Securities Law of the People's Republic of China (Amended in 2004)
Securities Law of the People's Republic of China (Amended in 2004)
Securities Law of the People's Republic of China (Amended in 2004)
Order of the President [2004] No. 21
August 28, 2004
(Adopted at the 6th Meeting of the Standing Committee of the Ninth National People's Congress on December 29, 1998, promulgated by Order of the President of the People's Republic of China No. 12 on December 29, 1998, and amended in accordance with the Decisions of the Standing Committee of the Tenth National People's Congress on Amending the Securities Law of the People's Republic of China adopted at its 11th Meeting on August 28, 2004)
Contents
Chapter I General Provisions
Chapter II Issuing of Securities
Chapter III Trading of Securities
Section 1 General Regulations
Section 2 Listing of Securities
Section 3 Continuing Disclosure of Information
Section 4 Prohibited Trading Acts
Chapter IV Takeover of Listed Companies
Chapter V Stock Exchanges
Chapter VI Securities Companies
Chapter VII Securities Registration and Clearing Institutions
Chapter VIII Securities Trading Service Organizations
Chapter IX The Securities Industry Association
Chapter X Securities Regulatory Authority
Chapter XI Legal Liability
Chapter XII Supplementary Provisions
Chapter I General Provisions
Article 1 This Law is enacted in order to standardize the issuing and trading of securities, protect the lawful rights and interests of investors, safeguard the economic order and public interests of society and promote the development of the socialist market economy.
Article 2 This Law is applicable to the issuing and trading in China of shares, corporate bonds and such other securities as are lawfully recognized by the State Council. Where their issuing and trading are not covered by this Law, the provisions of the Company Law and other laws and administrative regulations shall apply.
The issuing and trading of government bonds shall be separately provided for in laws and administrative regulations.
Article 3 Securities shall be issued and traded in line with the principles of openness, fairness and equitability.
Article 4 The parties involved in the issuing and trading of securities shall have equal legal status and adhere to the principles of voluntariness, compensation and good faith.
Article 5 Securities shall be issued and traded in accordance with laws and administrative regulations. Fraudulent and insider trading and manipulation of the securities trading market are prohibited.
Article 6 Securities business shall be engaged in and administered as a business separate from the banking business, trust business and insurance business. Securities companies shall be established separately from banks, trust companies and insurance companies.
Article 7 The securities regulatory authority under the State Council shall, in accordance with law, implement centralized and unified regulation of the securities market nationwide.
The securities regulatory authority under the State Council may, where necessary, establish offices which shall perform the regulatory functions as authorized.
Article 8 On condition that the State regulates the issuing and trading of securities on a centralized and unified basis, a Securities Industry Association shall, in accordance with law, be established for self-regulation.
Article 9 The State audit authority shall, in accordance with law and through auditing, supervise stock exchanges, securities companies, securities registration and clearing institutions and the securities regulatory authority.
Chapter II Issuing of Securities
Article 10 Public offerings of securities shall meet the conditions prescribed in laws and administrative regulations and shall, in accordance with law, be reported to the securities regulatory authority under the State Council or the department authorized by the State Council for verification or examination and approval. No unit or individual may make a public offerings of securities if the same has not been verified or examined and approved according to law.
Article 11 Public offerings of shares shall, in compliance with the conditions provided for in the Company Law, be reported to the securities regulatory authority under the State Council for verification. The issuer shall submit to the said authority the application documents prescribed in the Company Law and the relevant documents specified by the authority.
The issuing of corporate bonds shall, in compliance with the conditions provided for in the Company Law, be reported to the department authorized by the State Council for examination and approval. The issuer shall submit to the department authorized by the State Council the application documents prescribed in the Company Law and the relevant documents specified by the said department.
Article 12 The formats and ways of delivery of the application documents to be submitted by an issuer who applies, according to law, for public offerings of securities shall be prescribed by the authority or department legally responsible for verification or examination and approval.
Article 13 The application documents for the issuing of securities submitted by an issuer to the securities regulatory authority under the State Council or the department authorized by the State Council shall be truthful, accurate and complete.
Professional institutions and individuals that produce relevant documents for the issuance of securities shall strictly perform their statutory duties and warrant the truthfulness, accuracy and completeness of the documents that they produce.
Article 14 In the securities regulatory authority under the State Council an issuance examination commission shall be established to examine according to law applications for issuance of shares.
The issuance examination commission shall be composed of professionals from the securities regulatory authority under the State Council and other relevant specialists engaged from outside the said authority, who shall vote on applications for issuance of shares and state their opinions after examination.
The specific measures for forming the issuance examination commission, the term of office of its members and its working procedures shall be formulated by the securities regulatory authority under the State Council and submitted to the State Council for approval.
Article 15 The securities regulatory authority under the State Council shall, in accordance with the statutory conditions, be responsible for verification of applications for issuance of shares. The verification procedures shall be made public and shall be subject to supervision according to law.
The persons involved in the verification of an application for issuance of shares may not have any interests to share with or accept gifts from the applicant, or hold shares the application for the issuance of which they have verified, or have any private contact with the applicant.
The department authorized by the State Council shall examine and approve applications for issuance of corporate bonds by reference to the provisions in the preceding two paragraphs.
Article 16 The securities regulatory authority under the State Council or the department authorized by the State Council shall make a decision on application documents for the issuing of securities within three months from the date of acceptance of the same. If it refuses to verify the application documents or to grant approval to the same upon examination, it shall state its reasons.
Article 17 Once an application for issuance of securities has been verified or approved upon examination, the issuer shall announce the public offering documents prior to the public offering of the securities, as prescribed in laws and administrative regulations, and make the said documents available at the designated places for the public to consult.
Before information about the issuing of securities is announced according to law, no person in the know may make public or divulge such information.
No issuer may issue securities before announcing the public offering documents.
Article 18 If the securities regulatory authority under the State Council or the department authorized by the State Council discovers that a decision it has made to verify or approve upon examination the issuing of securities does not conform to the provisions of laws or administrative regulations, it shall revoke the decision. If the relevant securities have not yet been issued, they shall be kept from being issued; if they have already been issued, the holders of the securities may require the issuer to refund their money at the issue price plus bank deposit interest for the same period.
Article 19 After shares have been issued according to law, the issuer shall itself be responsible for any change in its operation or earnings; and the investors shall themselves be responsible for any investment risks caused by such change.
Article 20 To issue new shares, listed companies shall meet the conditions provided for in the Company Law for the issuance of new shares. Such shares may be issued in the form of a public offering or be allocated as divided to the existing shareholders.
The proceeds of a share issue by a listed company shall be used in adherence to the purpose of the funds as described in the share prospectus. Any change in the purpose of the funds described in the share prospectus shall be subject to approval by the shareholders' general meeting. If a change in the purpose is made without authorization and is not rectified, or if such a change is not subsequently ratified by the shareholders' general meeting, no new shares may be issued.
Article 21 Securities companies shall, in accordance with the provisions of laws and administrative regulations, underwrite the securities to be issued to the public by issuers. Securities shall be underwritten on an agency basis or on a sole agency basis.
"Underwriting securities on an agency basis"means the way whereby the securities company sells securities as the agent of the issuer and, at the end of the underwriting period, returns to the issuer all the securities that remain unsold.
"Underwriting securities on a sole agency basis"means the way whereby the securities company purchases, pursuant to an agreement, all the securities to be issued by the issuer or whereby it purchases, at the end of the underwriting period, all the securities that remain after sale.
Article 22 An issuer that makes a public offering of securities shall have the right, independently and according to law, to select a securities company to underwrite its securities. Securities companies may not solicit securities underwriting business by means of unfair competition.
Article 23 To underwrite securities, the securities company shall enter into an agreement with the issuer for underwriting as an agent or as a sole agent. Such agreement shall include the following:
1. the names and domiciles of the parties and the names of their legal representatives;
2. the type, quantity, amount and issuing price of the securities to be underwriten on an agency basis or on a sole agency basis;
3. the period during which securities are issued on an agency basis or on a sole agency basis, including the commencement and termination dates of the period;
4. the means and date of payment of the proceeds from sale on an agency basis or on a sole agency basis;
5. the fees for sale on an agency basis or on a sole agency basis and the means of settlement thereof;
6. liability for breach of contract; and
7. other matters prescribed by the securities regulatory authority under the State Council.
Article 24 To underwrite securities, a securities company shall examine the truthfulness, accuracy and completeness of the public offering documents. If it finds any falsehoods, misleading statements or major omissions in such documents, it may not carry out the sales activities. If it has already begun to sell the securities, it shall immediately discontinue the sales activities and adopt remedial measures.
Article 25 Securities to be offered to the public with a total face value exceeding RMB 50 million shall be underwritten by an underwriting syndicate. An underwriting syndicate shall be composed of a securities company acting as the lead underwriter and securities companies acting as participating underwriters.
Article 26 The maximum period for underwriting securities on an agency basis or on a sole agency basis shall be 90 days.
During the period for securities underwritten on an agency basis or on a sole agency basis, securities companies shall ensure that such securities are first sold to subscribers. Securities companies may not reserve, in advance, for themselves securities which they underwrite as agents, or purchase, in advance, and retain securities which they underwrite as the sole agents.
Article 27 Securities companies that underwrite securities as the sole agents, shall within 15 days after the expiration of the period for underwriting as the sole agents, report the details of such underwriting to the securities regulatory authority under the State Council for the record.
Securities companies that underwrite securities as agents shall, in conjunction with the issuer and within 15 days after the expiration of the period for underwriting as agents, report the details of such underwriting to the securities regulatory authority under the State Council for the record.
Article 28 Where shares are issued at a premium, the issue price shall be determined through consultation between the issuer and the securities underwriting company.
Article 29 Enterprises in China that intend to directly or indirectly issue securities abroad or to list their securities for trading abroad shall be subject to approval by the securities regulatory authority under the State Council.
Chapter III Trading of Securities
Section 1 General Regulations
Article 30 Securities purchased or sold according to law by the parties to a securities transaction shall be securities that have been issued and delivered according to law.
Securities that have not been issued according to law may not be purchased or sold.
Article 31 Where the transfer of shares, corporate bonds and other securities issued according to law is prohibited by law within a certain period, they may not be purchased or sold during the period.
Article 32 Shares, corporate bonds and other securities that have been lawfully approved for trading shall be quoted and traded on stock exchanges.
Article 33 Securities that are quoted and traded on stock exchanges shall be traded in the manner of public, centralized trading at competing prices.
Centralized competitive pricing for securities trading shall follow the principle of price precedence and time precedence.
Article 34 The securities purchased and sold by the parties to a securities transaction may be in the form of scrip or such other forms as prescribed by the securities regulatory authority under the State Council.
Article 35 Securities trading shall take the form of spot transaction.
Article 36 Securities companies may not engage in securities trading activities by providing the clients with funds or securities obtained.
Article 37 Employees of stock exchanges, securities companies and securities registration and clearing institutions, staff members of the securities regulatory authority, and other persons prohibited by laws and administrative regulations from participating in share trading may not, while in office or during the statutory period, hold, purchase or sell shares directly or under an assumed name or under the name of another, nor may they receive or accept shares as gifts.
When anyone becomes an employee, a staff member or a person as mentioned in the preceding paragraph, he shall, in accordance with law, transfer all the shares he is holding.
Article 38 Stock exchanges, securities companies and securities registration and clearing institutions shall, in accordance with law, keep confidential the accounts opened for their clients.
Article 39 Professional institutions and individuals that produce documents such as audit reports, asset appraisal reports and legal opinions for share issuance may not purchase or sell the shares in question during the underwriting period for such shares and for a period of six months after the expiration thereof.
In addition to the provisions of the preceding paragraph, professional institutions and individuals that produce documents such as audit reports, asset appraisal reports and legal opinions for listed companies may not purchase or sell the shares in question from the date on which they accept the entrustment by the listed company to the sixth day after the said documents are made public.
Article 40 The fees charged for securities trading shall be reasonable. The items for which fees are charged, the rates for the fees and the collection methods shall be made public.
The items for which fees are charged, the rates for the fees and administrative measures in securities trading shall be prescribed by the relevant administrative department under the State Council in a unified manner.
Article 41 A shareholder that holds five percent of the shares issued by a company limited by shares shall, within three days from the date on which the number of shares held by him reaches this percentage, report the same to the company, which shall, within three days from the date on which it receives the report, report the same to the securities regulatory authority under the State Council. If the company is a listed company, it shall report the matter to the stock exchange at the same time.
Article 42 If the shareholder described in the preceding article sells, within six months of purchase, the shares he holds of the said company or repurchases the shares within six months after selling the same, the earnings so obtained by the shareholder shall belong to the company and be recovered by the board of directors of the company. However, a securities company that has a shareholding of not less than five percent due to purchase of the remaining shares in the capacity of a company that underwrites as the sole agent shall not be subject to the restriction of six months when selling the said shares.
If the company's board of directors fails to comply with the provisions of the preceding paragraph, the other shareholders shall have the right to require the board of directors to comply.
If the company's board of directors fails to comply with the provisions of the first paragraph and thereby causes losses to the company, the directors responsible therefor shall bear joint and several liabilities for the losses.
Section 2 Listing of Securities
Article 43 Before a company limited by shares applies for listing of its shares, it shall report to the securities regulatory authority under the State Council for verification.
The securities regulatory authority under the State Council may authorize a stock exchange, pursuant to the statutory conditions and procedures, to verify the application for share listing.
Article 44 The State encourages companies that conform to industrial policies and meet the conditions for listing to have their shares listed.
Article 45 When applying for share listing to the securities regulatory authority under the State Council, the company shall provide the following documents:
1.
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