Regulations have recently been issued to permit
sino-foreign joint venture securities companies.
Two pieces of new regulations
During the last several months, the China
Securities Regulatory Commission (CSRC) has been formulating rules
on approval and administration of joint venture securities
companies. The draft Regulations for Examination and Approval of
Joint Venture Securities Companies (Examination and Approval
Regulations) were circulated for public comment in December 2001
and will be issued in due course. Regulations on the Administration
of Securities Companies (Administration Regulations) were formally
promulgated by CSRC on 28 December 2001 after a period for comment
and came into effect as of 1 March 2002.
Under the draft Examination and Approval
Regulations, foreign investors can acquire a stake in a securities
company and can inject capital into a securities company.
The ownership interest of the foreign partner in a
joint venture securities company should not be less than 1/4 and
should not exceed 1/3, as compared to the Chinese partners'
interest. The interest of the Chinese partner should be not less
The foreign investor must come from a country where
the institution in charge of securities supervision and management
has signed a Memorandum of co-operation on securities supervision
with CSRC and maintains co-operative relations with CSRC. The
foreign investor should have conducted finance business for more
than ten years. The foreign investor must be a securities firm in
compliance with legislation and requirements of the securities
supervisory authority of its home country. The foreign investor
should have an excellent reputation for outstanding achievement in
the international market.
Requirements for approval of joint venture
securities companies are set out in the draft Examination and
Approval Regulations as follows: 1. Registered capital should be no
less than 500 million RMB (around USD 40 million). 2. The joint
venture securities company must employ at least 50 Staff qualified
to engage in the securities business. 3. The company should have
qualified accounts, lawyers and IT experts on staff. 4. The company
should have sound internal management and risk control system
ready, as well as a system for management of underwriting,
brokerage and self-operation in the aspects of personnel, financing
The Administration Regulations focus on the
supervision and administration of securities companies, and apply
to all securities houses registered in the PRC. Securities
companies are categorised as either comprehensive or brokerage
securities companies. A brokerage securities company may act as a
broker for an investor in securities trading, redemption,
distribution of dividends and interest, custody and account
maintenance. A comprehensive securities company may engage in
securities dealing for its own account, underwriting securities,
providing securities investment advice and portfolio management.
Foreign participation is permitted in comprehensive and brokerage
The Administration Regulations also set out
conditions for establishing an internet-based securities brokerage
company. Provisions on corporate governance and risk management
control are raised. There are also qualification requirements for
personnel and senior officers of securities companies.
For further information on this please contact
Luke Filei on firstname.lastname@example.org or +86 10 6590 0389 in
Beijing or +86 21 6289 6363 in Shanghai.