Measures for the Recordation Administration of Over-the-Counter Securities Businesses
· Area of Law： Securities
· Level of Authority： Industry Regulations
· Date issued：07-29-2015
· Effective Date：09-01-2015
· Status： Effective
· Issuing Authority： Securities Association of China
Measures for the Recordation Administration of Over-the-Counter Securities Businesses
(Issued by the Securities Association of China on July 29, 2015, amended in accordance with the Notice of the Securities Association of China on Adjusting a Clause of the Measures for the Recordation Administration of Over-the-Counter Securities Businesses, and officially coming into force on September 1, 2015)
Chapter I General Provisions
Article 1 For the purpose of regulating and promoting the development of over-the-counter securities businesses, these Measures are developed in accordance with relevant self-regulatory rules of the Securities Association of China (“SAC”).
Article 2 “Over-the-counter securities businesses” means the securities businesses operated at trading venues other than the Shanghai Stock Exchange, the Shenzhen Stock Exchange, futures exchanges, and the National Equities Exchange and Quotations, including but not limited to the following:
(1) Sale and recommendation of over-the-counter securities.
(2) Asset financing of over-the-counter securities.
(3) Outsourcing of the back office and technical services for over-the-counter securities businesses, including technical systems, registration, custody, clearing, and third-party interface.
(4) Over-the-counter proprietary and market-making businesses.
(5) Over-the-counter securities intermediary business.
(6) Over-the-counter securities investment consulting business.
(7) Over-the-counter securities financial advisory business.
(8) Over-the-counter securities brokerage business.
(9) Over-the-counter securities product credit rating.
(10) Non-public equity financing via the Internet.
(11) Credit enhancement business in the over-the-counter securities market.
(12) Over-the-counter securities information service business.
(13) Over-the-counter financial derivatives.
(14) Other over-the-counter securities businesses for which the recordation procedure shall be undergone as deemed necessary by securities regulatory authorities or self-regulatory organizations for the development of over-the-counter securities businesses.
Article 3 Securities companies, securities investment fund companies, futures companies, securities investment advisory institutions, and private placement fund management institutions that engage in the over-the-counter securities businesses mentioned in Article 2 of these Measures, as well as institutions required by securities regulatory authorities or self-regulatory organizations to undergo the recordation procedure with the SAC (hereinafter referred to as “recordation institutions”), shall undergo the recordation procedure for their over-the-counter securities businesses in accordance with these Measures.
Where a recordation institution forms a new wholly-owned subsidiary to engage in the over-the-counter securities businesses mentioned in Article 2 of these Measures, the institution shall file relevant information as required in the event of modification, and the body responsible for filing information shall change accordingly.
Article 4 The SAC shall handle the recordation of over-the-counter securities businesses under the principles of fairness, equity, simplicity, and efficiency.
The granting of recordation does not mean that the SAC provides any guarantee or judgment regarding the investment value and risks of the over-the-counter securities business granted recordation and does not exempt the recordation institution from its legal responsibility for disclosing information about its over-the-counter securities business in a veracious, compliant, accurate, integrated, and timely manner.
Chapter II Recordation Conditions
Article 5 To engage in over-the-counter securities businesses, a recordation institution shall satisfy the following requirements:
(1) Its corporate governance system is well-established, its decision-making and authorization systems are clear, and its relevant internal management rules are integrated.
(2) It has the capital strength, professionals, and technical systems required for the relevant over-the-counter securities business.
(3) It has risk control mechanisms for effectively preventing conduct such as tunneling, unfair trading, and market manipulation.
(4) It has sound measures for educating investors and for protecting the rights and interests of investors.
(5) Other requirements as set out by the SAC.
Article 6 A recordation institution shall, in accordance with laws, regulations, self-regulatory rules, or the contract, urge the information disclosure obligator to disclose information and risks of over-the-counter businesses in a timely, sufficient, and accurate manner. It is prohibited to recommend inappropriate business to investors by concealing relevant information.
Article 7 A recordation institution and its employees shall scrupulously observe professional ethics and refrain from:
(1) defrauding clients;
(2) engaging in tunneling;
(3) manipulating the market;
(4) engaging in unfair trading;
(5) engaging in unfair competition;
(6) evading the information disclosure obligation; or
(7) committing any other violation of laws or regulations.
Chapter III Recordation Procedure
Article 8 The SAC shall receive recordation materials through the over-the-counter securities business reporting system.
Article 9 A recordation institution shall file the following materials within one month as of the day when it launches the business for which recordation is required for the first time to complete the initial recordation of the business:
(1) A recordation application form and a letter of commitment.
(2) Descriptions of the over-the-counter securities business.
(3) Internal management rules for the over-the-counter securities business, including but not limited to internal control rules, risk control rules, compliance rules, and investor protection rules.
(4) Other materials as required by the SAC.
The recordation materials shall bear the official seal of the recordation institution or the signature or seal of the legal representative of the recordation institution.
If the recordation of the over-the-counter securities business has been completed with the regulatory authority or any other self-regulatory organization, the recordation institution is merely required to enter the basic information of the recordation application form. Where there are any special provisions in the SAC rules governing the recordation of a certain business, such provisions shall apply.
If the recordation institution has several businesses for recordation, it shall fill out a recordation application and the over-the-counter securities business descriptions for each business. Where its internal management rules are applicable to several over-the-counter securities businesses, it merely needs to file them once when it undergoes the recordation of the first business for the first time. Where several parties are required to undergo the recordation of the same business, they shall reach an agreement to expressly stipulate that one party is to be responsible for filing materials. For any change in information granted recordation, the recordation institution shall file information about the change in the monthly report for the next period after the change occurs.
Article 10 The SAC shall examine recordation materials in terms of their completeness and compliance. The contents subject to examination shall include but be not limited to the following:
(1) Whether the recordation materials are complete.
(2) Whether there is any violation of the provisions of the CSRC, any other relevant government department, or the SAC in the over-the-counter securities business.
(3) Whether the recordation institution satisfies the conditions for operating the business as set out by these Measures, any law or regulation, or relevant self-regulatory rules on engaging in over-the-counter securities businesses.
Article 11 For the initial recordation of a business, if the recordation materials are incomplete, the SAC shall, within five working days of receipt of the recordation materials, inform the recordation institution to make a correction or supplement at one time. If the SAC fails to require correction or supplementation or present any other question within five working days, the materials shall be deemed to have been accepted for recordation. The SAC shall publish the over-the-counter securities businesses of recordation institutions that have been granted recordation on its website.
Article 12 A recordation institution shall fulfill the following reporting obligations during its operation of over-the-counter securities businesses:
(1) It shall file the size, types, and other basic information of over-the-counter securities businesses in the previous month before the 10th day of each month, and file an annual report of over-the-counter securities businesses for the previous year before April 30 of each year, except for contents that have been filed with the regulatory authority or any other self-regulatory organization.
(2) After an event that affects the normal operation of over-the-counter securities businesses and may cause abnormal and heavy losses to investors occurs, it shall file a major event report in a timely manner.
(3) In the event of offering, maturity, change of the date of maturity, or renewal under an over-the-counter securities business, it shall file a report of relevant information within five working days. In the case of modification or renewal, the recordation institution shall make reasonable arrangements in accordance with relevant provisions and shall not damage the lawful rights and interests of investors.
Chapter IV Self-Regulation
Article 13 The SAC shall establish an inspection system for over-the-counter securities businesses. Recordation institutions and relevant personnel shall be cooperative in the inspections conducted by the SAC.
Article 14 The SAC shall inspect the suitability of investors in over-the-counter securities businesses, including but not limited to the following aspects:
(1) Whether a recordation institution has established and implemented investor suitability management rules in accordance with laws, regulations, and self-regulatory rules.
(2) Whether a recordation institution has checked the risk tolerance of investors in products sold by the institution, whether the risk tolerance of investors matches the risk degree of relevant over-the-counter securities businesses, and whether the recordation institution has made arrangements with its sales agencies for checking the risk tolerance of investors.
(3) Whether the marketing materials of over-the-counter securities businesses are objective, authentic, and accurate and contain no false or misleading information; whether the risk disclosure statement has pertinently disclosed the major risk characteristics of over-the-counter securities businesses and the possible consequences resulting from such risks and has been signed by clients upon confirmation.
(4) Whether a recordation institution has disclosed to investors such information disclosure documents as the descriptions of over-the-counter products or services, potential conflicts of interest between the company and investors, and other information helpful for investors to understand, analyze and judge the businesses.
Article 15 The SAC shall inspect the disclosure of information about over-the-counter securities businesses, including but not limited to:
(1) whether the contents of disclosed information, the disclosure methods, the responsibility for disclosure, the disclosure channels, and other matters concerning the disclosure of information about over-the-counter securities businesses are specific;
(2) whether the information disclosure obligators have promised to disclose information about over-the-counter securities businesses in an authentic, compliant, accurate, integrated, and timely manner and guaranteed that there is no false record, misleading statement or material omission; and
(3) whether information about over-the-counter securities businesses is disclosed in a timely, sufficient, and accurate manner as required.
Article 16 The SAC shall inspect the corporate governance of the over-the-counter securities business of a recordation institution, including but not limited to the following aspects:
(1) Whether the corporate governance, decision-making and authorization mechanisms, and internal control rules of the recordation institution are commensurate with its over-the-counter securities business.
(2) Whether the recordation institution has the capital strength, professionals, and technical systems commensurate with its over-the-counter securities business.
(3) Whether the recordation institution has conduct such as tunneling, unfair trading, or market manipulation and whether it has observed professional ethics and safeguarded the bottom line when engaging in the over-the-counter securities business.
Article 17 Where a recordation institution fails to undergo recordation or file information as required, or is found in inspection to be with any other violation, the SAC may, depending on the severity of the circumstances, hold an interview with the person in charge of the business or the chief person in charge of the institution and require it to rectify within a certain time limit.
After completing rectification within the prescribed time, the recordation institution shall submit a rectification report to the SAC. If it is determined upon inspection that the institution has reached relevant requirements, the SAC shall confirm it within five working days.
Article 18 The SAC shall establish a blacklist system for over-the-counter securities businesses, under which recordation institutions with serious violations and relevant personnel shall be put on the blacklist in accordance with these Measures. The blacklist will be published on the website of the SAC and be recorded in the integrity system.
(1) Where a recordation institution violates Article 3, 5, 6, 7, 12 or 13 once and fails to rectify as required, the SAC shall put it on the blacklist for six months.
(2) Where a recordation institution violates the same provision in item (1) of this Article twice, the SAC shall put it on the blacklist for 12 months.
(3) Where a recordation institution violates the same provision in item (1) of this Article for three times, the SAC shall put it on the blacklist for 24 months.
(4) Where a recordation institution violates the same provision in item (1) of this Article for four times or more, or violates other provisions under extraordinarily serious circumstances, the SAC shall put it on the blacklist permanently.
Where a recordation institution violates several of the aforesaid provisions at the same time, the violations shall be counted separately and shall not be combined.
Article 19 A recordation institution shall, within five working days after being put on the blacklist, issue a “risk alert” on a media designated by the CSRC, shall publish a “risk warning” of the business on the over-the-counter securities business page of its official website during the blacklist period, and shall not newly conduct the same over-the-counter securities business. After being permanently put on the blacklist, a recordation institution shall immediately liquidate its existing business under the pretext of protecting the interests of investors, shall determine the liquidation method, time limit, succession matters, and follow-up arrangements, and shall not newly conduct the same over-the-counter securities business.
Upon expiry of the blacklist period, a recordation institution shall submit a report on the correction of its violation. If it has failed to complete initial recordation or file information on an ongoing basis as required by Article 3 or 12 of these Measures, the recordation institution shall complete recordation or file information by following the procedure prescribed by these Measures.
Where the SAC discovers any institution engaging in an over-the-counter securities business without recordation, failing to report information when being required to do so, or newly conducting relevant over-the-counter securities business during the blacklist period, it may report the situation to the CSRC and request the latter to conduct investigation.
Article 20 Recordation information shall be retained for not less than ten years. If necessary for regulatory work, the SAC shall share information with the CSRC and the local offices thereof and relevant self-regulatory organizations. As long as it is in compliance with laws and regulations, the SAC may disclose recordation information to the public for the general public to consult conditionally.
Article 21 The staff members of the SAC shall perform their duties for recordation administration, and shall not practice favoritism, neglect duties, purposely make things difficult for recordation institutions, or divulge recordation information in violation of rules. Where a staff member of the SAC violates this Article or relevant provisions, the SAC shall take a disciplinary action against him or her.
Chapter V Supplementary Provisions
Article 22 If necessary, the SAC may develop special guidelines for recordation of over-the-counter securities businesses. China Securities Internet System Co., Ltd (hereinafter referred to as the “Quotation System”) shall be responsible for the management of the over-the-counter securities business reporting system and develop recordation format guidelines for different over-the-counter securities businesses. Recordation guidelines and recordation format guidelines shall have the same effect as these Measures.
Article 23 Recordation institutions engaging in over-the-counter securities businesses at the Quotation System shall be presumed to have undergone recordation with the SAC and have fulfilled the reporting obligation.
Where regional equity trading market management bodies, other financial institutions, and Internet companies engaging in financial business engage in the over-the-counter securities businesses mentioned in Article 2 of these Measures, the measures for the recordation administration thereof shall be developed separately.
Article 24 Recordation institutions may apply for acceding to the SAC to become its members.
Article 25 These Measures shall be subject to interpretation and revision by the SAC. These Measures shall come into force on September 1, 2015.