(Adopted at the 6th Meeting of the Standing Committee of the 9th National People's Congress on December 29, 1998, revised at the 18th Meeting of the Standing Committee of the Tenth National People's Congress of the People's Republic of China on October 27, 2005 according to the Decision on Revising the Securities Law of the People's Republic of China as made at the 11th meeting of the Standing Committee of the 10th People's Congress on August 28, 2004)
Contents
Chapter I General Provisions
Chapter II Issuance of Securities
Chapter III Transaction of Securities
Section I General Provisions
Section II Listing of Securities
Section III On-going Disclosure of Information
Section IV Prohibited Trading Acts
Chapter IV Acquisition of Listed Companies
Chapter V Stock Exchanges
Chapter VI Securities Companies
Chapter VII Securities Registration and Clearing Institutions
Chapter VIII Securities Trading Service Institutions
Chapter IX Securities Industrial Association
Chapter X Security Regulatory Bodies
Chapter XI Legal Liabilities
Chapter XII Supplementary Articles
Chapter I General Provisions
Article 1 The present Law is formulated for the purpose of regulating the issuance and transaction of securities, protecting the lawful rights and interests of investors, safeguarding the economic order and public interests of the society and promoting the growth of the socialist market economy.
Article 2 The present Law shall be applied to the issuance and transaction of stocks, corporate bonds as well as any other securities as lawfully recognized by the State Council within the territory of the People's Republic of China. Where there is no such provision in the present Law, the provisions of the Corporation Law of the People's Republic of China and other relevant laws and administrative regulations shall be applied. Any listed trading of government bonds and share of securities investment funds shall be governed by the present Law. Where there is any special provision in any other law or administrative regulation, the special provision shall prevail. The measures for the administration of issuance and transaction of securities derivatives shall be prescribed by the State Council according to the principles of the present Law.
Article 3 The issuance and transaction of securities shall adhere to the principles of openness, fairness and impartiality.
Article 4 The parties involved in any issuance or transaction of securities shall have equal legal status and shall persist in the principles of free will, compensation and integrity and creditworthy.
Article 5 The issuance and transaction of securities shall observe laws and administrative regulations. No fraud, insider trading or manipulation of the securities market may be permitted.
Article 6 The divided operation and management shall be adopted by the industries of securities, banking, trust as well as insurance. The securities companies and the business organs of banks, trust and insurance shall be established separately, unless otherwise provided for by the state.
Article 7 The securities regulatory authority under the State Council shall adopt a centralized and unified supervision and administration of the national securities market. The securities regulatory authority under the State Council may, in light of the relevant requirements, establish dispatched offices, which shall perform their duties and functions of supervision and administration upon the authorization.
Article 8 Under the centralized and unified supervision and administration of the state regarding the issuance and transaction of securities, a securities industrial association shall be lawfully established, which shall adopt the self-regulating administration.
Article 9 The auditing organ of the state shall carry out auditing supervision of stock exchanges, securities companies, securities registration and clearing institutions and securities regulatory bodies.
Chapter II Issuance of Securities
Article 10 A public issuance of securities shall satisfy the requirements of the relevant laws and administrative regulations and shall be reported to the securities regulatory authority under the State Council or a department upon authorization by the State Council for examination and approval according to law. Without any examination and approval according to law, no entity or individual may make a public issuance of any securities. It shall be deemed as a public issuance upon the occurrence of any of the following circumstances:
(1) Making a public issuance of securities to non-specified objects;
(2) Making a public issuance of securities to accumulatively more than 200 specified objects; or
(3) Making a public issuance as prescribed by any law or administrative regulation. For any securities that are not issued in a public manner, the means of advertising, public inducement or public issuance in any disguised form may not be adopted thereto.
Article 11 An issuer that files an application for public issuance of stocks or convertible corporate bonds by means of underwriting according to law or for public issuance of any other securities, to which a recommendation system is applied, as is prescribed by laws and administrative regulations, shall employ an institution with the qualification of recommendation as its recommendation party. A recommendation party shall abide by operational rules and industrial norms and, on the basis of the principles of being honesty, creditworthy, diligent and accountable, carry out a prudent examination of application documents and information disclosure materials of its issuers as well as supervise and urge its issuers to operate in a regulative manner. The qualification of the recommendation party as well as the relevant measures for administration shall be formulated by the securities regulatory authority under the State Council.
Article 12 A public offer of stocks for establishing a stock-limited company shall satisfy the requirements as prescribed in the Corporation Law of the People's Republic of China as well as any other requirements as prescribed by the securities regulatory authority under the State Council, which have been approved by the State Council. An application for public offer of stocks as well as the following documents shall be reported to the securities regulatory authority under the State Council:
(1) The constitution of the company;
(2) The promoter's agreement;
(3) The name or title of the promoter, the amount of shares as subscribed by the promoter, the category of contributed capital as well as the capital verification certification;
(4) The prospectus;
(5) The name and address of the bank that receives the funds as generated from the issuance of stocks on the behalf of the company; and
(6) The name of the underwriting organization as well as the relevant agreements. In case a recommendation party shall be employed, as prescribed by the present Law, the Recommendation Letter of Issuance as produced by the recommendation party shall be submitted as well. In case the establishment of a company shall be reported for approval, as prescribed by laws and administrative regulations, the relevant approval documents shall be submitted as well.
Article 13 An initial public offer (IPO) of stocks of a company shall satisfy the following requirements:
(1) Having a complete and well-operated organization;
(2) Having the capability of making profits successively and a sound financial status;
(3) Having no false record in its financial statements over the latest 3 years and having no other major irregularity; and
(4) Meeting any other requirements as prescribed by the securities regulatory authority under the State Council, which has been approved by the State Council. A listed company that makes any initial non-public offer of stocks shall satisfy the requirements as prescribed by the securities regulatory authority under the State Council, which have been approved by the State Council and shall be reported to the securities regulatory authority under the State Council for examination and approval.
Article 14 A company that makes an IPO of stocks shall apply for public offer of stocks as well as the following documents to the securities regulatory authority under the State Council:
(1) The business license of the company;
(2) The constitution of the company;
(3) The resolution of the general assemble of shareholders;
(4) The prospectus;
(5) The financial statements;
(6) The name and address of the bank that receives the funds as generated from the public offer of stocks on the behalf of the company; and
(7) The name of the underwriting institution as well as the relevant agreements. In case a recommendation party shall be employed, as prescribed by the present Law, the Recommendation Letter of Issuance as produced by the recommendation party shall be submitted as well.
Article 15 The funds as raised through public offer of stocks as made by a company shall be used according to the purpose as prescribed in the prospectus. Any alteration of the use of funds as prescribed in the prospectus shall be subject to a resolution of the general assembly of shareholders. In case a company fails to correct any unlawful alteration of its use of funds or where any alteration of its use of funds fails to be adopted by the general assembly of shareholders, the relevant company may not make any IPO of stocks. In the foregoing circumstance, a listed company may not make any non-public offer of stocks.
Article 16 A public issuance of corporate bonds shall satisfy the following requirements:
(1) The net asset of a stock-limited company being no less than RMB 30 million yuan and the net asset of a limited-liability company being no less than RMB 60 million yuan;
(2) The accumulated bond balance constituting no more than 40 % of the net asset of a company;
(3) The average distributable profits over the latest 3 years being sufficient to pay the 1-year interests of corporate bonds;
(4) The investment of raised funds complying with the industrial policies of the state;
(5) The yield rate of bonds not surpassing the level of interest rate as qualified by the State Council; and
(6) Meeting any other requirements as prescribed by the State Council. The funds as raised through public issuance of corporate bonds shall be used for the purpose as verified and may not be used for covering any deficit or non-production expenditure. The public issuance of convertible corporate bonds as made by a listed company may not only meet the requirements as provided for in paragraph 1 herein but also meet the requirements of the present Law on public offer of stocks, and shall be reported to the securities regulatory authority under the State Council for examination and approval.
Article 17 With regard to an application for public issuance of corporate bonds, the following documents shall be reported to the department as authorized by the State Council or the securities regulatory authority under the State Council:
(1) The business license of the company;
(2) The constitution of the company;
(3) The procedures for issuing corporate bonds;
(4) An assent appraisal report and an asset verification report; and
(5) Any other document as prescribed by the department as authorized by the State Council or by the securities regulatory authority under the State Council. In case a recommendation party shall be employed, as prescribed by the present Law, the Recommendation Letter of Issuance as produced by the recommendation party shall be submitted as well.
Article 18 In any of the following circumstances, no more public issuance of corporate bonds may be carried out:
(1) Where the corporate bonds as issued in the previous public issuance haven't been fully subscribed;
(2) Where a company has any default on corporate bonds as publicly issued or on any other liabilities, or postpones the payment of the relevant principal plus interests, and such situation is still continuing; or
(3) Where a company violates the present Law by altering the use of funds as raised through public issuance of corporate bonds.
Article 19 The formats and reporting ways of application documents as reported by an issuer for examination and approval of securities issuance according to law shall be prescribed by the legally competent organ or department in charge of examination and approval.
Article 20 The application documents for securities issuance as reported by an issuer to the securities regulatory authority under the State Council or the department as authorized by the State Council shall be authentic, accurate and integrate. A securities trading service institution and its staff that produces the relevant documents for securities issuance shall strictly perform its/his statutory duties and functions and guarantee the authenticity, accuracy and integrity of the documents as produced thereby.
Article 21 Where an issuer files an application for an IPO of stocks, it shall, upon submitting the application documents, disclose the relevant application documents in advance according to the provisions of the securities regulatory authority under the State Council.
Article 22 The securities regulatory authority under the State Council shall establish an issuance examination committee, which shall examine the applications for stock issuance according to law. The issuance examination committee shall be composed of the professionals from the securities regulatory authority under the State Council and other relevant experts from outside the said authority, adopt the means of voting for the determination of applications for stock issuance and set forth the opinions on examination. The specific formulation measures, tenure of members as well as work procedures of the issuance examination committee shall be formulated by the securities regulatory authority under the State Council.
Article 23 The securities regulatory authority under the State Council shall take charge of the examination and approval of applications for stock issuance in light of the statutory requirements. The procedures for examination and approval shall be publicized and shall be subject to supervision according to law. The personnel participating in the examination and verification of stock issuance may not have any interest relationship with an issuance applicant, may not directly or indirectly accept any present of the issuance applicant, may not hold any stock as verified for issuance and may not have any private contact with an issuance applicant. The department as authorized by the State Council shall conduct the examination and approval of applications for issuance of corporate bonds by referring to the preceding 2 paragraphs herein.
Article 24 The securities regulatory authority under the State Council or the department as authorized by the State Council shall, within 3 months as of acceptance of an application for securities issuance, make an decision on approval or disapproval according to the statutory requirements and procedures, whereby the time for an issuer to supplement or correct its application documents for issuance according to the relevant requirements may not be calculated within the aforesaid term for examination and approval. In the event of disapproval, an explanation shall be given in writing.
Article 25 Where an application for securities issuance has been approved, the relevant issuer shall, in accordance with the provisions of the relevant laws and administrative regulations, announce the relevant financing documents of public issuance before publicly issuing any securities and shall make the aforesaid documents available for public reference in designated places. Before the information of securities issuance is publicized according to law, no insider may publicize or indulge the relevant information. An issuer may not issue any securities before an announcement of the relevant financial documents of public issuance.
Article 26 The securities regulatory authority under the State council or the department as authorized by the State Council shall, where finding any decision on approving securities issuance fails to comply with the relevant statutory requirements and procedures and if the relevant securities haven't been issued, revoke the decision on approval and terminate the issuance. As to any securities that have been issued but haven't been listed, the relevant decision on approval for issuance shall be revoked. The relevant issuer shall, according to the issuing price plus interests as calculated at the bank deposit rate for the corresponding period of time, return the funds to securities holders. A recommendation party shall bear the joint and several liabilities together with the relevant issuer, except for one who is able to prove his exemption of fault. Where any controlling shareholder or actual controller has any fault, he shall bear the joint and several liabilities together with the relevant issuer,
Article 27 After a legal offer of stocks, an issuer shall be liable for any alteration of its operation or its profits by itself. The investment risk as incurred therefrom shall be borne by investors by themselves.
Article 28 Where an issuer issues any securities to any non-specified object and if the said securities shall be underwritten by a securities company, as is provided for by laws and administrative regulations, the issuer shall conclude an underwriting agreement with a securities company. The forms of "sale by proxy" and "exclusive sale" shall be adopted for the underwriting operation of securities. The term "sale by proxy" refers to an underwriting form, whereby a securities company sells securities as a proxy of the relevant issuer and, upon the conclusion of the underwriting period, returns all the securities unsold to the relevant issuer. The term "exclusive sale" refers to an underwriting form, whereby a securities company purchases all of the securities of an issuer according to the agreement there between or purchases all of the residing unsold securities by itself upon the conclusion of the underwriting period.
Article 29 An issuer that makes public issuance of securities has the right to select a securities company for underwriting according to law at its own will. A securities company may not canvass any securities underwriting business by any unjust competition means.
Article 30 Where a securities company underwrites any securities, it shall reach an agreement with the relevant issuer on sale by proxy or exclusive sale, which shall indicate the following items:
(1) The name, domicile as well as the name of the legal representative of the parties concerned;
(2) The classes, quantity, amount as well as issuing prices of the securities under sale by proxy or exclusive sale;
(3) The term of sale by proxy or exclusive sale as well as the start-stop date;
(4) The means and date of payment for sale by proxy or exclusive sale;
(5) The expenses for and settlement methods of sale by proxy or exclusive sale;
(6) The liabilities of breach; and
(7) Any other matter as prescribed by the securities regulatory authority under the State Council.
Article 31 A securities company that is engaged in the underwriting of securities shall carry out verification on the authenticity, accuracy and integrity of the financing documents of public issuance. Where any false record, misleading statement or major omission is found, no sales activity may be carried out. Where any securities have been sold out under the foregoing circumstances, the relevant sales activity shall be immediately terminated and measures for correction shall be taken.
Article 32 Where the total face value of securities as issued to non-specified objects is beyond RMB 50 million yuan, the said securities shall be underwritten by an underwriting syndicate. An underwriting syndicate shall be composed of securities companies acting as principal underwriters and participant underwriters.
Article 33 The term for sale by proxy or exclusive sale may not exceed 90 days at the most. A securities company shall, within the term of sale by proxy or exclusive sale, guarantee the priority of the relevant subscribers in purchasing securities under sale by proxy or exclusive sale. A securities company may not reserve in advance any securities under sale by proxy thereby or purchase in advance and sustain any securities under exclusive sale thereby.
Article 34 Where any stock is issued at a premium, the issuing price thereof shall be agreed on through negotiation of the relevant issuer and the securities company that is engaged in underwriting.
Article 35 As to a public offer of stocks through sale by proxy, when the term of sale by proxy expires and if the quantity of stocks fails to reach 70 % of the planned quantity in a public offer, it shall be deemed as a failure. The relevant issuer shall return the issuing price plus interests as calculated at the bank deposit rate for the contemporary period of time to the subscribers of stocks.
Article 36 In a public offer of stocks, when the term for sale by proxy or exclusive sale expires, an issuer shall report the information on stock issuance to the securities regulatory authority under the State Council for archival purpose within the prescribed time.
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