Measures for the Administration of Foreign-Funded Securities Companies

• Document Number：Order No. 140 of the China Securities Regulatory Commission
• Area of Law： Foreign-funded Enterprises
• Level of Authority： Departmental Rules
• Date issued：04-28-2018
• Effective Date：04-28-2018
• Status： Effective
• Issuing Authority： China Securities Regulatory Commission

Order of the China Securities Regulatory Commission
(No. 140)
With the approval of the State Council, the Measures for the Administration of Foreign-Funded Securities Companies are hereby issued and shall come into force on the date of issuance.
Chairman of the China Securities Regulatory Commission: Liu Shiyu
April 28, 2018
Annex:

Measures for the Administration of Foreign-Funded Securities Companies
Article 1 For the purposes of meeting the needs of the securities market's opening up to foreign investors, strengthening and improving the supervision and administration of foreign-funded securities companies, and specifying the conditions and procedures for the formation of foreign-funded securities companies, these Measures are developed in accordance with the relevant provisions of the Company Law of the People's Republic of China (hereinafter referred to as the “Company Law”) and the Securities Law of the People's Republic of China (hereinafter referred to as the “Securities Law”).
Article 2 For the purpose of the Measures, “foreign-funded securities companies” means:
(1) securities companies jointly funded and formed by foreign and domestic shareholders according to the law;
(2) securities companies resulting from modification of domestic-funded securities companies according to the law due to the lawful transfer of equities of domestic-funded securities companies to foreign investors or foreign investors' lawful subscription for such equities; and
(3) securities companies resulting from modification of domestic-funded securities companies according to the law due to the modification of actual controllers of shareholders of domestic-funded securities companies into foreign investors.
Article 3 The China Securities Regulatory Commission (“CSRC”) shall be responsible for the approval as well as the supervision and administration of foreign-funded securities companies.
Article 4 The name, business form, registered capital, business scope, establishment and functions of governing bodies, shareholders, directors, supervisors and senior executives, among others, of a foreign-funded securities company shall comply with the relevant provisions of the Company Law, the Securities Law, and other laws and regulations as well as the relevant rules of the CSRC.
Article 5 For the formation of a foreign-funded securities company, the following conditions shall be met in addition to those for the formation of securities companies set out in the Company Law, the Securities Law and the Regulation on the Supervision and Administration of Securities Companies, as well as approved by the State Council and specified by the CSRC:
(1) A foreign shareholder of the company shall satisfy the qualifications set out in these Measures, and comply with the provisions of these Measures regarding the proportion and form of capital contribution of the foreign shareholder.
(2) The company's initial business scope shall be commensurate with the experience of its controlling shareholder or largest shareholder in operating securities business.
(3) Other prudential conditions specified by the CSRC.
Article 6 A foreign shareholder of a foreign-funded securities company shall meet the following conditions:
(1) The country or region where it is located has sound securities laws and regulatory rules, and the relevant financial regulatory authority has entered into a memorandum of understanding regarding securities regulatory cooperation and maintained an effective regulatory cooperation relationship with the CSRC or an institution recognized by the CSRC.
(2) It is a financial institution legally formed in the country or region where it is located, and all its financial indicators in recent three years comply with the provisions of laws and the requirements of the regulatory authorities of the country or region where it is located.
(3) It has engaged in securities business for five consecutive years or more, has not received any major punishment from a regulatory authority, administrative agency, or judicial authority in the country or region where it is located in the recent three years, and is not under investigation by the relevant authority on suspicion of any major violation of a law or regulation.
(4) It has a sound internal control system.
(5) It has good international reputation and business performance, is a leader in the world in terms of business scale, revenue, and profits in the recent three years, and has maintained a high rating of long-term credit in the recent three years.
(6) Other prudential conditions specified by the CSRC.
Article 7 Foreign shareholders shall make their contributions with freely convertible currencies.
The proportion of equity cumulatively held by foreign shareholders (including direct holding and indirect control) in a foreign-funded securities company shall comply with the arrangements of the state on the opening up of the securities industry.
Article 8 To apply for forming a foreign-funded securities company, the representative jointly designated or the agent jointly authorized by all of its shareholders shall submit the following documents to the CSRC:
(1) An application form jointly signed by the legal representatives or the authorized representatives of its domestic and foreign shareholders.
(2) The contract on formation of the foreign-funded securities company and the draft bylaws.
(3) The resumes of the proposed chairman of the board of directors, general manager, and person in charge of compliance of the foreign-funded securities company.
(4) The photocopies of business licenses or registration certificates and securities business qualification certificates of its shareholders.
(5) The audited financial statements of its domestic and foreign shareholders for the three years prior to the filing of the application.
(6) Explanatory letters issued by the relevant regulatory authorities in the country or region where a foreign shareholder is located or foreign institutions recognized by the CSRC regarding whether the foreign shareholder meets the conditions set out in subparagraphs (2) and (3) of Article 6 of these Measures.
(7) Supporting documents on a foreign shareholder's good international reputation and business performance, leading position in the world in terms of business scale, revenue, and profits in the recent three years, and long-term credit rating in the recent three years.
(8) Legal opinions issued by a law firm within China.
(9) Other documents required by the CSRC.
Article 9 The CSRC shall, according to the relevant laws and administrative regulations and these Measures, examine the application documents set out in Article 8, make a decision to approve or disapprove the application during a prescribed period, and notify the applicant in writing. If an application is disapproved, reasons for disapproval shall be explained in writing.
Article 10 The shareholders shall, within six months of issuance of the approval document of the CSRC, contribute capital in full amount or fulfill the agreed cooperative conditions, elect directors and supervisors, appoint senior executives, and apply to the company registration authority for formation registration and a business license.
Article 11 A foreign-funded securities company shall, within 15 working days of issuance of the business license of the company, submit the following documents to the CSRC to apply for a securities business permit:
(1) A photocopy of the duplicate of the business license.
(2) Bylaws of the company.
(3) A capital verification report issued by an accounting firm within China qualified for engaging in securities-related business.
(4) Lists of directors, supervisors, senior executives, and main business personnel and their office holding qualification certificates and securities business qualification certificates.
(5) Texts of internal control rules.
(6) Explanatory documents on business premises and operating facilities.
(7) Other documents required by the CSRC.
Article 12 The CSRC shall, according to the relevant laws and administrative regulations and these Measures, examine the application documents set out in Article 11, and make a decision within 15 working days of receipt of the application documents satisfying the requirements. If the application meets the prescribed conditions, a securities business permit shall be issued; otherwise, no securities business permit shall be issued, but reasons for denial shall be explained in writing.
Article 13 A foreign-funded securities company that has not obtained a securities business permit from the CSRC shall not open for business, nor engage in securities business.
Article 14 Where a domestic-funded securities company applies for modification into a foreign-funded securities company, the conditions set out in Article 5 of these Measures shall be met.
Foreign shareholders resulting from acquiring or subscribing for equities of domestic-funded securities companies shall meet the conditions set out in Article 6 of these Measures, and comply with the provision of Article 7 of these Measures regarding the proportion of equity acquired or capital contributed by them.
Where the actual controller of a shareholder of a domestic-funded securities company is modified into a foreign investor, the foreign investor shall meet the conditions set out in Article 6 of these Measures, and comply with the provision of Article 7 of these Measures regarding the proportion of equity in the securities company indirectly controlled by it. If the foreign investor fails to meet the conditions or fails to comply with the provision regarding the proportion of equity in the securities company indirectly controlled by it, correction of the failure shall be completed within three months.
Article 15 A domestic-funded securities company applying for changing itself into a foreign-funded securities company shall submit the following documents to the CSRC:
(1) An application form signed by its legal representative.
(2) The resolution of its shareholders' meeting regarding modification of it into a foreign-funded securities company.
(3) The draft amendments to its bylaws.
(4) The equity transfer agreement or the capital contribution agreement (share subscription agreement).
(5) The list and resumes of persons to be appointed by the foreign investor to positions in the securities company and their corresponding practicing qualification certificates and office qualification certificates.
(6) The photocopies of the business license or registration certificate and the relevant business qualification certificates of the foreign shareholder.
(7) The audited financial statements of the foreign shareholder for the three years prior to the filing of the application.
(8) Explanatory letters issued by the relevant regulatory authorities in the country or region where the foreign shareholder is located or foreign institutions recognized by the CSRC regarding whether the foreign shareholder meets the conditions set out in subparagraphs (2) and (3) of Article 6 of these Measures.
(9) Supporting documents on the foreign shareholder's good international reputation and business performance, leading position in the world in terms of business scale, revenue, and profits in the recent three years, and long-term credit rating in the recent three years.
(10) Legal opinions issued by a law firm within China.
(11) Other documents required by the CSRC.
Article 16 The CSRC shall, according to the relevant laws and administrative regulations and these Measures, examine the application documents set out in Article 15, make a decision to approve or disapprove the application during a prescribed period, and notify the applicant in writing. If an application is disapproved, reasons for disapproval shall be explained in writing.
Article 17 A securities company approved to be modified shall, within six months of the date when the CSRC issues the approval document, handle the matters of equity transfer or capital increase, apply to the company registration authority for the registration of modification and obtain a new business license.
Article 18 Where a securities company is modified with approval, it shall, within 15 working days of registration of modification, submit the following documents to the CSRC to apply for a new securities business permit:
(1) The photocopy of the duplicate of its business license.
(2) The bylaws of the foreign-funded securities company.
(3) Its original securities business permit and the duplicate thereof.
(4) A capital verification report issued by an accounting firm within China qualified for engaging in securities-related business.
(5) Other documents required by the CSRC.
Article 19 The CSRC shall, according to the relevant laws and administrative regulations and these Measures, examine the application documents set out in Article 18, and make a decision within 15 working days of receipt of the application documents satisfying the requirements. If the application meets the prescribed conditions, a new securities business permit shall be issued; otherwise, no new securities business permit shall be issued, but reasons for denial shall be explained in writing.
Article 20 A foreign-funded securities company newly formed or continuing to exist after the merger of foreign-funded securities companies or the merger of foreign-funded securities companies and domestic-funded securities companies shall meet the conditions for formation of foreign-funded securities company prescribed in these Measures; and the proportion of shares held by foreign shareholders shall comply with the provisions of these Measures.
Where a securities company formed as a result of separation of a foreign-funded securities company has foreign shareholders, its foreign shareholders shall comply with the provisions of these Measures regarding the proportion of equity by them.
Article 21 Foreign investors may legally hold shares in a listed domestic-funded securities company through securities trading on a stock exchange or hold shares in a listed domestic-funded securities company with the approval of the CSRC by establishing a strategic partnership with the listed domestic-funded securities company.
A foreign investor legally holding 5% or more of shares in a listed domestic-funded securities company through securities trading on a stock exchange or by agreement or any other arrangement jointly with others shall meet the conditions set out in Article 6 of these Measures, and comply with the Securities Law and the relevant provisions of the CSRC on approval for acquisition of a listed company and modification of a securities company.
Article 22 The application documents and materials submitted to the CSRC under these Measures shall be in Chinese. Where the documents or materials produced by a foreign shareholder and the relevant regulatory authorities in the country or region where it is located or the foreign institutions recognized by the CSRC are in a foreign language, the Chinese versions consistent with the originals shall be attached.
Where the documents and materials submitted by an applicant fail to sufficiently explain the condition of the applicant, the CSRC may require the applicant to make further explanations.
Article 23 Foreign-funded securities companies involving review of national security shall be handled in accordance with the relevant provisions issued by the state.
Article 24 Investors from the Hong Kong Special Administrative Region, the Macao Special Administrative Region and the Taiwan Region making investment in securities companies shall be governed, mutatis mutandis to, these Measures, except as otherwise specified by the state.
Article 25 Matters concerning the formation, modification, termination, operations, supervision, and administration of foreign-funded securities companies not included in these Measures shall be governed by other relevant rules of the CSRC.
Article 26 These Measures shall come into force on the date of issuance. The Rules for the Formation of Securities Companies with Foreign Shareholders shall be concurrently repealed.