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2012-07-02 12:53:01

 

Chapter 1 General Provisions

Article 1 These measures are formulated to regulate the pilot program of margin financing and securities lending business of the securities company, to prevent the risks of the securities company, to protect the legitimate rights and interests of the investors in securities and social public interests, and promote the improvement of the securities trading mechanism and the stable and healthy development of the securities market.

 

Article 2 The securities company shall launch pilot program of the margin financing and securities lending business in accordance with the provisions of applicable laws, administrative regulations and the administrative measures to strengthen internal control, to strictly prevent and control the risks, and effectively safeguard the safety of the customer’s assets.  

The margin financing and securities lending business, referred in the administrative measures, means the operating activities which the securities company receives collateral to permit the customers to borrow money from the securities company to buy the listed securities or sell the listed securities which are borrowed from the securities company.  

 

Article 3 The securities company must be subject to the approval of China Securities Regulatory Commission (hereinafter referred to as CSRC) upon the implementation of the pilot margin financing and securities lending business. Neither shall the securities company provide funds or securities to the customer, nor shall they provide any convenience and service for the margin financing and securities lending activities between the customers or between the customer and other person.  

 

Article 4 CSRC shall, according to the principle of prudent supervision, approve the securities company conforming to the provisions of these measures to carry out the pilot program of margin financing and securities lending business; and based on the pilot situation and the development demand of the securities market, progressively approve the other securities company conforming to the provisions of these measures to carry out the pilot program of margin financing and securities lending business.  

 

Article 5 CSRC and its resident agencies shall carry out supervision and administration to the pilot program of margin financing and securities lending business of the securities company in accordance with the provisions of applicable laws, administrative regulations and these measures.  

 

Securities Association of China (SAC), Stock Exchange and Securities Registration and Clearing Institutions shall, in accordance with their respective Articles of Association and rules, carry out self-regulation for the activities in the pilot program of margin financing and securities lending business of the securities company.  

Chapter 2     Business License

Article 6 The securities company applying for pilot program of margin financing and securities lending business shall meet the following conditions:  

a)        the company has engaged in the securities brokerage business at least three years, and has been rated as pilot innovative class of securities company by Securities Association of China (SAC);

b)        the company has sound governance, effective internal controls, and they can effectively identify, control and prevent the business operating risks and internal management risks;

c)        the company, its directors, supervisor and senior officers were not subject to administrative penalties and criminal penalties for illegal operation in recent two years, and not subject to investigation by CSRC or during the period of rectification;

d)        the financial position is good, the risk control indicators in recent two years continue to conform to the provisions, and the net capital for the last 6 months is more than 1.2 billion Yuan;

e)        customer’s assets security, completeness, third-party depository program of customer transaction settlement funds have obtained the approval of CSRC, and have made clear arrangements for the implementation progress;

f)         the central management for the transaction, settlement, customer account and risk control has been completed, and the non-standard accounts which were left due to historical reason have been identified and subject to central supervision;

g)        the practicable implementation plan and internal management system for pilot program of margin financing and securities lending business have been developed, and the professional staffs, technical system, funds and securities required by the pilot program of margin financing and securities lending business have become available.  

 

Article 7 The securities company shall submit the following materials to CSRC and at the same time send a copy hereof to the resident agencies of CSRC where the company is located upon application for the pilot program of margin financing and securities lending business:  

a)        Application form of pilot program of margin financing and securities lending business;

b)        Resolution of shareholders’ meeting on operating the margin financing and securities lending business;

c)        the implementation program, internal management system text for the pilot program of margin financing and securities lending, and customer selection standard which is developed according to Article 12 hereof;

d)        instruction for the implementation of the third party depository program of customer’s transaction settlement funds;

e)        list and qualification documents of the senior officers and business staff responsible for the margin financing and securities lending business;

f)         Other documents required to submit by CSRC.  

The legal representatives and the principal responsible persons for business management of the securities company shall sign on the application form of the pilot program of margin financing and securities lending business, and shall make a commitment to the authenticity, accuracy and integrity of the contents hereof, and shall be responsible for any false records, misleading statements or material omissions of the application information.  

 

Article 8 The resident agencies of CSRC shall issue a written opinion to decide whether to consent the applicants to carry out the pilot program of margin financing and securities lending business within 10 working days upon receipt of the above application materials.  

In accordance with the statutory procedure and the terms and conditions of these measures, CSRC shall review the application materials, and shall organize relevant experts to evaluate program to implement the pilot program of margin financing and securities lending business, after which CSRC shall decide whether or not to approve the application, and send a written notice to the applicant.  

The securities company which takes a leading position in the level of net capital shall obtain the priority to apply for the pilot program of margin financing and securities lending business given the same conditions.  

 

Article 9 The approved securities company shall, in accordance with applicable terms and conditions, apply to the company registration authority for change of registration of business scope, and apply to renew its securities business license from the CSRC.  

The securities company shall implement the pilot program of margin financing and securities lending business only after the securities business license was renewed by CSRC.  

 

Chapter 3 Business Rules

Article 10 The securities company shall implement the margin financing and securities lending business in its own name, and shall open special securities account for the margin financing and securities lending business, customer credit transaction collateral securities account, credit transaction securities delivery account and credit transaction funds delivery account separately in the securities registration and settlement institution.  

The special securities account for the margin financing and securities lending business is used to record the securities which are held by the securities company and proposed to be lent to the customers as well as the securities which are returned by the customers; the customer credit transaction collateral securities account is used to record the securities which the customer delegated the securities company to hold and the securities company obtain obligatory right due to the margin financing and securities lending business to the customers; the credit transaction securities delivery account is used for the settlement of the securities in the margin financing and securities lending transaction; and the credit transaction funds delivery account is used for funds settlement of the customer’s margin financing and securities lending transaction.  

 

Article 11 The securities company shall implement the margin financing and securities lending business in its own name, and shall open special securities account for the margin financing and securities lending business and customer credit transaction collateral securities account separately in commercial banks.  

The special securities account for the margin financing and securities lending business is used to deposit the funds which the securities company proposes to lend to the customers and the fund which are returned by the customers; the customer credit transaction collateral securities account is used to deposit the funds which the customer will deposit and the securities company obtains obligatory right due to the margin financing and securities lending business to the customers.

 

Article 12 Prior to the margin financing and securities lending to the customers, the securities company shall carry out the customer credit investigation, understand the customer’s identification, property and income situation, securities investment experience and risk preference, which shall be recorded and preserved in written and electronic form.  

The securities company shall not carry out the margin financing and securities lending business to those who fail in  submitting the relevant situations according the requirements, those who have involved less than half a year in  the securities transaction in the company, whose transaction settlement funds not included in third party custody, lack of experience in securities investment, lack of risk bearing ability or with the record of material breach, as well as the directors and related persons of the company.  

The securities company shall establish specific standard of customer selection conforming the previous provisions.  

 

Article 13 Prior to the margin financing and securities lending to the customer, the securities company shall execute the contract of margin financing and securities lending which is included in the Statutory articles specified by the Securities Association of China (SAC), the following items are expressly agreed upon:  

a)        the calculation method for the credit limit to the margin financing and securities lending, the period, interest rate (rate), interest (expense);

b)        the proportion of the margin, guarantee maintenance ratio, types and conversion rate of the securities which can offset the deposit, and the secured debt range;

c)        the notice form and period of the additional margin;

d)        the customer’s debt settlement manner and the securities company’s disposal right to the collateral;

e)        disposal of the equity of the margin financing and securities lending;

f)         Other relevant matters.

The customer can only execute the contract on margin financing and securities lending with one Securities Company to carry out the margin financing and securities lending business.  

 

Article 14 The contract of margin financing and securities lending shall provide that, the customer’s securities in the customer credit transaction collateral securities account, and the funds in the customer credit transaction collateral funds account, shall be the trust property of which the securities company obtains obligation due to the margin financing and securities lending business to the customers.  

The period for the margin financing and securities lending agreed by the securities company and the customer shall not exceed the maximum period specified in the provisions of the Stock Exchange, and shall not be extended; the financing interest rate shall not be lower than the benchmark lending rate of financial institutions of the People’s Bank of China during the same period.

 

Article 15 Prior to the conclusion of the contract of the margin financing and securities lending between the securities company and the customer, a special person shall be designated to interpret the business rules and contract content to the customer, and the Risk Disclosure Statement on Margin financing and securities lending shall be submitted to the customer for signature and confirmation.

 

Article 16 After the conclusion of the contract of the margin financing and securities lending with the customer, the securities company shall, upon the request of the customer, open a real-name credit securities account for the customer in accordance with the provisions of the securities registration and settlement institutions. The customer can only own one credit securities account for the listed securities of one Stock Exchange. The names of the account holder of the customer credit securities account and the common securities account shall be uniform.  

The customer credit securities account is the secondary account of the customer credit securities account, used to record the detail data of the collateralized securities which are held by the securities company and delegated by the customer.  

The securities company shall delegate the Securities Registration and Settlement Institution to modify the data in the customer credit securities account according to the results of settlement and delivery etc.  

 

Article 17 The securities company shall conclude and sign the depository agreement of the customer credit funds with its customers and commercial banks by reference to the manner of the third party’s custody of the customer transaction settlement funds. After conclusion and signing of the contract of margin financing and securities lending with the customer, the securities company shall, upon the request of the customer, inform the commercial bank to open a real-name credit funds account for the customer. The customer can only open one credit funds account.  

The customer credit funds account is the secondary account of the customer’s credit transaction collateral account, used to record the detail data of the collateralized funds which are deposited by the customer.  

Based on the results of settlement and delivery etc, the commercial bank shall carry out the data modification of the customer credit funds account.  

 

Article 18 The securities company shall only use the fund in the special funds account for the margin financing and securities lending business when to provide financing to the customer; and only use the securities in the special securities account for the margin financing and securities lending when lending the securities to the customer.  

The customer’s margin financing and securities lending business shall not exceed the scope specified by the Stock Exchange.  

When concluding and signing the contract of margin financing and securities lending with the securities company, the customer shall declare all the securities of itself and the associated persons to the securities company. During the securities lending period, where he/she or the associated persons has sold the same securities with the lent ones, the customer shall declare and report it to the securities company within 3 business days after it happened. The securities company shall submit the statement of situation declared by the customer to the related Stock Exchange every month.  

Where the customer sold the same securities with the lent ones during the securities lending period, it shall conform to the provisions of the Stock Exchange, and the securities shall not be sold in the manner of violating the related provisions to manipulate the market.  

 

Article 19 Where carrying out the margin financing and securities lending business, and issuing the securities trading and securities transfer instructions according to the customer’s delegation, the securities company shall ensure the instructions are true and accurate. Where the customer is subject to losses due to incorrect instructions resulting from the mistake of the securities company, the customer may request the securities company to make compensation in accordance with applicable laws, without affecting the business operation which is in progress or has been completed by Stock Exchange or the securities registration and settlement institution.  

 

Article 20 The risk control indicators, such as the proportion of the amount which the securities company provides margin financing and securities lending business to all customers, individual customer and single security to its net capital, shall conform to the provisions of CSRC.  

 

Article 21 Where purchasing the securities through financing, the customer shall repay the funds lending from the securities company through direct repayment or sale of the securities.  

Where selling the lending securities, the customer shall repay the securities lending from the securities company through direct repayment of securities or purchase of securities.  

 

Article 22 In the event that the securities which the customer purchased through financing or sold through lending are suspended, and the resuming day is later than the expiration date of margin financing and securities lending, the period of margin financing and securities lending shall be extended. In the event that the contract of margin financing and securities lending provides otherwise, such provisions shall prevail.  

 

Article 23 In the event that the securities which the customer purchased through financing or sold through lending are scheduled to terminate the transaction, and the final trading day is earlier than the expiration date of margin financing and securities lending, the period of margin financing and securities lending shall be shortened to the previous trading day of the final trading day. In the event that the contract of margin financing and securities lending provides otherwise, such provisions shall prevail.  

 

Chapter 4 Guarantee of Obligatory Right

Article 24 As of the margin financing and securities lending, the securities company shall charge the customer a certain proportion of deposit. The securities can be used as the deposit.   

 

Article 25 The customer deposit and all the amount obtained by purchase of all securities through financing and sale of all securities through lending by the customer, shall be deposited in the customer credit transaction collateral securities account and the customer credit transaction collateral funds account separately as the collateral of the obligatory right resulting by the customer’s margin financing and securities lending.  

 

Article 26 The securities company shall calculate the proportion of the collateral and the owned debt value of the customer on a daily basis. In the event that this proportion is lower than the minimum guarantee maintenance ratio, a notice shall be sent to the customer to make up the difference within a certain time period.  

In the event that the customer fails to make up the difference within certain period or repay the debt due, the securities company shall immediately dispose the collateral as agreed.  

 

Article 27 The collateral ratio and the types and conversion rate of the securities which can offset the deposit specified in Article 24 hereof, and the minimum guarantee maintenance ratio and the period to make up the difference specified in Article hereof, shall be determined by Stock Exchange.  

Under the premise of conforming to the regulations of Stock Exchange, the securities company may make specific provisions for the matters listed in previous article.  

 

Article 28 Except the following circumstances, nobody can use the securities in the customer credit transaction collateral securities account and the funds in the customer credit transaction collateral funds account:  

a)        settlement for the customer to carry out margin financing and securities lending transaction;

b)        collection of the funds and securities which the customer should repay;

c)        collection of the interest, expenses and taxes which the customer should pay;

d)        disposal of the collateral according to the provisions hereof and the agreement with the customer;

e)        collection of the liquidated damages which the customer should pay;

f)         remaining securities and funds after the customer has repaid the capital and interest, taxes and the liquidated damages;

Securities and fund

g)        other situations specified by laws and administrative regulations and these measures.

 

Article 29 Where the proportion of the collateral deposited by the customer and the debt has exceeded the specified level, the customer may extract the collateral in accordance with the provisions of Stock Exchange and the agreement of the contract of margin financing and securities lending.  

 

Article 30 Where the judicial authority will adopt property preservation or carry out a compulsory execution measure for the equities which are recorded in the customer credit securities account or credit funds account in accordance with applicable laws and regulations, the securities company shall dispose the collateral, realize the obligatory right due to the margin financing and securities lending to the customer, and assist the judicial authority for implementation.  

 

Chapter 5 Equity Treatment

Article 31 In accordance with the records in the customer credit transaction collateral securities account, the securities registration and settlement institution shall confirm the fact that the securities company holds securities, and register in the list of securities holders in the nominal holder of the securities company.  

 

Article 32 As to the securities which are recorded in the customer credit transaction collateral securities account, the securities company may exercise the rights of the issuer in its own name and for the benefit of the customer. Prior to exercising the rights of the issuer, the securities company shall ask for the customer’s opinion in advance, and shall deal with the case according to this opinion.  

The rights of the issuer referred in previous article, means the right of requesting to hold a meeting of the securities holders, taking part in the meeting, proposal, decision of the securities holders, subscription of the placing shares, request allocation of investment income and other rights resulting from holding of the securities.  

 

Article 33 Where distributing investment income in form of securities entrusted by the issuer of securities, the securities registration and settlement institution shall record the distributed securities in the customer credit transaction collateral securities account, and accordingly modify the detail data in the customer credit securities account.  

Where distributing investment income in form of cash entrusted by the issuer of securities, the securities registration and settlement institution shall put the distributed funds into the customer credit transaction funds delivery account. After the funds have been transferred to the account, the securities company shall inform the commercial bank to modify the detail data in the customer credit funds account.  

 

Article 34 After the customer lends the securities, or before the customer returns the securities, in the event of distribution of investment income to the issuer of the securities, or placing or gratuitous distribution of securities to holders of securities, or issuance of the securities which the holders of the securities own preferential subscription rights, the customer shall pay to the securities company the securities or funds equal to the acquirable interest of the lent securities when repaying the debts in accordance with the contract of the margin financing and securities lending.  

 

Article 35 the shares which the securities company holds through the customer credit transaction collateral securities account, shall not be included into its own shares, and the securities company needs not perform the obligation of the corresponding information report, disclosure or tender offer due to the change in the number of the shares in the account.  

Where the customer and the persons acting in concert hold the shares or equities of a listing enterprise by common securities account and credit securities account, after the total number has reached the specified proportion, it shall perform the corresponding obligations of information report, disclosure or tender offer.  

 

Article 6   Supervision and Management

Article 36 Stock Exchange can make restrictive regulations for the proportion of the purchase quantity by financing and the sale quantity by lending of individual securities and its market circulation as well as the sale price of the lending securities.  

 

Article 37 Stock Exchange shall take measures in accordance with the business rules to carry out front-end check for the instruction of the margin financing and securities lending transaction, and shall refuse the instructions which will violate the provisions of the types and prices of the securities.  

Where the proportion of the purchase quantity by financing and the sale quantity by lending of individual securities and its market circulation of individual security has exceeded the maximum limit value, Stock Exchange may suspend to accept the purchase instruction of financing and the sale instruction of lending of this type of securities.  

 

Article 38 In the event that the margin financing and securities lending transactions are abnormal which have already endangered or will endanger the stability of the market, and the transactions are necessary to be suspended, Stock Exchange shall suspend all or part of the securities’ margin financing and securities lending transaction and issue a public announcement in accordance with the provisions of the business rules.  

 

Article 39 The securities registration and settlement institution shall supervise the securities transfer in connection with the margin financing and securities lending transaction as well as the funds transfer in the credit transaction funds delivery account of the securities company in accordance with the business rules. The transfer instructions of the securities and funds violating the provisions shall be refused; where abnormal circumstances are found, the securities company shall be required to make a statement, and report to CSRC and its local office in the place where the company is based.  

 

Article 40 The commercial bank, which is responsible for the custody of the customer credit funds, shall refuse the securities company’s funds transfer instructions violating the provisions in accordance with the depository agreement of the customer credit funds; where abnormal circumstances are found, the securities company shall be required to make a statement, and report to CSRC and its local office in the place where the company is based.  

 

Article 41 The securities company shall, in accordance with the agreed form of the margin financing and securities lending contract, submit the statement of account to the customer, and provide the inquiry service for the data in the credit securities account and credit funds account.  

The securities registration and settlement institution shall provide the customer inquiry service for the data in the credit securities account. The commercial bank, which is responsible for the custody of the customer credit funds, shall provide the customer inquiry service for the data in the credit fund account.  

 

Article 42 The securities company shall report the information relating to the customer’s margin financing and securities lending transaction after closing every day in accordance with the provisions of the Stock Exchange.

Stock Exchange shall carry out summary and statistics for the information delivered by the securities company, and make a public announcement prior to the next opening.  

 

Article 43 The securities company shall submit a written report concerning the following circumstances in current month to CSRC, its local offices and Stock Exchange with 10 days upon the end of every month:  

a)        account opening number of the customer’s margin financing and securities lending;

b)        the margin financing and securities lending balances of all customers and the top 10 customers;

c)        the types and numbers of the collateral which the customer submits;

d)        the customer quantity and the transaction amount of forced liquidation;

e)        indicators concerning risk control;

f)         profit or loss condition of the margin financing and securities lending business.  

 

Article 44 CSRC and its local offices, Securities Association of China, Stock Exchange, Securities Registration and Settlement Institution shall perform the duties of supervision or self regulation to the margin financing and securities lending business of the securities company in accordance with the related provisions, and may require the securities company to submit the information and materials relating to the margin financing and securities lending.  

 

Article 45 The local office of CSRC shall carry out off-site inspection and site inspection for the customer selection, conclusion of contract, determination of credit facility, collection and management of the collateral, notice of additional delivery of collateral and disposal of collateral concerning the margin financing and securities lending business conducted by Stock Exchanges and their branches in accordance with the requirements of the jurisdiction regulatory responsibility.  

 

Article 46 In the event that Stock Exchange or its branches violate the provisions in the pilot margin financing and securities lending business, the local office of CSRC shall stop the activities and order it to rectify within specified period; in the event of refusing to rectify or serious circumstance, CSRC shall take different measures such as warning, public warning, ordering to punish the related persons, ordering to stop the relevant branch’s margin financing and securities lending business, and revoking the permit of margin financing and securities lending.  

In the event that the securities company or its branches carry out the margin financing and securities lending business without approval, it shall be punished in accordance with the provisions of Article 205 of the Securities Law.  

 

Chapter 7  Supplementary Provisions

Article 47 Stock Exchange, the Securities Registration and Settlement Institution and Securities Association of China shall formulate the business rules and self regulation rules for the margin financing and securities lending business in accordance with the provisions of this measure, and shall implement it after obtaining the approval from CSRC.

 

Article 48 These measures shall be implemented as of August 1, 2006.

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