every year.

Overseas securities institutions which engage in underwriting for overseas listed shares for overseas investors should send CSRC a business report at the end of every underwriting business within 30 days.

Article 17

Domestic and overseas securities institutions which deal in shares for overseas investors should keep the original bills, vouchers, trading records and relevant business documents, account books, report forms and other necessary materials for at least seven years.

Article 18

The CSRC may have regular or irregular examinations of the stock trading for overseas investors of the domestic and overseas securities institutions, and may ask them for relevant business documents and materials whenever it deems necessary.

Chapter IV Penalty Provisions

Article 19

In one of the following cases, domestic and overseas securities institutions shall be imposed one or several of the punishments such as warnings, confiscations of their illegal proceeds, fines, suspension of the stock trading for overseas investors for six months or a year, and revoking of their qualifications certificates in accordance with the seriousness of the case; fines may be imposed in line with "The Measures on the Management of Stock Underwriting by Securities Institutions":

(1)

They obtained the qualifications certificates by cheating or other improper means;

(2)

They keep on deals in shares for overseas investors or do so in a disguised way before they obtain the qualifications certificates or after their qualifications certificates have become invalid;

(3)

They fail to report their stock trading business for overseas investors according to regulations;

(4)

They refuse or do not cooperate with CSRC's examinations; and

(5)

They have done other actions that violate relevant State laws and this set of Provisions.

Chapter V Supplementary Provisions

Article 20

Domestic securities institutions which are engaged in stock underwriting for overseas investors should also abide by the relevant stipulations in "The Measures on the Management of Stock Underwriting by Securities Institutions" apart from this set of Provisions.

Article 21

The CSRC is entitled to interpret this set of Provisions.

Article 22

This set of Provisions shall enter into force as of December 1, 1996.