Laws of the People's Republic of China

China Insurance Regulatory Commission, China Securities Regulatory Commission

Order of China Insurance Regulatory Commission and China Securities Regulatory Commission

No. 12

Interim Measures for the Administration of Stock Investment of Insurance Institutional Investors enacted by China Insurance Regulatory Commission together with China Securities Regulatory Commission, are hereby promulgated and shall come into force as of the day of promulgation.

President of China Insurance Regulatory Commission, Wu Dingfu

President of China Securities Regulatory Commission, Shang Fulin

December 24, 2004

Interim Measures for the Administration of Stock Investment of Insurance Institutional Investors

Chapter I General Provisions

Article 1

The present Measures are formulated according to the "Insurance Law of the People's Republic of China", the "Securities Law of the People's Republic of China" and other laws and administrative regulations for the purpose of strengthening the administration of stock investment business by insurance institutional investors, regulating investment activities, preventing investment risks and guaranteeing the interests of insurants.

Article 2

Insurance institutional investors mentioned in the present Measures shall mean insurance companies or insurance asset management companies that meet the conditions prescribed by China Insurance Regulatory Commission (hereinafter referred to as CIRC) and engage in stock investment. Insurance group companies and insurance holding companies engaging in stock investment shall be governed by the present Measures.

Stock investment mentioned in the present Measures shall mean the activity that an insurance institutional investor engages in or entrusts a qualified institution to engage in the trading of stocks, bonds of convertible companies and other stock market products.

Stock asset trusteeship mentioned in the present Measures shall mean the activity that an insurance company concludes, according to the relevant provisions of CIRC, a trusteeship agreement with a commercial bank or other professional financial institution, who is entrusted by the insurance company to keep in custody of the stocks and the funds for investment in stocks, to be responsible for the settlement and transaction, valuation of assets, investment supervision and etc.

Article 3

When investing in stocks, An insurance institutional investor shall set up an independent trusteeship mechanism, follow the principles of prudence, safety and value increase, as well as independently operate the business and bear the risks, profits and losses by itself.

Article 4

The CIRC and China Securities Regulatory Commission (hereinafter referred to as CSRC) shall, according to their respective duties, conduct supervision and administration over the stock investment activities carried out by insurance institutional investors.

Chapter II Qualification Requirements

Article 5

An insurance asset management company shall, if it accepts the entrust to engage in stock investment, meet the following conditions:

(1)

Its internal management system and risk control system accord with the "Guide to Risk Control on Utilization of Insurance Funds";

(2)

It has found an independent trading department;

(3)

Its relevant senior managers and major operating personnel meet the requirements prescribed in the present Measures;

(4)

It has professional investment analysis system and risk control system; and

(5)

Other conditions prescribed by the CIRC.

Article 6

An insurance company meeting the following conditions may, with approval of the CIRC, entrust a relevant insurance asset management company which meets the conditions prescribed in Article 5 of the present Measures to engage in stock investment:

(1)

Its solvency accords with the relevant provisions of the CIRC;

(2)

Its internal management system and risk control system accord with the "Guide to Risk Control on Utilization of Insurance Funds";

(3)

It has found a special department responsible for entrustment of insurance funds;

(4)

The relevant senior managers and major operating personnel meet the requirements prescribed in the present Measures;

(5)

It has set up a mechanism for stock asset trusteeship;

(6)

It has no investment records that severely violate laws or rules during the last three years; and

(7)

Other conditions prescribed by the CIRC.

Article 7

An insurance company meeting the following conditions may, with approval of the CIRC, directly engage in stock investment:

(1)

Its solvency accords with the relevant provisions of the CIRC;

(2)

Its internal management system and risk control system accord with the "Guide to Risk Control on Utilization of Insurance Funds";

(3)

It has found a professional fund utilization department;

(4)

It has found an independent trading department;

(5)

It has set up a mechanism for stock asset trusteeship;

(6)

The relevant senior managers and major operating personnel meet the requirements prescribed in the present Measures;

(7)

It has professional investment analysis system and risk control system;

(8)

It has no investment records that severely violate laws or rules during the last three years; and

(9)

Other conditions prescribed by the CIRC.

Article 8

An insurance company that applies for directly engaging in or entrusting an insurance asset management company to engage in stock investment shall submit the following documents and materials to the CIRC in triplicate:

(1)

The application letter;

(2)

The board resolution on stock investment;

(3)

Its internal management system, risk control system and the condition on the setup of its internal frameworks;

(4)

Relevant materials on stock asset trustees and the draft of the trusteeship agreement;

(5)

The list and resumes of the relevant senior managers and major operating personnel;

(6)

The financial statements of the company of the latest three years which have been audited by an accounting firm;

(7)

The existing trading seats, securities accounts and fund accounts;

(8)

Its stock investment strategies, which shall at least state the idea of stock investment, investment targets and the direction of investment combination; and

(9)

Other documents and materials prescribed by the CIRC to be provided.

In case an insurance company applies for directly engaging in stock investment, it shall submit the statement on the investment analysis system and risk control system in addition.

Article 9

When examining the application of an insurance company for directly engaging in or entrusting an insurance asset management company to engage in stock investment, the CIRC shall make a decision on whether or not to approve the application within 20 days as of receipt of the complete application documents and materials. If the CIRC decides not to approve the application, it shall notify the applicant in written form and state the reason thereof.

When considering it necessary, the CIRC may conduct expert appraisal on the application proceedings of the insurance company and shall notify the insurance company in written form of the time needed by the expert appraisal.

Article 10

Where an insurance company directly engages in stock investment, it shall, within 10 days after completing the relevant procedures for stock investment, submit to the CIRC the formal trusteeship agreement, the benchmark for evaluating investment performance, as well as the relevant materials on trading seats, securities account and fund account.

Where an insurance company entrusts an insurance asset management company to engage in stock investment, it shall, within 10 days after completing the relevant procedures for stock investment, submit to the CIRC the entrustment agreement, the formal trusteeship agreement, the guide on investment, the benchmark for evaluating investment performance, as well as the relevant materials on trading seats, securities account and fund account.

In case that the contents prescribed in the preceding two paragraphs are modified, the insurance company shall report it to the CIRC within 5 days after completing the modification procedures.

The insurance company shall submit copies of the relevant materials on trading seats, securities account and fund account to the CSRC simultaneously.

Chapter III Investment Scope and Proportions

Article 11

The stock investment of an insurance institutional investor shall be limited to the following varieties:

(1)

Ordinary RMB stocks;

(2)

Convertible company bonds; and

(3)

Other investment varieties prescribed by the CIRC.

Ordinary RMB stocks mentioned in Item (1) of the preceding paragraph shall mean the stocks that are issued publicly in territory of China and circulate on the market, and subscribed and traded in RMB.

Article 12

The stock investment of an insurance institutional investor may be conducted by the following means:

(1)

To be subscribed on primary market, including distribution based on market value, subscription either on or off the network, participation in distribution in the identity of a strategic investor, and etc.;

(2)

To be traded on secondary market.

Article 13

The stocks of one listed company which are held by an insurance institutional investor shall be less than 30% of the ordinary RMB stocks of the listed company.

The concrete proportion of the investment stocks held by an insurance institutional investor shall be separately prescribed by the CIRC.

An insurance asset management company may not use its own funds in stock investment.

Article 14

An insurance institutional investor may not invest in ordinary RMB stocks of the following types:

(1)

Those which are under "special penalty" or "warnings on special penalty due to risks on termination of the listing" imposed by the stock exchange, or have been terminated by the stock exchange to be on listing;

(2)

The rise of price of the stocks during the past 12 months exceeds 100%;

(3)

The stocks are suspected of being manipulated by others;

(4)

Its listed company has been has issued with opinions on refusal to comment or reservation opinions on the financial statements of the listed company by an accounting company in the latest year;

(5)

Its listed company has disclosed that its performance has gone down by a big margin, and it is in heavy loss or will be in heavy loss in the future;

(6)

Its listed company has disclosed that it is investigated by the supervisory department or has been severely punished by the supervisory department within the latest year; or

(7)

Other types of stocks prescribed by the CIRC.

Article 15

The balance of the investment by an insurance institutional investor in convertible company bonds shall be calculated into the investment balance of the enterprise bonds, and shall accord with the relevant provisions of the "Interim Measures for the Administration for Insurance Companies to Invest in Enterprise Bonds".

Where an insurance company converts the convertible company bonds held by it into stocks, such bonds shall be calculated into the investment balance of the ordinary RMB stocks at cost price, and shall accord with the relevant provisions of the CIRC on the proportion of stock investment.

Article 16

In an investment account set up by an insurance institutional investor for investment-linked insurance, the proportion of investment stocks may be 100%.

In an investment account set up by an insurance institutional investor for omnipotent life insurance, the proportion of investment stocks may not exceed 80%.

In an independent account set up by an insurance institutional investor for other insurance products, the proportion of investment stocks may not exceed the relevant rate prescribed by the CIRC.

In an independent account set up by an insurance institutional investor for the insurance products mentioned above, the proportion of investment stocks may not exceed the promissory proportion in the insurance clauses.

Chapter IV Trusteeship of Assets

Article 17

To select a stock asset trustee; an insurance company shall select a commercial bank or other professional financial institution which meets the conditions prescribed in the "Guide to Stock Asset Trusteeship for Insurance Companies".

Article 18

The stock asset trustee of an insurance company shall perform the following obligations:

(1)

Safely keeping custody of the insurance company's funds and stock assets;

(2)

Handling matters of settlement and transaction in time in accordance of the orders of the insurance company or the insurance asset management company;

(3)

Supervising the investment operation of the insurance company or the insurance asset management company;

(4)

Valuating the stock assets entrusted by the insurance company;

(5)

Periodically providing reports on stock asset trusteeship to the insurance company or the insurance asset management company;

(6)

Upon the supervisory requirements of the CIRC, submitting to the CIRC the relevant data on the stock assets and providing periodically or a periodically intervals reports on risk evaluation and performance evaluation of the stock assets, etc.;

(7)

Keeping completely the records, account books, statements on stock asset trusteeship as well as other relevant documents. The relevant important documents such as vouchers, trading records, contracts, etc. on custody of the stock assets shall be kept for not less than 15 years; and

(8)

Other obligations prescribed by the CIRC.

Article 19

The stock asset trustee of an insurance company must strictly separate its own assets from the stock assets under its management upon entrustment, and must set up relevant accounts for different insurance companies for the sake of separate management.

Article 20

The stock asset trustee of an insurance company may not have the following acts:

(1)

Mixing its own assets with the stock assets entrusted by the insurance company to manage;

(2)

Mixing other assets under its trusteeship with the stock assets entrusted by the insurance company to manage;

(3)

Mixing stock assets of different insurance companies under its trusteeship to manage;

(4)

Peculating stock assets entrusted by the insurance company;

(5)

Taking advantage of stock assets entrusted by the insurance company and other relevant information to seek benefits for itself or for a third person;

(6)

Violating laws, administrative regulations, relevant provisions of the state or the trusteeship agreement; or

(7)

Other acts prohibited by the CIRC.

Article 21

An insurance company shall conclude a trusteeship agreement with the stock asset trustee. The trusteeship agreement must set forth the following content:

(1)

Obligations of the stock asset trustee as prescribed in Article 18 , Article 19 and Article 20 of the present Measures;

(2)

Where the stock asset trustee violates the obligations in Item (1) of the Article and the CIRC requires the insurance company to change the stock asset trustee, the insurance company shall have the right to terminate the trusteeship agreement in advance.

Article 22

Where a stock asset trustee is lawfully disbanded, revoked, or runs into bankruptcy, the stock assets of the insurance company entrusted to it shall not be listed as assets for liquidation.

Chapter V Prohibited Acts of Insurance Institutional Investors

Article 23

The scope and the proportion of stock investments of insurance institutional investors may not exceed the relevant provisions of the CIRC.

Article 24

In respect of decision-making, research, trading and settlement concerning stock investments, none of the management staff and other relevant persons of an insurance institutional investor may engage in insider trading.

Insider trading mentioned in the preceding paragraph shall be cognized according to "Securities Law of the People's Republic of China" and "Interim Measures for Prohibiting Securities Frauds".

Article 25

An insurance institutional investor engaging in stock investment may not commit any of the following acts:

(1)

Transferring profits between securities accounts for insurance funds of different natures;

(2)

Buying stocks through financing by illegal means; or

(3)

Other acts prescribed by the CIRC.

Article 26

The insurance institutional investor may not obtain inappropriate benefits or transfer risks by the following means:

(1)

Centralizing advantages of funds or share holding either alone or by conspiracy, or utilizing information advantage to trade united or continuously, so as to manipulate securities trading prices;

(2)

Colluding with others to trade in securities pursuant to the time, price and method agreed upon in advance, or to trade in securities held by neither of them, so as to affect the securities trading price or the securities trading amount;

(3)

Trading with itself without transferring the ownership, so as to affect the securities trading price or securities trading amount; or

(4)

Manipulating securities trading prices in other methods.

Article 27

Where a listed company holds either directly or indirectly not less than 10% of the shares of an insurance institutional investor, the insurance institutional investor may not invest in the stocks of the listed company or any of its associated companies.

Article 28

No insurance institutional investors, stock asset trustees, securities operation institutions or other securities intermediary institutions may fabricate false trading records, financial information or other materials.

Article 29

An insurance company investing in stocks may not entrust any institution other than insurance asset management companies except ones prescribed by the CIRC.

Chapter VI Risk Control

Article 30

An insurance institutional investor shall have the ideology of long-term investment and value investment, optimize the allocation of assets and disperse the risks of investment.

Article 31

The insurance institutional investor shall, in accordance with the "Guide to Risk Control on Utilization of Insurance Funds", found a well developed risk control system of stock investment.

Article 32

The risk control system of stock investment of an insurance institutional investor shall at least include the following content:

(1)

The process of investment decision making;

(2)

The system of investment authorization;

(3)

The study report system;

(4)

The system of stock scope selection;

(5)

Index systems of risk assessment and performance appraisal;

(6)

The criteria on vocational ethics; and

(7)

The mechanism for dealing with major incidents.

Where an insurance company entrusts an insurance asset management company to engage in stock investment, its risk control system of stock investment shall at least include the stock trusteeship system in addition.

Where an insurance company directly engages in stock investment, its risk control system of stock investment shall at least include the stock trusteeship system, the stock trading management system and the information management system in addition.

The risk control system of stock investment of an insurance asset management company shall at least include the stock trading management system and the information management system in addition.

Article 33

When investing in stocks, an insurance institutional investor must work out a written study report before making the following important decisions:

(1)

A single-item - investment fund is to exceed the amount determined by the insurance institutional investor;

(2)

Not less than 5% of the investable stock assets are to be involved;

(3)

The investment portfolio or investment direction needs to be adjusted greatly;

(4)

The standard for selecting the scope of stocks needs to be adjusted greatly; or

(5)

The degree of stock investment risk tolerance needs to be adjusted greatly.

Article 34

When determining the scope of investable stocks, an insurance institutional investor shall consider various indexes of the listed company such as governance structure, earning capacity, information transparency, stock liquidity and etc.

The insurance institutional investor must invest in stocks within the scope of investable stocks.

Article 35

Before investment, an insurance institutional investor shall determine the benchmark for evaluating stock investment performance by taking the indexes of excellent-performance stocks, blue chips and shares of high liquidity into account for reference.

The benchmark for evaluating stock investment performance of the insurance industry shall be separately prescribed by the CIRC.

Article 36

When making use of the following funds, an insurance institutional investor shall separately open a securities account and a fund account for separate accounting:

(1)

Funds for traditional insurance products;

(2)

Funds for participating insurance products;

(3)

Funds for universal insurance products;

(4)

Funds for investment-linked insurance products; or

(5)

Funds for insurance products required by the CIRC to be accounted independently.

Article 37

The insurance asset management companies and the insurance companies directly engaging in stock investment shall trade in stocks through independent seats. The administrative measures for independent seats of stock trading shall be separately formulated.

Article 38

The stock investment trading orders of either an insurance asset management company or an insurance company directly engaging in stock investment shall be carried out responsibly by the independent trading department and full-time trading staff.

Article 39

The insurance asset management companies and the insurance companies directly engaging in stock investment shall establish information management systems on firewall, on-post duties, access, security and prevention, etc.

Article 40

The insurance asset management companies and the insurance companies directly engaging in stock investment shall regulate the operating programs of stock trading systems such as computer room establishments, communication equipments, computer equipments, operating system software, database software, etc.

Article 41

Where an insurance institutional investor selects the seat of a securities operation institution to trade in stock, this securities operation institution shall meet the following conditions:

(1)

It is in good financial condition and steady business operation, and its net capital is not less than 1 billion Yuan;

(2)

It has well developed internal control system;

(3)

The settlement funds of client trading are fully deposited in a commercial bank with the qualification for engaging in deposition and custody of securities trading settlement funds;

(4)

It has set up two separate accounts in China Securities Depository Clearing Co., Ltd., one for self-operation settlement of reserve account, the other for client settlement of reserve account;

(5)

It sets up seats separately for self-operated business and non-self-operated business in the stock exchanges of Shanghai and Shenzhen;

(6)

The communication conditions and trading facilities are high efficient and secure, which can meet the requirements of stock trading, and the information service is all-sided;

(7)

It has the capability for securities market research and is able to provide consulting service in time;

(8)

In the latest 3 years, it has no records on major violation of laws or rules. And it has not been punished by the CSRC or is not in the process of investigation under a case filed;

(9)

It has no ill records on honesty and credibility, and has no actions of occupying or peculating the guarantee money and securities of client in the latest year;

(10)

It has promised in written form to accept the inspection of CIRC on the stock trading of the insurance institutional investor and truthfully provides the CIRC with various stock trading information of the insurance institutional investor;

(11)

Its local business departments has normative management, good operation and complete service functions; and

(12)

Other conditions prescribed by the CIRC.

Article 42

Where an insurance institutional investor selects the seat of a business department of a securities operation institution to trade in stock investment, it shall conclude a relevant agreement with the head office. The agreement shall set forth the obligations of the securities operation institution as prescribed in Item (10) of Article 41 of the present Measures. If the securities operation institution violates the said obligations and the CIRC requires the insurance institutional investor to change the securities operation institution, the insurance institutional investor shall have right to terminate the agreement in advance. The insurance institutional investor shall submit a copy of the agreement to the CIRC within 5 days as of concluding the agreement prescribed in the preceding paragraph.

Article 43

Before the opening of each day, the insurance asset management companies and the insurance companies directly engaging in stock investment shall check the balance of securities and that of funds with the stock asset trustees so as to guarantee the said balances to be enough for settlement.

Article 44

Where the stocks held by an insurance institutional investor are under any of the circumstances prescribed in Article 14 of the present Measures, the insurance institutional investor shall formulate idiographic solutions.

Article 45

Where the operational situation of an insurance company is changed and no longer meets the conditions prescribed in the present Measures, the insurance company shall not add stocks and shall lower the stock investment proportion according to the time limit, methods and other requirements prescribed by the CIRC.

Article 46

An insurance institutional investor shall reveal the situation of stock investment risks by adopting risk value and other risk measurement indexes.

Article 47

The transfer of funds and the payment of expense between an insurance company and an insurance asset management company; a stock asset trustee or a securities operation institution must be in a method of transfer between accounts.

Article 48

The senior manager of an insurance institutional investor, who is in charge of stock investment, shall meet the following conditions:

(1)

He has the academic qualification of university graduate or above;

(2)

He has worked and experienced not less than 5 years in the field of securities or finance;

(3)

He knows well the operation of securities investment and has necessary financial and legal knowledge; and

(4)

Other conditions prescribed by the CIRC.

Article 49

The senior manager of an insurance institutional investor must, when making decisions on stock investment, strictly comply with the purview of power prescribed in the company's internal management system and risk control system. It is strictly prohibited to make investment or make decisions outside the purview of power.

Article 50

The operating personnel in an insurance institutional investor, who engages in stock investment, shall meet the following conditions:

(1)

He has the academic qualification of university graduate or above;

(2)

He has worked and experienced not less than 3 years in the field of securities or finance;

(3)

He knows well the securities business rules and operational procedures; and

(4)

Other conditions prescribed by the CIRC.

The operating personnel mentioned in the preceding paragraph shall refer to the director and the persons who operate the stock investment business.

Article 51

In an insurance asset management company or in an insurance company directly engaging in stock investment, the number of operating personnel engaging in stock investment shall fit in with the scale of stock investment, and the company concerned shall have a suitable number of researchers in the fields of macro-economics, industrial analysis, financial engineering and etc.

In case the stock assets in use amount to 100 million Yuan or more in an insurance asset management company or in an insurance company directly engaging in stock investment, there shall not be less than 5 major operating personnel engaging in stock investment.

Article 52

A person under any of the following circumstances may not act as a senior manager in charge of stock investment business or major operating personnel in an insurance institutional investor:

(1)

He has been sentenced to criminal punishments due to the crime of embezzlement, bribery, malicious occupation of properties, misappropriation of properties, or destruction of socialist economic order, etc.;

(2)

He has been imposed upon administrative penalties or sentenced to criminal punishments due to such illegal actions as gambling, taking drugs, visiting prostitutes, frauds and etc.;

(3)

He has been a senior manager of a company or an enterprise running into bankruptcy and liquidation due to inappropriate management and bears individual liability or direct leadership liability for the bankruptcy. And it has not covered 5 years since the finalization of liquidation of the company or enterprise;

(4)

He is presently investigated by a judicial organ, disciplinary supervision department, or the CIRC;

(5)

He himself bears large amount of debts which have been due but unpaid; or

(6)

It has been decided by the financial supervisory departments that he may not hold any post in a financial institution within a time limit, and this time limit has not expired.

Chapter VII Supervision and Administration

Article 53

The CIRC and the CSRC shall, pursuant to their respective duties, conduct inspections on the stock investment business of insurance institutional investors.

The CIRC may retain intermediary institutions like accounting firms to inspect the stock investment of insurance institutional investors.

Article 54

An insurance institutional investor shall submit the following statements, reports or other documents to the CIRC according to provisions:

(1)

The benchmark for evaluating investment performance;

(2)

The method of calculating risk indexes and the statement on the use thereof; and

(3)

The relevant statements on stock investment.

The contents of the statements and reports prescribed in the preceding paragraph and the methods of submission shall be separately prescribed by the CIRC.

Article 55

An insurance institutional investor shall disclose the relevant information on stock investment in the method prescribed by the CIRC.

Article 56

When investing in stocks, an insurance institutional investor shall abide by the laws, administrative regulations and relevant provisions of the state, and accept the CSRC's supervision over its market trading actions.

Article 57

Where an insurance institutional investor violates the laws, administrative regulations or relevant provisions of the CIRC, the CIRC may have a supervisory talk or interrogation with the relevant senior managers and major operating personnel. If the case is serious, the CIRC may impose warnings or fines in accordance with the law or order to dismiss and replace such manager or operating personnel.

Article 58

Where an insurance institutional investor violates the laws, administrative regulations and relevant provisions, the CIRC and the CSRC may impose administrative penalties in accordance with the law.

Article 59

Where any stock asset trustee or securities operation institution prescribed in the present Measures violates the laws, administrative regulations or relevant provisions of the state, the relevant supervisory departments shall impose administrative penalties pursuant to their respective purview of power or supervisory duties.

Where a stock asset trustee or securities operation institution mentioned in the preceding paragraph violates the present Measures and the case is serious, the CIRC may charge the insurance institutional investor to replace the insurance assets trustee or the securities operation institution.

Chapter VIII Supplementary Provisions

Article 60

"Days" mentioned in the present Measures shall only refer to working days, excluding legal holidays.

Article 61

The present Measures shall come into force as of the date of their promulgation.