Chapter VI Securities Companies
Article 122 The establishment of a securities company shall be subject to the examination and approval of the securities regulatory under the State Council. No entity or individual may engage in any securities business without the approval of the securities regulatory under the State Council.
Article 123 For the purpose of the present Law, the term "securities company" as mentioned in the present Law refers to a limited- liability company or stock-limited company that has been established and engages in business operation of securities according to the Corporation Law of the People's Republic of China as well as the provisions of the present Law.
Article 124 The establishment of a securities company shall fulfill the following requirements:
(1) Having a corporation constitution that meets the relevant laws and administrative regulations;
(2) The major shareholders having the ability to make profits successively, enjoying good credit standing and having no irregular or rule-breaking record over the latest 3 years, and its net asset being no less than 0.2 billion yuan.
(3) Having a registered capital that meets the provisions of the present Law;
(4) The directors, supervisors and senior managers thereof having the post-holding qualification and its practitioners having the qualification to engage in securities business;
(5) Having a complete risk management system as well as an internal control system;
(6) Having a qualified business place and facilities for operation; and
(7) Meeting any other requirement as prescribed by laws and administrative regulations as well as the provisions of the securities regulatory authority under the State Council, which have been approved by the State Council.
Article 125 A securities company may undertake some of or all the following business operations upon the approval of the securities regulatory authority under the State Council:
(1) Securities brokerage;
(2) Securities Investment consulting;
(3) Financial advising relating to activities of securities trading or securities investment;
(4) Underwriting and recommendation of securities;
(5) Self-operation of securities;
(6) Securities asset management; and
(7) Any other business operation concerning securities.
Article 126 A securities company shall indicate the words "limited-liability securities company" or "stock-limited securities company" in its name.
Article 127 Where a securities company engages in the business operation as prescribed in item (1), (2) or (3) of Article 125 of the present Law, its registered capital shall be RMB 50 million yuan at the least. Where a securities company engages in any of the business operations as prescribed in item (4), (5), (6) or (7), its registered capital shall be RMB 100 million yuan at the least; Where a securities company engages in two or more business operations as prescribed in item (4), (5), (6) or (7), its registered capital shall be 500 million yuan at the least. The registered capital of a securities company shall be the paid-in capital. The securities regulatory authority under the State Council may, according to the principals of prudent supervision and in light of the risk rating of all business operations, adjust the requirement of minimum amount of registered capital, which shall be no less than the minimum amount as prescribed in the preceding paragraph herein.
Article 128 The securities regulatory authority under the State Council shall, within 6 months as of accepting an application for establishing a securities company, carry out an examination according to the statutory requirements and procedures and on the basis of the principle of prudent supervision, make a decision on approval or disapproval and thereafter, notify the relevant applicant. In the case of disapproval, an explanation shall be given. Where an application for establishing a securities company has been approved, an applicant shall, within the prescribed period, apply for registration of establishment with the organ in charge of corporation registration and collect its business license therefrom. A securities company shall, within 15 days as of collecting its business license, file an application for the Securities Business Permit with the securities regulatory authority under the State Council. Without a Securities Business Permit, a securities company may not engage in any business operation of securities.
Article 129 Where a securities company establishes, purchases or cancels a branch, alters its business scope or registered capital, alters its shareholders or actual controllers who hold more than 5% of its stock rights, alters any important article of its constitution, has any merger or spilt-up, alters its form of corporation, suspends its business, goes through dissolution or bankruptcy, it shall be subject to the approval of the securities regulatory authority under the State Council. Where a securities company establishes, purchases a securities operation institution abroad or purchases the shares of any securities operational institution abroad, it shall be subject to the approval of the securities regulatory authority under the State Council.
Article 130 The securities regulatory authority under the State Council shall formulate provisions on the risk control indicators of a securities company such as net capital, the ratio between net capital and liabilities, the ratio between net capital and net assets, the ratio between net capital and operational scale of self-operation, underwriting and asset management, the ratio between liabilities and net asset as well as the ratio between current assets and current liabilities. A securities company may not provide any financing or guaranty for its shareholders or any related person thereof.
Article 131 The directors, supervisors and senior managers of a securities company shall be honest and integrate, have good moral grade, be familiar with the laws and administrative regulations on securities and have the ability of operation and management as required by the performance of their functions and duties, and shall have obtained the post-holding qualification as verified by the securities regulatory authority under the State Council before assuming his post. Anyone who is under any circumstance as prescribed in Article 147 of the Corporation Law of the People's Republic of China or is under any of the following circumstances may not hold the post of director, supervisor or senior manager of a securities company:
(1) Where a person-in-charge of a stock exchange or securities registration and clearing institution or a director, supervisor or senior manager of a securities company has been removed from his post for his irregularity or disciplinary breach and if it has been within 5 years as of the day when he is removed from his post; and
(2) Where a professional of a law firm, accounting firm or investment consulting organization, financial advising organization, credit rating institution, asset appraisal institution or asset verification institution has been disqualified for his irregularity or disciplinary breach and if it has been within 5 years as of the day when he is removed from his post.
Article 132 A practitioner of a stock exchange, securities registration and clearing institution, securities trading service institution or securities company or any functionary of the state organ, who has been dismissed for his irregularity or disciplinary breach, may not be employed as a practitioner of a stock exchange.
Article 133 A functionary of the state organ and any other personnel as prohibited by laws and administrative regulations from taking any job in a company on a part-time basis may not take any job in a securities company on a part-time basis.
Article 134 The state shall establish the securities investor protection fund. The securities investor protection fund shall be composed of the capital as paid by securities companies and any other capital as lawfully raised. The specific measures for financing, administration and use of the foregoing fund shall be formulated by the State Council.
Article 135 A securities company shall withdraw a trading risk reserve from its annual after-tax profits to cover any loss from securities transaction. The specific proportion for withdrawal shall be prescribed by the securities regulatory authority under the State Council.
Article 136 A securities company shall establish and improve an internal control system, adopt an effective measures of separation so as to prevent any interest conflict between the company and its clients or between different clients thereof. A securities company shall undertake its operations of securities brokerage, underwriting, self-operation and asset management in a separate manner but not in a mixed manner.
Article 137 A securities company shall undertake its self-operation in its own name and may not make use of any other person's name or in an individual's name. A securities company shall undertake its self-operation by using its own capital and funds as lawfully raised. A securities company may not lend its self-operation account to any other person.
Article 138 A securities company may enjoy its right of independent management according to law and its legal operation may not be interfered.
Article 139 The trading settlement funds of the clients of a securities company shall be deposited in a commercial bank and be managed through accounts as separately opened in the name of each client. The specific measures and implementation procedures shall be formulated by the State Council. A securities company may not incorporate any trading settlement funds or securities of its clients into its own assets. Any entity or individual is prohibited from misusing any trading settlement funds or securities of its/his clients in any form. Where a securities company goes bankruptcy or goes through liquidation. The trading settlement funds or securities of its client may not be defined as its insolvent assets or liquidation assets. Under any other circumstance as irrelevant to the liabilities of its clients or under any other circumstance as prescribed by law, the trading settlement funds or securities of its clients may not be sealed-up, frozen, deducted or enforced compulsorily.
Article 140 Where a securities company engages in any brokerage business, it shall arrange a uniformly formulated the power of attorney of securities transactions for the entrusting party. Where any other means of entrustment is adopted, the relevant entrustment records shall be made. For an entrustment of securities transaction as made by a client, whether the transaction is concluded or not, the entrustment records shall be kept in the relevant securities company within the prescribed period.
Article 141 Upon accepting an entrustment of securities transaction, a securities company shall, on the basis of the description of the securities, trading volume, method of bidding, price band, etc. as indicated in the power of attorney, undertake securities trading as an agent according to the trading rules and make trading records in a faithful manner. After a transaction is concluded, a securities company shall, according to the relevant regulations, formulate a transaction report and deliver it to the relevant clients. The statements in a check sheet that confirms trading acts and results in securities trading shall be authentic. Such statements shall be subject to the examination of an examiner, other than the relevant transaction handler, on a transaction-by-transaction basis, so as to guarantee the consistency between the balance of securities in book account and the securities as actually held.
Article 142 Where a securities company provides any service of securities financing through securities transactions for its client, it shall meet the provisions of the State Council and shall be subject to the approval of the securities regulatory authority under the State Council.
Article 143 A securities company that engages in brokerage operation may not decide any purchase or sale of securities, class selection of securities, trading volume or trading price on the basis of full entrustment of its client.
Article 144 A securities company may not make a promise to its clients on the proceeds as generated from securities transactions or on compensating the loss as incurred from securities transactions by any means.
Article 145 A securities company and the practitioners thereof may not privately accept any entrustment of its client for securities transaction beyond its business place as established according to law.
Article 146 Where any practitioner of a securities company violates the trading rules by implementing the instructions of his securities company or taking advantage of his post in any securities trading, the relevant securities company shall bear all the liabilities as incurred therefrom.
Article 147 A securities company shall keep the materials of its clients regarding account opening, entrustment records, trading records and internal management as well as business operation in a proper manner. No one may conceal, forge, alter or damage the aforesaid materials. The term for keeping the aforesaid materials shall be no less than 20 years.
Article 148 A securities company shall, according to the relevant provisions, report the information and materials regarding operation and management such as its business operation and financial status to the securities regulatory authority under the State Council. The securities regulatory authority under the State Council has the right to require a securities company as well as the shareholders and actual controllers thereof to provide the relevant information and materials within a prescribed period. The information and materials as reported or provided by a securities company and the shareholders and actual controllers thereof to the securities regulatory authority under the State Council shall be authentic, accurate and complete.
Article 149 The securities regulatory authority under the State Council may, when believing it requires so, entrust an accounting firm or an asset appraisal institution to carry out an auditing or appraisal on the financial status, internal control as well as asset value of a securities company. The specific measures thereof shall be formulated by the securities regulatory authority under the State Council in collaboration with the relevant administrative departments.
Article 150 Where the net capital or any other indicator of risk control of a securities company fails to satisfy the relevant provisions, the securities regulatory authority under the State Council shall order it to correct in a prescribed period. Where a securities company fails to correct within the prescribed period or any act thereof has injured the sound operation of the securities company or has damaged the legitimate rights and interests of its clients, the securities regulatory authority under the State Council may take the following measures in light of different circumstances:
(1) Restricting its business operation, ordering it to suspend some business operations and stopping the approval of any new operation thereof;
(2) Stopping the approval for establishing or taking over any business branch;
(3) Restricting its distribution of dividends, restricting the payment of remunerations to or provision of welfare for its directors, supervisors or senior managers;
(4) Restricting any transfer of property or the setting of any other right to its property;
(5) Ordering it to alter its directors, supervisors and senior managers or restricting the right thereof;
(6) Ordering the controlling shareholders to transfer their stock right or restricting its shareholders from exercising the shareholders' rights; and
(7) Revoking the relevant business license. A securities company shall, upon rectification, submit a report to the securities regulatory authority under the State Council. The securities regulatory authority under the State Council shall lift the relevant measures as prescribed in the preceding paragraph herein within 3 days as of concluding the relevant examination and acceptance of a securities company that has met the requirements of risk control indicators upon examination and acceptance.
Article 151 Where a shareholder of a securities company makes any fake capital contribution or spirits away registered capital, the securities regulatory authority under the State Council shall order him to correct within the prescribed period and may order him to transfer the stock rights of the securities company as held thereby. Before a shareholder as prescribed in the preceding paragraph herein corrects his irregularity and transfers the stock right of the securities company as held thereby according to the relevant requirements, the securities regulatory authority under the State Council may restrict the shareholders' rights thereof.
Article 152 Where any director, supervisor or senior manager of a securities company fails to fulfill his accountability in a diligent manner and thus incurs any major irregularity or rule-breaking act or major risk to his securities company, the securities regulatory authority under the State Council may revoke the post-holding qualification thereof and order his company to remove him from his post for alteration.
Article 153 Where any illegal operation of a securities company or any major risk thereof seriously disturbs the order of the securities market or injures the interests of the relevant investors, the securities regulatory authority under the State Council may take such supervisory measures as suspending its business for rectification, designating any other institution for trusteeship, take-over or cancellation.
Article 154 During a period when a securities company is ordered to suspend its business for rectification, or is designated for trusteeship, or is being taken over or liquidated, or where any major risk occurs, the following measures may be adopted to any director, supervisor, senior manager or any other person of the securities company directly responsible upon the approval of the securities regulatory authority under the State Council:
(1) Notifying the export administrative organ to prevent him from exiting the Chinese territory; and
(2) Requesting the judicial organ to prohibit him from moving, transferring his properties or disposing his properties by any other means, or setting any other right to his properties.
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