Article 1 To meet the demand of opening the securities market, to strengthen and improve the supervision and administration of foreign-shared securities companies and to clarify the preconditions and procedures for the establishment of foreign-shared securities companies, the Rules is therefore formulated in accordance with relevant provisions of the Company Law and the Securities Law.
Article 2 Foreign-shared securities companies as referred to in the Rules shall include domestic securities companies whose shares are transferred to or purchased by foreign shareholders or those that are co-funded by foreign and domestic shareholders.
Article 3 The China Securities Regulatory Commission (hereinafter referred to as CSRC) shall be responsible for the examination, approval, supervision and administration of foreign-shared securities companies.
Article 4 The organizational structure of a foreign-shared securities company shall be that of limited liability. The name, registered capital, founding and functions of the departments of a foreign-shared securities company shall be compliant with the relevant provisions of the Company Law, the Securities Law and CSRC.
Article 5 A foreign-shared securities company may engage in the following businesses:
1) Underwriting of shares (including RMB ordinary shares and foreign shares) and bonds (including bonds issued by the government and companies);
2) Brokerage of foreign shares;
3) Brokerage and proprietary dealing of bonds (including bonds issued by the government and companies);
4) Other businesses approved by the CSRC. The foreign shares as used in the preceding paragraph shall refer to domestic listed foreign shares (B-shares) and overseas listed foreign shares. The securities company shall file the application for business scope to the CSRC according to the first paragraph of this Article. Those engaging in the lead underwriting of stocks shall obtain the license for share lead underwriting in accordance with the provisions of the CSRC on the administration of share lead underwriting license for securities companies.
Article 6 A foreign-shared securities company shall possess the following qualifications:
1) The registered capital is in accordance with the provisions of the Securities Law on the registered capital of comprehensive securities companies;
2) The shareholders should possess the qualifications as provided for by the Rules, and the proportion and form of their capital contribution be in accordance with the provisions of the Rules;
3) Staff members that have obtained the qualifications as securities practitioners according to the provisions of the CSRC shall be no less than 50, and there shall be professionals in accounting, law and computer as required.
4) The company should have sound systems of internal management and risk control, separate systems of organization, personnel, information and business execution for such businesses as underwriting, brokerage and proprietary trading and a well-designed technical system for internal control.
5) The company should own the operating place and other facilities for transactions as required.
6) Other prudential conditions provided for by the CSRC.
Article 7 The foreign shareholders of a foreign-shared securities company shall possess the following qualifications:
1) Their home countries shall have sound legal and regulatory systems on securities transactions, and the securities regulatory bodies should have signed the memorandums of understanding on securities regulation with the CSRC, and maintained effective cooperation with the CSRC;
2) They have legitimate qualifications for securities dealing in their home countries and have engaged in the financial business for no less than 10 years without being imposed severe punishments by the securities regulatory bodies and judicial departments during the past 3 years;
3) The various risk supervision indicators during the past three years should conform to the legal provisions and the requirements of the securities regulatory bodies of their home countries;
4) Having sound internal control systems;
5) Having good reputation and sound track record on the international securities market;
6) Other prudential conditions provided for by the CSRC.
Article 8 The domestic shareholders of a foreign-shared securities company shall possess the qualifications as shareholders of securities companies as provided for by the CSRC. At least one of the domestic shareholders of a foreign-shared securities company shall be a domestically funded securities company. However, it does not include foreign-shared securities companies changed from domestically funded securities companies.
Article 9 The domestic shareholders may invest by cash and tangible objects essential for the business operation; while the foreign shareholders shall invest by free convertible currencies.
Article 10 The shares held by foreign shareholders or the equity possessed by them (both directly and indirectly) in a foreign-shared securities company should not exceed one third of the total. At least one of the domestic shareholders of a domestic-funded securities company shall hold o less than one third of the shares or equity of the company. As for a foreign-shared securities company changed from a domestically funded securities company, at least one domestic shareholder shall hold no less than one third of the shares.
Article 11 The board chairman, general manager, and deputy general manager of a foreign-shared securities company shall possess the qualifications as senior management of securities companies as provided for by the CSRC.
Article 12 To apply for the establishment of a foreign-shared securities company, the representatives appointed or the agents entrusted by the shareholders shall submit the following documents to the CSRC:
1) The application form jointly signed by legal representatives or authorized representatives of the domestic and foreign shareholders;
2) Contract and draft corporate statute for the establishment of the foreign-shared securities company;
3) Application forms of qualified candidates for the board chairman, general manager and deputy general manager of the foreign-shared securities company;
4) Photocopies of the business license or registration certificate and securities transaction credentials of the shareholders;
5) Audited financial statements of the foreign and domestic shareholders of the year prior to the application;
6) Statements issued by the securities regulatory bodies of the home countries of the foreign shareholders on whether those shareholders possess the qualifications as provided for in Items 2) and 3) of Article 7 of the Rules;
7) Legal opinions presented by law firms in China qualified for securities-related businesses.
Article 13 The CSRC shall, according to relevant laws, administrative regulations and the Rules, examine the application materials as provided for in the preceding paragraph, and shall decide on whether to approve the application within 45 working days upon receipt of valid application materials, and shall notify the applicant in writing. For those unapproved applications, reasons shall be explained to the applicants in writing.
Article 14 The shareholders shall contribute the capital in full or provide the cooperative conditions as agreed upon, elect the board of directors, decide on members of the senior management, and apply to competent administrations for industry and commerce for registration of establishment and claim the business license within 6 months as of the issuance of approval by the CSRC.
Article 15 The board chairman or authorized representatives of a foreign-shared securities company shall, within 15 working days as o the issuance of the business license, submit the following documents to the CSRC and apply for the License for Securities Business:
1) A copy of the business license;
2) The company statute;
3) A capital verification report produced by an accounting firm in China qualified for securities-related businesses;
4) A name list and resumes of the directors, supervisors and other members of the senior management, a name list of the main business personnel and copies of their credentials for securities business;
5) A written version of the internal control system regulations;
6) Descriptions of the operating place and transaction facilities.
Article 16 The CSRC shall, according to related laws, administrative regulations and the Rules, examine the application materials as provided for in the preceding paragraph, and shall decide within 15 working days upon receipt of valid application materials. For those that meet the requirements, the License for Securities Business shall be granted; for those that fail to meet the requirements, the license shall not be granted and reasons shall be explained in writing.
Article 17 A foreign-shared securities company is not allowed to operate in the securities business without the License for Securities Business issued by the CSRC.
Article 18 Domestically funded securities companies applying to be changed into foreign-shared securities companies should meet the requirements provided for in Article 6 of the Rules. Foreign shareholders purchasing or holding shares of domestic-funded securities companies shall meet the requirements provided for in Article 7 of the Rules, and the proportion of the purchased shares or the capital contribution thereof shall conform to the provisions of Article 10 of the Rules.
Article 19 Domestically funded securities companies applying for a change to foreign-shared securities companies shall submit the following documents to the CSRC:
1) An application form signed by the legal representative;
2) Decision of the shareholdersˇ¦ meeting on changing the company into a foreign-shared securities company;
3) Draft company statute
4) Agreement on share transfer or capital contribution (agreement on share purchase);
5) A name list and resumes of the personnel appointed by the foreign investors to take post in that securities company;
6) The business license or registration certificates of the foreign shareholders and copies of their credentials for the securities business;
7) Audited financial statements of the foreign shareholders of the year prior to the application;
8) Statements issued by the securities regulatory bodies of the home countries of the foreign shareholders on whether those shareholders possess the qualifications as provided for in Items 2) and 3) of Article 7 of the Rules;
9) Plans for eliminating businesses that are prohibited from a foreign-shared securities company by related laws;
10) Legal opinions issued by a law firm in China qualified for securities-related businesses.
Article 20 The CSRC shall, according to related laws, administrative regulations and the Rules, examine the application materials as provided for in the preceding paragraph, and shall decide within 30 working days upon receipt of valid application materials, and shall notify the applying securities companies in writing, for those that fail to get the approval, reasons shall be explained in writing.
Article 21 Securities companies approved for the change shall, within 6 months as of the issuance of the approval by the CSRC, complete the transfer of shares or added investment, eliminate the businesses banned from a foreign-shared securities company by related laws, and shall apply to competent administrations for industry and commerce for alteration registration and claim the new business license by returning the original one.
Article 22 A securities company approved for the change shall, within 15 working days as of the alteration registration, submit the following documents to the CSRC, and apply for the new License for Securities Business:
1) A copy of the business license;
2) Corporate statute of the foreign-shared company;
3) Original license for securities business and copies thereof of the company;
4) A capital verification report presented by an accounting firm in China qualified for the securities business;
5) Work report on the elimination of the businesses that are banned from a foreign-shared securities company by related laws;
6) Legal opinions and verification report on the above-mentioned elimination issued by a law firm and an accounting firm qualified for securities-related businesses.
Article 23 The CSRC shall, according to related laws, administrative regulations and the Rules, examine the application materials as provided for in the preceding paragraph, and shall decide on whether to approve it within 45 working days upon receipt of valid application materials, for those that meet the requirements, the new License for Securities Business shall be granted, and for those that fail to meet the requirements, the new license shall not be granted, and reasons shall be explained to them in writing.
Article 24 A securities company newly established or continuing to exist after the merger of foreign-shared securities companies or the merger between a foreign-shared securities company and a domestically funded one shall meet the requirements for the establishment of a foreign-shared securities company as provided for by the Rules; its business scope and the proportion of the shares or equity held by the foreign shareholders shall conform to the provisions of the Rules. If the securities companies established as a result of the split of a foreign-shared securities company still have foreign shareholders, their business scope and the proportion of the shares or equity held by the foreign shareholders shall be in accordance with the provisions of the Rules.
Article 25 The application materials and documents submitted to the CSRC as provided for in the Rules shall be in Chinese. If the documents and materials of the foreign shareholders and those issued by the securities regulatory bodies of their home countries are in foreign languages, the Chinese versions consistent with the original documents shall also be submitted. If the documents and materials submitted fail to fully describe the circumstances of the applicant, the CSRC may require the applicant to make supplementary statements.
Article 26 The Rules should be equally applicable to investors from the Hong Kong Special Administration Region, the Macao Special Administration Region and the Taiwan area holding shares in securities companies.
Article 27 Other related provisions not covered by the Rules should be applicable for the establishment, alteration, termination and business activities of foreign-shared securities companies and the supervision and management thereon.
Article 28 The Rules shall enter into force as of July 1, 2002.
Promulgated by The China Securities Regulatory Commission on 2002-6-1
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