Article 1 In order to meet the demands of opening up the securities market, to strengthen and improve the supervision and administration of securities companies with foreign shareholders and to define the conditions and procedures for the formation of securities companies with foreign shareholders, these Rules have been formulated according to the relevant provisions of the Company Law and the Securities Law.
Article 2 The “securities companies with foreign shareholders” as mentioned in these Rules refers to:
1. The securities companies that are jointly contributed and established by the foreign and domestic shareholders; and
2. The securities companies that are changed from domestic-funded securities companies through the acceptance or purchase of shares by foreign shareholders.
Article 3 The China Securities Regulatory Commission (hereinafter referred to as the CSRC) shall be responsible for the examination and approval, supervision and administration of securities companies with foreign shareholders.
Article 4 The name, form of organization, registered capital, establishment and duties of the departments of a securities company with foreign shareholders shall comply with the relevant provisions of the Company Law, the Securities Law and the CSRC.
Article 5 A securities companies with foreign shareholders may engage in the following businesses:
1. Underwriting and recommendation of stocks (including RMB common stocks and foreign capital stocks) and bonds (including government bonds and corporate bonds);
2. Brokerage of foreign capital stocks;
3. Brokerage and proprietary trading of bonds (including government bonds and corporate bonds); and
4. Other businesses approved by the CSRC.
Article 6 A securities companies with foreign shareholders shall meet the following conditions:
1. The registered capital is in compliance with the provisions of the Securities Law;
2. The shareholders have the qualifications as provided for by these Rules, and the proportion and form of their capital contribution comply with the provisions of these Rules;
3. The numbers of persons who have obtained the qualification for securities dealing according to the provisions of the CSRC should be 30 or more, and there are necessary professionals for accounting, legal affairs, and computing;
4. Having sound internal management, risk control, as well as the separated management system of underwriting, brokerage and proprietary trading in the aspects of institution, personnel, information and business execution, etc., and having an appropriate internal control technical system;
5. Having the business premises that meet the requirements and the qualified business facilities; and
6. Other prudential conditions as provided for by the CSRC.
Article 7 The foreign shareholders of a securities company with foreign shareholders shall meet the following conditions:
1. Their home countries or regions have a sound legal and regulatory system of securities, and the securities regulatory bodies have signed the memorandum of understanding on securities regulation and kept an effective cooperative relation with the CSRC or the institution accepted by the CSRC;
2. They have been lawfully formed in their home countries or regions, at least one of them is an institution that has the lawful financial business qualification; and they shall not transfer their equities in the foreign-shared securities company within three years after the equity participation;
3. They have engaged in the financial business for five years or more, and haven’t been given major punishment by the securities regulatory body, the administrative or justice department of their respective home countries or regions in last three years;
4. All of their financial indicators in last three years are in compliance with the legal provisions of their respective home countries or regions and the requirements of their respective securities regulatory bodies;
5.They have a sound internal control system;
6. They have a good reputation and business performance; and
7. Other prudential conditions as provided for by the CSRC.
Article 8 The domestic shareholders of a securities company with foreign shareholders shall have the qualification requirements for the shareholders of securities companies as provided for by the CSRC.
Among the domestic shareholders of a securities company with foreign shareholders, at least one shall be a domestic-funded securities company. But the foreign-shared securities company changed from a domestic-funded securities company shall be an exception.
Article 9 The domestic shareholders may invest by cash or tangible goods that are necessary for the business operation. The foreign shareholders shall use freely exchangeable currencies to invest.
Article 10 The shareholding of foreign shareholders or the stake of foreign shareholders in a securities company with foreign shareholders shall not exceed 49% cumulatively (including direct shareholding and indirect control).
The shareholding or stake of one domestic-funded securities company at a minimum among domestic shareholders in a securities company with foreign shareholders shall not be lower than 49%.
After a domestic-funded securities company is changed into a securities company with foreign shareholders, the shareholding of one domestic shareholder at a minimum shall not be lower than 49%.
Article 11 The directors, supervisors and senior managers of a securities company with foreign shareholders shall have the qualification requirements as provided for by the CSRC.
Article 12 To apply for establishing a securities company with foreign shareholders, the representatives appointed by all the shareholders or the agents entrusted by them shall submit the following documents to the CSRC:
1. Application form jointly signed by the legal representatives or the authorized representatives of the domestic and foreign shareholders;
2. Contract for formation the securities company with foreign shareholders and the draft of the company’s bylaw;
3. Explanatory documents on the competence of principal senior managers to be appointed by the securities company with foreign shareholders;
4. Copies of business licenses, registration certificates, or securities business qualification certificates of the shareholders;
5. Audited financial statements of the foreign and domestic shareholders for the three years prior to the application;
6. Explanatory letters issued by the securities regulatory bodies of the home countries or regions of the foreign shareholders or the foreign institutions accepted by the CSRC on whether these shareholders have met the conditions as provided for in Items (2) up to (4) of Article 7 of these Rules;
7. Legal opinions issued by the law firms within the territory of China; and
8. Other documents required by the CSRC.
Article 13 The CSRC shall, according to the relevant laws, administrative regulations and these Rules, examine the application documents as provided for in the preceding article, make the decision on whether to approve the application within the stipulated time limit, and notify the applicant in written form. For those not approved, reasons shall be explained in written form.
Article 14 The shareholders shall contribute the capital in full amount or provide the cooperative conditions agreed upon, elect directors and supervisors, appoint senior officers, and apply to the administration for industry and commerce for registration of establishment and get the business license within six months from the day on which the CSRC issued the document of approval.
Article 15 The board chairman or the authorized representative of a securities company with foreign shareholders shall, within 15 workdays from the day on which the business license is granted, submit the following documents to the CSRC to apply for the License for Securities Business:
1. Copy of the business license;
2. The company’s bylaw;
3. Capital verification report produced by the accounting firm that is qualified for securities-related business within the territory of China;
4. Name list of the directors, supervisors, senior officers and principal business operators, and the copies of their post holding qualification certificates and their securities business qualification certificates;
5. documents about the internal control system;
6. Explanatory documents about the business premises and business facilities; and
7. Other documents required by the CSRC.
