Laws of the People's Republic of China

China Securities Regulatory Commission

Circular on the Release of the Interim Provisions for Administration of Membership-Style Securities Investment Consulting Businesses

To various securities investment consulting organizations:

Professional, standardized and individualized securities investment consulting services are objective needs for development of stock exchanges. In recent years, some securities investment consulting organizations have always been trying to offer membership-style securities investment consulting services, and in practice have not only gained certain effects and experiences, but also caused some circumstances, which damage reputations of the said organizations in the industry and interests of investors. In order to regulate membership-style securities investment consulting businesses (hereinafter referred to as the "membership-style businesses"), and protect legitimate rights and interests of investors, the Interim Provisions for Administration of Membership-Style Securities Investment Consulting Businesses (hereinafter referred to as the Provisions) was formulated by our Commission, is hereby promulgated and shall go into effect as of January 1, 2006. Organizations which have engaged in membership-style businesses, shall strictly comply with the Provisions and meet the following requirements:

(1)

Any organization, which achieves no membership with the China Securities Regulatory Commission, shall, within 15 working days from the promulgation of the Provisions, apply for an application with the China Securities Regulatory Commission and obtain a membership according to stipulated procedures.

(2)

Any organization shall, within 15 working days from the promulgation of the Provisions, submit filing materials and undergo filing procedures subject to Article 5 of the Provisions. The filing of any new organization proposing to deal with membership-style businesses shall not be accepted for the time being before June 20, 2006.

(3)

Any organization with a paid-up capital of less than RMB 5 million yuan must put up with its practical capital increase program prior to March 31, 2006 and finish its capital increase before June 30, 2006, otherwise it shall suspend its membership-style businesses.

(4)

For current non-local members failing to meet requirements of Article 6 under the Provisions, it must be required to deal well with follow-up services and complaint handling, but forbidden to renew a further appointment with any of the said non-local member.

(5)

Personnel required in the second paragraph of Article 8 of the Provisions shall pass examination and complete record-keeping formalities before December 31, 2006. And

(6)

Any organization shall, before December 31, 2005, put all consulting service revenues deposited in other accounts into a bank account having been put on file to be specially used for collection of charges, withdraw provisions of risk at a rate 5% of the total annual service revenues for 2005, deposit such provisions of risk into the a bank account having been put on file to be specially used for provisions of risk. The said provisions of risks may not be transferred until a company has suspended its membership-style businesses for 6 months and properly handled all complaints.

China Securities Regulatory Commission

December 12, 2005

Interim Provisions for Administration of Membership-Style Securities Investment Consulting Businesses

With a view to protecting legitimate rights and interests of investors, regulating membership-style securities investment consulting businesses (hereinafter referred to as the "membership-style businesses"), and in accordance with the Securities Law of the People's Republic of China, the Interim Measures on Administration of Securities and Futures Investment Consultancy and Several Provisions on Strengthening the Administration of Securities and Futures Information Dissemination, and other pertinent provisions, related matters are hereby specified as follows:

Article 1

"Membership-style businesses" refers to professional services during which securities investment consulting organizations canvass for members from unspecified investors and provide such members with securities investment information, analysis, forecasting or consulting opinions, by means of television, radio station, websites and other media or by means of tools and marketing methods, such as fax, message, email, telephone, and refer to operating methods of securities investment consulting businesses, by which the said securities investment consulting organizations can obtain consulting service revenues.

Article 2

Organizations engaging in membership-style businesses (hereinafter referred to as "membership organizations") must be qualified for securities investment consulting businesses.

Article 3

Any membership organization must hold a membership with the China Securities Regulatory Commission (hereinafter referred to as the "Commission"), carry on its businesses in accordance with self-regulatory principles stipulated by the Commission and accept the self-supervision of the Commission.

Article 4

Any membership organization shall not have a paid-up capital of less than RMB 5 million yuan, and shall add another paid-in capital of no less than RMB 2.5 million yuan whenever establishing a new branch.

Article 5

Organizations proposing to engage in membership-style businesses shall, within 15 working days before their business commencement, report to securities regulatory bureaus of places where such organizations are registered and to securities regulatory bureaus of places where branches of such organizations are located. Membership organizations and branches thereof shall be forbidden to carry out their membership-style businesses until completing the filing procedures.

Filing materials include but not limited to: the paid-in capital of a company, its business pattern and planning, its personnel, its business operating process, its contract samples, its cooperation agreements entered into with media, its special bank deposit accounts, its account opening agreements, its risk control measures, its solutions for handling of clients' complaints, and its telephone (s), email (s), fax(es), message platform and website for rendering investment consulting services.

Article 6

Membership organizations shall only be permitted to canvass for members in their registration places, provinces, autonomous regions and municipalities directly under the Central Government where their branches are located (Members canvassed from places other than those mentioned above shall be called "non-local members"), and shall not canvass for non-local members.

Article 7

Membership organizations shall have clear ownership structure and a final controlling relationship and shall be forbidden to carry out their membership-style businesses by controlling or jointly controlling several other organizations; Where more than 5% of the equity or actual controllers are changed, membership organizations shall, within 5 working days from the said changes, report in writing to securities regulatory bureaus of places where such organizations are registered.

Article 8

Management and business personnel of membership organizations must have relevant qualifications:

(1)

Planners of media columns, media analysts and personnel giving instructions to operations of investors, must be qualified for securities investment consulting practice; and

(2)

Board chairmen, senior officers, departmental responsible persons and personnel in charge of marketing promotion and client service, must pass the securities practicing qualification examination, and their organizations shall report to the Commission for the record.

Article 9

Any membership organization shall strengthen the legal person responsibility, uniformly and externally sign cooperation agreements in the capacity of a corporate legal person, take part in media columns, open a bank count specially used for collection of charges, print contracts, canvass for members, sign member agreement contracts and collect service fees, but shall not carry out businesses externally in the name of its branches. Branches shall only obey their company's uniform arrangements, render client services, handle complaints, collect information, conduct liaison and carry out other activities, and shall, for future reference, retain contracts made out by and between members canvassed from places where the said branches are located and the company, and keep other business information.

Any branch set up by a membership organization shall have a fixed premise, necessary service facilities, sufficient practitioners, client service personnel and complaint handling personnel, as well as relevant management and control mechanism, and shall undergo filing procedures with a securities regulatory bureau of a place where the said organization is registered and with another a securities regulatory bureau of a place where the said branch is located. Branches shall accept the supervision conducted by all the aforesaid security regulatory bureaus.

Article 10

Any membership organization shall, at its registration places, open in the capacity of legal persons or designate an exclusive bank deposit account specially used for collection of consulting service fees (hereinafter referred to as the "bank account special for collection of charges") and an exclusive bank deposit account specially used for storage of provisions of risk (hereinafter referred to as the "bank account special for provisions of risk").

(1)

Consulting service fees charged by membership organizations must be fully remitted (deposited) into the recorded bank account special for collection of charges; Funds deposited in such bank account shall only be used for provisions of risks, clients' claims, operating and management expenses, dividends of shareholders and other reasonable expenses.

(2)

Membership organizations shall withdraw provisions of risk at a rate of 10% of each service revenue, gather on a monthly basis and deposit such all provisions of risk into the bank account special for provisions of risk. The provisions of risk shall not be transferred back into bank account special for collection of charges on a monthly basis, until expiration of each contract has been confirmed and relevant complaints have been properly settled, 6 month from the said expiration. With the exception of the said means, funds deposited in the bank account special for provisions of risk shall neither be transferred out or paid in any other manner nor be transferred out in a disguised form, such as pledge and guaranty.

(3)

The bank account special for collection of charges and the bank account special for provisions of risk shall be opened with a commercial bank which carried on depository business of client transaction settlement funds. Pertinent accounting opening agreement must indicate nature of the said accounts and requirements for using such accounts.

Article 11

When intending to carry on membership-style businesses by means of television, radio, advertisements and other media or by means of network and software, a membership organization shall on pertinent columns and business premises prominently announce its full name, business qualification certificate number, full names of practitioners participating in columns and their practicing qualification certificate numbers. When changing their organizations and media analysts, a membership organization shall, within 3 months from such changes, be forbidden to carry on the said businesses on pertinent media columns on behalf of changed organizations.

If intending to give investment opinions or suggestions through media, a membership organization must do that in accordance with the written research report of his/her company for the recent 1 month, and enable to timely provide clients in demand with research reports concerned.

Article 12

Membership organizations shall, on pertinent medial columns, business premises, first pages of relevant securities investment consulting service contracts and research recommendation reports, noticeably give risk warning statements (Risk warning statements on television columns shall be given one time for less than 3 minutes): "Our company commits to provide professional services, but neither promises investors to make income from investment, nor agrees with investors to share investment income or investment losses " and "There are risks in the market, investors do be careful."

Article 13

Membership organizations shall uniformly print formal contracts, number them for management convenience and indicate on the first page of each contract the complaint telephone, the number, name and opening bank of the bank account special for collection of charges. Membership organizations shall ensure that investors have read pertinent risk warning statements upon signature and shall not charge consulting service fees if no written contract has been entered into.

Article 14

Membership organizations shall establish valid systems for sound recording confirmation of client marketing and consulting services. Any membership organization shall, upon opening services to be rendered to each client, give risk warning statements (which shall be commensurate with those risk set forth in Article 12 ) in a sound recording manner, retain sound recordings of marketing process and sound recordings of clients which have recognized "assume sole responsibility for own profits or losses" and keep other valid confirmation documents, for future reference in case of disputes.

Article 15

Membership organization shall set special departments and arrange special personnel to independently hand clients' complaints. The handling of relevant received complaints shall be completed before the end of the next month by organizations concerned. Regulatory departments shall attach importance to any organization which has a high complaint rate, receives a large number of complaints or fails to timely handle clients' complaints, shall adopt relevant regulator measures and put such organization on regulatory files.

Article 16

Any membership organization must, within 3 months from the end of each fiscal year, submit to a securities regulatory bureau of a place where the membership organization is registered, an audit report issued by an accounting firm qualified for relevant securities and futures businesses. The audit report shall specially indicate where consulting service revenues have been completely transferred into the bank deposit account, and where the base and proportion for withdrawing provisions of risk are up to standards.

Article 17

Legal representatives and major responsible persons of membership organizations shall present to securities regulatory bureaus of places where membership organizations are registered, their good faith commitments, so as to clearly commit the good faith and compliance of business operation, authenticity, accuracy, completeness of filing documents, and commit to bear relevant liabilities if running businesses in violation of provisions and providing untrue materials and false information.

Article 18

Membership organizations shall, according to provisions, submit to securities regulatory bureaus of places where membership organizations are registered relevant materials which are to be put on file, and establish complete business information files. Branches, if set up by a membership organization, shall also, according to provisions, submit to securities regulatory bureaus of places where branches are located relevant materials which are to be put on file, and establish corresponding business information files.

(1)

circumstances of organizations with share holding, equity participation or joint controlling relations, and changes experienced by such organizations; valid identification certificates, contact information and changes thereof of any company's shareholders;

(2)

the list of major cooperating organizations, all cooperation agreements (photocopies) signed with such cooperating units, as media, communication service providers, contact information of cooperating media and changes of such information, the opening bank of the, bank account special for provisions of risk, pertinent account opening agreements and changes thereof;

(3)

name lists of practitioners and the employed, their certificate numbers, numbers of their valid identification certificates, their positions, name lists of members served by practitioners, participation of practitioners in media columns, departments performing supervision and inspection functions or exercising functions of complaint handling and lists of personnel fulfilling all the preceding functions, as well as changes of such departments and personnel;

(4)

securities types which are summarized in a table based on category and sequence of recommendation date and are publicly recommended in the last month to members at various levels (of categories), as well as changes of such securities types;

(5)

samples of securities investment consulting service, all client lists during the reporting period, period of service contract and changes in the quantity of members;

(6)

amounts of consulting service contracts, actually-obtained amounts of service revenues, turnover of fund expenditures (withdrawal), amounts of claims, claim lists, withdrawal of provisions of risk and balances during reporting period ;

(7)

complete records (stored in carriers, such as disks, tapes, etc.) on participation in pertinent media columns and materials for publicity of businesses;

(8)

sound-recordings of client marketing process and sound-recordings of telephone complaints;

(9)

records showing a company receives complaints from clients, verification and handling of such complaints; and

(10)

other materials required by the China Securities Regulatory Commission and related securities regulatory bureaus.

Where materials described in the abovementioned (1) and (2) are changed, such changes shall be timely reported to securities regulatory bureaus of places where membership organizations are registered for the record; Materials laid down from (3) to (6) shall, within 5 working days from the end of each month, be reported to securities regulatory bureaus for the record in the format specified by provisions; For materials indicated from (7) to (9), business information files shall be established, for the reference of pertinent securities regulatory bureaus, and shall keep such materials for more than 3 years.

Article 19

Where carrying on membership-style businesses, membership organizations and personnel thereof shall be forbidden to:

(1)

to canvass for non-local members at their registration places or at places where their branches are located, by the means of public media columns, such as satellite television, and so on;

(2)

to lease and lend qualification certificates of a company and its practitioners or carry on membership-style businesses in a leasing or contracting manner;

(3)

to tell investors it is sure to make profits from investment by explicit or implied manner, such as "black horse recommendation", or solicit businesses by such marketing methods as "give shares for free";

(4)

to carry out untrue and inducible advertising publicity and marketing activities; or disseminate other false, one-sided and misleading information, by means of overstatement, untruthful report and recommendation of performance (including to replace recommended performance of portfolio with recommended performance of individual shares market) ;

(5)

to directly conduct operation for clients, or agree with clients to share investment income or losses;

(6)

to sell and purchase stocks of listed companies served by the same membership organizations;

(7)

to agree on affiliates, their personnel and interests parties to manipulate securities prices;

(8)

to offer information concerned to membership organizations and personnel thereof themselves for the transaction of such membership organizations or affiliates, before evaluation, forecasting and recommendation is made;

(9)

to make recommendations which are in favor of membership organizations and personnel thereof themselves, affiliates and specified clients, but are harmful to interests of other clients and investors;

(10)

to share consulting service revenues with pertinent media, communication service agencies and other cooperators;

(11)

to render consulting services through any telephone, post box, fax, message platform or website, all of which fail to be put on file;

(12)

service revenues to charge clients of depository and consulting service revenues through any bank deposit account, which fail to be put on file; and

(13)

to commit other acts detrimental to legitimate rights and interests of clients, by violating pertinent regulations.

Article 20

Where practitioners and the employed contravene pertinent laws and these Provisions, their company shall be ordered to pursue their liabilities, such as to record a demerit, reduce salary, demote and dismiss them, and timely report such measures to the Commission. Then the Commission shall, in accordance with self-regulatory principles, take actions including to record into good faith records, revoke practicing qualifications; Where circumstances are, the Commission shall give them penalties, such as to cancel practicing or engaging qualifications, prevent them from entering the market, etc. Where being suspected of committing crimes, they shall be referred to judicial organs.

Membership organizations, if violating pertinent regulations and these Provisions, shall, according to circumstances, be reminded through talks, ordered to make corrections, publicly criticized, ordered to suspend businesses of their branches, ordered to stop publishing canvassing telephones on medial columns, ordered to suspend their participation in part or all media columns, such as columns on satellite television, and ordered to stop canvassing for new members, and shall have their annual inspection suspended temporarily, be refused to pass annual inspection and subject to other regulator measures; shall have their illegal gains confiscated, imposed fines, business qualifications suspended or canceled or be subject to other penalties measures; where offenses constitute crimes, shall be referred to judicial organs.

Article 21

If carrying on membership-style businesses illegally or other securities investment consulting businesses, organizations and personnel failing to obtain pertinent securities investment consulting qualifications, shall be strictly penalized by industrial and commercial departments, public security departments and other departments concerned.

Article 22

Securities companies engaging in membership-style businesses shall comply with the Provisions.