Article 128 The securities regulatory authority under the State Council
shall, within 6 months as of accepting an application for establishing a
securities company, carry out an examination according to the statutory
requirements and procedures and on the basis of the principle of prudent
supervision, make a decision on approval or disapproval and thereafter, notify
the relevant applicant. In the case of disapproval, an explanation shall be
given. Where an application for establishing a securities company has been
approved, an applicant shall, within the prescribed period, apply for
registration of establishment with the organ in charge of corporation
registration and collect its business license therefrom. A securities company
shall, within 15 days as of collecting its business license, file an application
for the Securities Business Permit with the securities regulatory authority
under the State Council. Without a Securities Business Permit, a securities
company may not engage in any business operation of securities.
Article 129 Where a securities company establishes, purchases or cancels a
branch, alters its business scope or registered capital, alters its shareholders
or actual controllers who hold more than 5% of its stock rights, alters any
important article of its constitution, has any merger or spilt-up, alters its
form of corporation, suspends its business, goes through dissolution or
bankruptcy, it shall be subject to the approval of the securities regulatory
authority under the State Council. Where a securities company establishes,
purchases a securities operation institution abroad or purchases the shares of
any securities operational institution abroad, it shall be subject to the
approval of the securities regulatory authority under the State Council.
Article 130 The securities regulatory authority under the State Council shall
formulate provisions on the risk control indicators of a securities company such
as net capital, the ratio between net capital and liabilities, the ratio between
net capital and net assets, the ratio between net capital and operational scale
of self-operation, underwriting and asset management, the ratio between
liabilities and net asset as well as the ratio between current assets and
current liabilities. A securities company may not provide any financing or
guaranty for its shareholders or any related person thereof.
Article 131 The directors, supervisors and senior managers of a securities
company shall be honest and integrate, have good moral grade, be familiar with
the laws and administrative regulations on securities and have the ability of
operation and management as required by the performance of their functions and
duties, and shall have obtained the post-holding qualification as verified by
the securities regulatory authority under the State Council before assuming his
post. Anyone who is under any circumstance as prescribed in Article 147 of the
Corporation Law of the People's Republic of China or is under any of the
following circumstances may not hold the post of director, supervisor or senior
manager of a securities company:
(1) Where a person-in-charge of a
stock exchange or securities registration and clearing institution or a
director, supervisor or senior manager of a securities company has been removed
from his post for his irregularity or disciplinary breach and if it has been
within 5 years as of the day when he is removed from his post; and
(2)
Where a professional of a law firm, accounting firm or investment consulting
organization, financial advising organization, credit rating institution, asset
appraisal institution or asset verification institution has been disqualified
for his irregularity or disciplinary breach and if it has been within 5 years as
of the day when he is removed from his post.
Article 132 A practitioner of a stock exchange, securities registration and
clearing institution, securities trading service institution or securities
company or any functionary of the state organ, who has been dismissed for his
irregularity or disciplinary breach, may not be employed as a practitioner of a
stock exchange.
Article 133 A functionary of the state organ and any other personnel as
prohibited by laws and administrative regulations from taking any job in a
company on a part-time basis may not take any job in a securities company on a
part-time basis.
Article 134 The state shall establish the securities investor protection
fund. The securities investor protection fund shall be composed of the capital
as paid by securities companies and any other capital as lawfully raised. The
specific measures for financing, administration and use of the foregoing fund
shall be formulated by the State Council.
Article 135 A securities company shall withdraw a trading risk reserve from
its annual after-tax profits to cover any loss from securities transaction. The
specific proportion for withdrawal shall be prescribed by the securities
regulatory authority under the State Council.
Article 136 A securities company shall establish and improve an internal
control system, adopt an effective measures of separation so as to prevent any
interest conflict between the company and its clients or between different
clients thereof. A securities company shall undertake its operations of
securities brokerage, underwriting, self-operation and asset management in a
separate manner but not in a mixed manner.
Article 137 A securities company shall undertake its self-operation in its
own name and may not make use of any other person's name or in an individual's
name. A securities company shall undertake its self-operation by using its own
capital and funds as lawfully raised. A securities company may not lend its
self-operation account to any other person.
Article 138 A securities company may enjoy its right of independent
management according to law and its legal operation may not be interfered.
Article 139 The trading settlement funds of the clients of a securities
company shall be deposited in a commercial bank and be managed through accounts
as separately opened in the name of each client. The specific measures and
implementation procedures shall be formulated by the State Council. A securities
company may not incorporate any trading settlement funds or securities of its
clients into its own assets. Any entity or individual is prohibited from
misusing any trading settlement funds or securities of its/his clients in any
form. Where a securities company goes bankruptcy or goes through liquidation.
The trading settlement funds or securities of its client may not be defined as
its insolvent assets or liquidation assets. Under any other circumstance as
irrelevant to the liabilities of its clients or under any other circumstance as
prescribed by law, the trading settlement funds or securities of its clients may
not be sealed-up, frozen, deducted or enforced compulsorily.
Article 140 Where a securities company engages in any brokerage business, it
shall arrange a uniformly formulated the power of attorney of securities
transactions for the entrusting party. Where any other means of entrustment is
adopted, the relevant entrustment records shall be made. For an entrustment of
securities transaction as made by a client, whether the transaction is concluded
or not, the entrustment records shall be kept in the relevant securities company
within the prescribed period.
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