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THE SECURITIES LAW OF THE PEOPLE'S REPUBLIC OF CHINA

(adopted by the Sixth Session of the Ninth National People's Congress [NPC]
Standing Committee on 29 December 1998)






SUBJECT: SECURITIES

ISSUING-DEPT: STANDING COMMITTEE OF THE NATIONAL PEOPLE'S CONGRESS

ISSUE-DATE: 12/29/1998

IMPLEMENT-DATE: 07/01/1999

LENGTH: 13847 words

TEXT:

CONTENTS
Chapter I General Provisions
Chapter II Stock Issuance
Chapter III Stock Transactions

Section I General Rules
Section II Stock Listing
Section III. Continuous Dissemination of Information
Section IV Prohibited Transactions

Chapter IV Acquisition of Listed Companies
Chapter V Stock Exchanges
Chapter VI Securities Companies
Chapter VII Securities Registration and Settlement Organizations
Chapter VIII Stock Exchange Service Organizations
Chapter IX Stock Brokers' Associations
Chapter X Securities Supervision and Administration Organizations
Chapter XI Legal Responsibilities
Chapter XII Supplementary Provision

Chapter I General Provisions

Article I. The formulation of this law aims to regulate stock issuance and transactions, to protect investors' legitimate rights and interests, to safeguard economic order and public interests of the society, and to enhance the development of the socialist market economy.

Article 2. This law will be applicable to the issuance and transactions of shares, company bonds, and other securities designated by the State Council according to law within China's territory. Situations that are stipulated in this law will be covered by the provisions of the Company Law, other laws, and administrative rules and regulations. The issuance and transactions of government treasury bonds will be governed separately by the provisions of other laws and administrative rules and regulations.

Article 3. When issuing and dealing in securities, all concerned must abide by the principles of openness and fairness.

Article 4. All participants involved in issuing and dealing in securities enjoy equal legal status, and shall abide by the principles that their acts will be voluntary, reimbursable, honest, and trustworthy.

Article 5. When issuing and dealing in securities, all concerned must abide by laws and administrative rules and regulations. Cheating, insider trading, and manipulation of stock markets are prohibited.

Article 6.
Stock firms, banks, trust firms, and insurance agencies shall operate separately and be administered separately. Stock firms, banks, trust firms, and insurance agencies shall be established separately.

Article 7. According to law, the securities regulatory body under the State Council shall centralize and unify the supervision and administration of all stock markets in China. If necessary, the securities regulatory body under the State Council may set up branches that will execute supervisory and administrative functions according to authorization.

Article 8. Under the prerequisite that the state shall centralize and unify the supervision and administration of the issuance and transactions of securities, stock brokers shall establish their own associations so as to exercise self‑disciplining administration.

Article 9.
According to law, the state auditing organ shall supervise by auditing the accounts of stock exchanges, securities companies, securities registration and settlement organizations, and securities supervision and administration organizations.

Chapter 11 Stock Issuance

Article 10. Before publicly issuing securities, one must fulfill the provisions of laws and administrative rules and regulations; report, according to law, to the securities regulatory body under the State Council, or to a relevant department authorized by the State Council; and attain its prior approval. Without attaining prior approval according to law, no unit or individual is allowed to openly issue securities to the public.

Article 11. Before publicly issuing shares, one must abide by the provisions of the Company Law, and report to and attain prior approval from the securities regulatory body under the State Council. The applicant‑issuer must submit to the securities regulatory body under the State Council, application documents as required by relevant provisions of the Company Law and other relevant documents as stipulated by the securities regulatory body under the State Council. Before issuing company bonds, one must abide by the provisions of the Company Law, and report to and attain prior approval from a relevant department authorized by the State Council. The applicant‑issuer must submit to the relevant department authorized by the State Council, application documents as required by relevant provisions of the Company Law and other relevant documents as stipulated by the relevant department authorized by the State Council.

Article 12. The organ or department legally in charge of examining and approving the application of an applicant‑issuer who applies to publicly issue securities according to law shall decide the formats of application documents and the modes for submitting them,

Article 13. When submitting application documents to the securities regulatory body under the State Council or to a relevant department authorized by the State Council for the approval to issue securities, the applicant‑issuer must furnish truthful, accurate, and complete information. The special organizations and personnel in charge of issuing relevant documents for securities issuance must strictly execute their legal duties, and ensure that the documents issued by them are truthful, accurate, and complete.

Article 14. The securities regulatory body under the State Council shall establish an issuance examination committee that will examine and approve, according to law, the applications for share issuance. The issuance examination committee will consist of professionals from the securities regulatory body under the State Council and outside experts hired by the securities regulatory body under the State Council. They will decide by casting their votes on the applications for share issuance, and expressed views on their deliberations. The securities regulatory body under the State Council shall formulate the specific provisions for establishing the issuance examination committee, and the appointment periods and work procedures for its personnel, and submit them to the State Council for its approval.

Article 15. The securities regulatory body under the State Council shall be responsible for approving stock issue applications in accordance with the law. The approval procedure shall be made public and subject to supervision in accordance with the law. Personnel who are involved in approving stock issue applications shall not have any interests in units applying for the issue; shall not receive gifts from units applying for the issue; shall not hold stocks of the approve issue; and shall not have private contact with units applying for the stock issue. The examination and approval of a company's application for bond issue by State Council‑authorized departments shall be implemented in accordance with the stipulations of the previous two paragraphs.

Article 16. The securities regulatory body under the State Council or State Council‑authorized departments shall make a decision within three months from the date of receipt of stock issue application papers. The organizations or departments shall give an explanation for applications that are not approved or examined.

Article 17. When a stock issue application is examined and approved, the stock issuer shall, in accordance with the stipulations of laws and administrative rules and regulations, issue a public subscription notice before the public issue of the stock, and place the notice in designated places for the public to read. Before making public the information on the stock issue in accordance with the law, any person who has information on the issue shall not disclose such information. The issuer shall not issue stocks before issuing a public subscription notice.

Article 18. When the securities regulatory body under the State Council or State Council‑authorized departments discover that the approval or decision to examine and approve a stock issue is not in compliance with the stipulations of laws and administrative rules and regulations, they shall annul the approval and decision. The stock issue shall be canceled if the issue has not commenced. For stocks already issued, stockholders shall ask the issuer to reftmd the issue price and the interest calculated on the price, using the bank deposit interest rate for the corresponding period.

Article 19. After the issue of stock in accordance with the laws, the issuer shall be responsible for changes in the operations and profits; and investors shall be responsible for investment risks arising from these changes.

Article 20. When a listed company issues new stocks, it shall comply with the conditions required by the Company Law on new stock issue. It may sell the new stocks to the public or to existing stockholders. A listed company shall utilize the capital it procures from stock issue in accordance with the uses explained in the public issue subscription notice. Changes in the listed capital uses in the stock issue explanations shall be approved by the general shareholders' meeting. A company shall not issue new stocks if it makes unauthorized changes in the use of capital which are not corrected or which are not approved by the shareholders' meeting.

Article 21. A securities company shall, in accordance with the stipulations of laws and administrative rules and regulations, underwrite to sell the securities an issuer offers for public subscription. The underwriting business is operated on a commission or sole agency basis. Commission underwriting refers to the method whereby a securities company undertakes to sell securities on behalf of the issuer and return all unsold securities to the issuer at the end of the underwriting period. The sole agency method of underwriting refers to the method whereby a securities company acquires all securities of the issuer in accordance with the agreement, or acquires all unsold securities after the publicoffer at the end of the underwriting period.

Article 22. An issuer who publicly issues securities has the right to select an underwriting securities company. Securities companies shall not procure the underwriting business with improper means of competition.

Article 23. The following shall be included in the underwriting or sole agency agreement signed between a securities company and a stock issuer:

(1) Names, addresses, and legal representatives of the parties; (2) Types, quantity, monetary amount, and issue price of the stocks underwritten on the commission and sole agency methods; (3) The duration, including the commencement date and deadline of the securities underwriting on the commission and sole agency methods; (4) The payment method and payment date for the securities underwriting on the commission and sole agency methods; (5) The fees and settlement method for the securities underwriting on the commission and sole agency methods; (6) Liability for breach of contract. (7) Other matters specified by the securities regulatory body under the State Council.

Article 24. A securities company shall verify the authenticity, correctness, and completeness of documents of the public stock issue it underwrites. It shall not proceed with the sale if false records, misrepresentations, or major omissions are discovered in the documents. It shall immediately stop the sale and take remedial measures on stocks it has sold.

Article 25. Where the total face value of a public stock issue exceeds 50 million renminbi, the issue shall be underwritten by an underwriting syndicate, which shall include a principal underwriting securities company and other companies who participate as joint underwriters of the share issue.

Article 26. The maximum period for underwriting the stock issue on a commission or sole agency basis shall not exceed 90 days. Within the period for underwriting the stock issue on a commission or sole agency basis, the securities company shall guarantee to first sell the stocks to subscribers. The securities company shall not reserve the stocks it underwrites to sell or make advance purchases of the stocks it solely underwrites.

Article 27. Where a securities company solely underwrites a stock issue, it shall report the stock sale to the securities supervision and administration organizations for record within 15 days after the expiry of the period of solely underwriting. Where a securities company underwrites stocks on a commission basis, it shall report the stock sale jointly with the issuer to the securities regulatory body under the State Council for record within 15 days after the expiry of the period for underwriting the stock issue on a commission basis. Article 28 Where a stock is issued at a premium, the issue price shall be discussed and determined between the issuer and the underwriting securities company, and report to the securities regulatory body under the State Council for approval. Article 29 Where a domestic enterprise directly or indirectly issues stocks abroad or lists its stocks for trading abroad, the enterprise shall obtain approval from the securities regulatory body under the State Council.


Chapter III. Stock Transactions

Section I. General Rules

Article 30. Stocks traded by parties to a stock transaction shall be the stocks issued and paid for in accordance with the law. Stocks not issued in accordance with the law shall not be traded.

Article 31. Stocks, company bonds, and other securities issued in accordance with the law shall be subject to restrictions stipulated by the law on the allotted times for transfer. They shall not be traded within the restricted allotted time periods.

Article 32. Stocks, company bonds, and other securities approved for listing and trading in accordance with the law shall be listed for trading in stock exchanges.

Article 33. The method of open and centralized price bidding shall be adopted for trading of stocks in stock exchanges. The principle of price and time preference shall be practiced in centralized price bidding in stock trading.

Article 34. Stocks traded by parties to a stock transaction shall be in paper form or other forms specified by the securities regulatory body under the State Council.

Article 35. The spot transaction method shall be implemented in stock transactions.

Article 36. Securities companies shall not engage in stock trading activities to raise capital or stocks from clients. Article 37 Personnel working at stock exchanges, securities companies, and securities registration and settlement institutions; personnel working at securities supervision and administration organizations; and other personnel prohibited by laws and administrative rules and regulations from participating in stock trading shall not hold stocks, trade in stocks, and receive stocks given by other people, directly under their names or under false names or other people's names during the term of their office or within the allotted time periods specified by the law. When a person becomes one of the personnel listed in the preceding paragraph, he or she shall transfer his or her stocks in accordance with the law.

Article 38. Stock exchanges, securities companies, and securities registration and settlement institutions shall keep their client accounts confidential in accordance with the law.

Article 39. Any special organization or its personnel that have prepared an auditing report, assets appraisal report, or legal advice for the issuance of a stock are prohibited from buying or selling the stock in question while the stock is being underwritten and within six month after the period of underwriting. In addition to provisions of the preceding paragraph, any special organization or its personnel that prepares an auditing report, assets appraisal report, or legal advice for a listed company is prohibited from buying or selling stocks of the company from the day it accepts the assignment until five days after the aforementioned document is published.


Article 40. Fees for security exchanges shall be reasonable; fees, fee standards, and fee methods shall be made public. Fees for securities exchanges, fee standards and management procedures shall be standardized by relevant authorities under the State Council.

Article 41. A stockholder shall notify the company within three days when the stocks in his possession have reached five percent of the stocks issued by a limited liability company. The company shall report it to the securities regulatory body under the State Council within three days of receipt of the report. Where is the company is listed, it shall also report it to the security exchange.

Article 42. Where the stockholder in the preceding article sells the stocks of the company in his possession within six months after he purchases them, or where he buys them back within six months after he sells them, profits from the transaction shall belong to the company and the company's board of directors shall take back the stockholder's profits. Where the securities company, as the sole underwriter, purchases all the unsold stocks and therefore exceeds the five‑percent possession limit, it is exempt from the six‑month restriction when it resells the stocks. Where the board of directors refuses to comply with the provisions of the preceding paragraph, other stockholders have the right to ask the board to comply. Where the board of directors' refusal to comply with the first paragraph of this article has resulted in losses to the company, the responsible directors are liable for the damages in accordance with the law.

Section Il Stock Listing

Article 43. When a limited liability company applies to have its stocks listed, it shall submit an application to the securities regulatory body of the State Council for approval. The securities regulatory body of the State Council may empower a security exchange to approve stock listings in line with legally prescribed conditions and procedures.

Article 44. The state encourages companies that conform with the policy for encouraging industrial development and also meet the conditions for stock listing to have their stocks listed.

Article 45. The following documents shall be submitted together with an application to the securities regulatory body of the State Council to have one's stock listed and traded at the exchange:

(1) The listing report; (2) The decision made by the shareholders' meeting to have the company listed; (3) The company's articles of incorporation; (4) The company's business license; (5) Balance sheets for the most recent three years, or since the company's founding, certified by a certifying organization; (6) Legal advice and recommendation of the securities company; and (7) The latest prospectus.


Article 46. After the application for stock listing is approved by the securities regulatory body under the State Council, the issuer shall submit to the stock exchange the approved document and relevant documents listed in the preceding article. The stock exchange shall arrange the listing of the said stock within six months after receipt from the issuer of the documents listed in the preceding paragraph.

Article 47 After the application for listing its stocks is approved by the stock exchanges, a listed company shall publish relevant documents concerning the approved listed stocks five days before trade of listed stocks begins. The said documents shall also be placed at appointed places for the public to read.

Article 48 In addition to the documents concerning the listing application stipulated by the preceding article, a listed company shall also publish the following:

(1) The date from which trade of stocks is approved to begin in the stock exchanges; (2) The name list of the top 10 stock holders of the company and the numbers of their stocks; and (3) The names of directors, supervisors, managers, and high‑ranking administrators as well as information on their stock and bond holdings in the company.

Article 49. When a listing company loses its listing conditions stipulated by the regulations of the company law, the listing of its stocks shall be suspended or terminated.

Article 50. The application filed by a company for listing its bonds must be approved by the securities regulatory body under the State Council. The securities regulatory body under the State Council can authorize the stock exchanges to approve a company's application for listing its bonds in accordance with legal conditions and legal procedures.

Article 51. In applying for listing its bonds, a company must meet the following conditions:

(1) The term of the company's bonds must be about one year; (2) The amount of the bonds issued shall be no less than 50 million yuan; and (3) The conditions for issuing the bonds shall be met at the time when a company applies for listing its bonds.

Article 52. When applying with the securities regulatory body under the State Council for listing its bonds, a company shall submit the following documents:

(1) The listing report; (2) The decision adopted by the board of directors regarding listing application; (3) The company charter; (4) The company's business license; (5) The company's measures regarding raising its bonds; and (6) The actual amount of the company's bonds issued.

Article 53. After being approved by the securities regulatory body under the State Council for listing its bonds, the issuer shall submit to the stock exchanges the approved document and relevant documents stipulated by the preceding article. The stock exchanges shall arrange the listing of the said bonds within three months after its has received from the issuer the documents stipulated in the preceding paragraph.

Article 54.After the stock exchanges have agreed to a company's application for listing its bonds, the issuer shall publish the company's report on its bond listing, approved documents and documents concerning its listing application five day before listing its bonds. The said documents shall also be placed at appointed places for the public to read.

Article 55. The securities regulatory body under the State Council shall order a company, after listing its bonds, to suspend its bond listing if one of the following conditions occur:

(1) The company commits a major violation of law; (2) The company experiences major changes, which do not conform to the conditions for a company to list its bonds; (3) The funds raised by the company's bonds are not used in accordance with the purposes approved by the authorities concerned; (4) The company fails to carry out its obligations stipulated by the company's measures for raising bonds; and (5) The company experiences consecutive economic losses in the most recent two years.

Article 56. If a company experiences one of the situations enumerated in paragraphs (1) to (4) of the preceding article and is found to have severe consequences after investigations or one of the situations enumerated in paragraphs (2), (3), or (5) of the preceding article and these situations have not been eliminated within a set period of time, the securities regulatory body under the State Council shall make a decision to terminate the listing of the company's bonds. When a company is disbanded, ordered to close in accordance with law, or announced bankrupt, the stock exchanges shall terminate the listing of its bonds and report for the record to the securities regulatory body under the State Council.

Article 57. The securities regulatory body under the State Council can authorize the stock exchanges to suspend or terminate the listing of a company's stocks or bonds in accordance with the law.

Section III. Continuous Dissemination of Information

Article 58. According to the regulations of the Company Law, a company that has been approved by the securities regulatory body under the State Council to list its stocks in accordance with law or by the department authorized by the State Council to issue its bonds in accordance with the law shall publish its prospectus or its measures for raising bonds. The company that issues new stocks or bonds in accordance with the law shall also publish its financial accounting report.

Article 59. The documents published by a company regarding the issuance and listing of its stocks or bonds shall be true, accurate, and complete and no fake records, misleading statements, or major omissions are allowed.

Article 60. A company that has listed its stocks or bonds shall submit a mid‑term report with the following information to the securities regulatory body under the State Council and to the stock exchanges within two months after the end of the first half year of each accounting year. Such documents shall also be published.

(1) The company's financial accounting report and management situation; (2) Major lawsuits involving the company; (3) The changes of stocks and bonds already issued; (4) Major matters submitted to the general meeting of stockholders for examination; and (5) Other matters stipulated by the securities regulatory body under the State Council.

Article 61. A company that has listed its stocks or bonds shall submit an annual report with following information to the securities regulatory body under the State Council and to the stock exchanges within four months after the end of each accounting year. Such documents shall also be published. (1) The company's general situation; (2) The company's financial accounting report and management situation; (3) The resumes of directors, supervisors, managers, and high‑ranking administrators as well as the situation regarding their holding of the company's stocks and bonds; (4) The situation concerning stocks and bonds already issued, including the name list of the top 10 stock holders of the company and the numbers of their stocks; and (5) Other matters stipulated by the securities regulatory body under the State Council.

Article 62. When a major incident occurs that might have a fairly large impact on the price of its listed stocks and the investors have no knowledge of the incident, a listed company shall immediately submit an interim report on the incident to the securities regulatory body under the State Council and the stock exchanges. It shall also publish the report to explain the true facts of the incident. The following situation can be termed as major incident stated in the preceding paragraph:

(1) Major changes of a company's management policy and management scope; (2) The company's decision concerning its major investment and major property purchase. (3) Major contracts signed by the company which might have an important influence on the company's assets, liabilities, rights, interests, and management results; (4) The company incurs major debts or fails to repay those debts that have come due in violation of an agreement; (5) The company experiences major economic losses or major economic losses which exceed more than 10 percent of its net assets; (6) Major changes occur in the external conditions of the company's production and management; (7) There is a change in the chairman or more than one third of directors or managers of the company; (8) There is a fairly large change in the holding of stockholders who hold more than 5 percent of the company's stocks; (9) The company's decisions to reduce capital, merge with another company, establish a separate company, disband, and apply for bankruptcy; (10) Major lawsuits involving the company and the court's canceling in accordance with law the decisions adopted by the general meeting of stockholders and the board of directors; and (11) Other matters stipulated by the regulations of laws and administrative rules.

Article 63. When the prospectus released by an issuer, or an underwriting securities company, and its corporate bonds placement measures, financial and accounting reports, listed reports, annual reports, interim reports, and provisional reports contain falsified or misleading information or important omissions that result in losses for investors during securities trading, the issuer and the underwriting securities company shall be liable for compensation, and the issuer and the liable board directors, supervisors, and managers of the underwriting securities company shall also be liable for compensation.

Article 64. Announcements that must be made by the law or by administrative regulations shall be published in newspapers and magazines authorized by relevant departments of the state, or in special bulletins. These announcements shall also be available at various companies and securities trade centers for the public to read.

Article 65. The securities regulatory body under the State Council shall supervise listed companies' annual reports, interim reports, and provisional reports, as well as the state of the announcements. They shall also supervise the state of listed companies' new stock apportionment and distribution. Securities regulatory bodies, securities exchanges, and underwriting securities companies and their personnel shall not prematurely leak out the contents of the public announcements which these companies are required to announce by the law and administrative regulations.

Article 66. The securities regulatory body under the State Council shall make timely announcements of the names of those listed companies which have had their listing credentials revoked owing to major lawless conduct, or which are not qualified to operate as listed companies. When a security exchange makes the decision mentioned in the paragraph above, it shall promptly make the announcement and report the announcement to the securities regulatory body of the State Council for the record.

Section IV. Prohibited Transactions

Article 67. Security exchange personnel with inside information are not allowed to engage in securities trading activities using inside information.

Article 68. The following personnel are personnel with inside securities trading information:

(1) Board directors, supervisors, managers, deputy managers, and other relevant senior administrators of companies that issue stocks or corporate bonds; (2) Stockholders holding 5 percent of more of a company's stocks; (3) Senior administrators of a company that controls companies that issue stocks; (4) Personnel who, because of their offices in the company they serve, can have access to information relevant to the company's securities trading; (5) Personnel working for securities regulatory organs, and other personnel who, because of their official responsibilities, supervise securities exchanges; (6) Personnel of intermediary organs, organs of securities registration and settlement, and organs providing security exchange services, who take part in securities trading because of their official responsibilities; (7) Other personnel prescribed by the securities regulatory body under the State Council.

Article 69. During securities trading, non‑publicized information concerning a company's operations and financial situation, and information having an important impact on the market prices of the company's securities, is inside information. The information below is inside information:

(1) Important events listed under the second clause of Article 62 of this law; (2) A company's plan for distributing dividends and increasing capital; (3) Important changes in the structure of a company's stock ownership; (4) Major changes in the company's security for debts; (5) The mortgaging, selling, and scrapping of a company's principal business property that exceeds one‑third of the company's property at one time; (6) The conduct of a company board directors, supervisors, managers, deputy managers, or other senior administrators that may undertake major compensatory responsibilities according to the law; (7) Plans relevant to the acquisition of listed companies; and (8) Other information which the securities regulatory body of the State Council identifies as having conspicuous effects on the prices of securities trading.

Article 70. Personnel with inside information about a company's securities trading, or other personnel having illegitimate access to inside information, shall not buy or sell the company's securities, leak the information, or suggest that other people buy or sell the securities. If this law has separate provisions governing the acquisition of stocks of a listed company by a stockholder who holds 5 percent or more of the company's stocks, the provisions shall apply.

Article 71. Nobody may use any of the following measures to acquire illegitimate interests, or pass risks onto others:

(1) Controlling the prices of securities trading through pooling capital, stocks, or information to jointly or continuously buy or sell securities, either acting individually or collectively; (2) Affecting the prices of securities trading or trading volumes by working in collusion with others to buy or sell securities at time, prices, and methods previously agreed upon; (3) Affecting the prices of securities trading, or the volume of securities trading, through purchase or sale that does not transfer ownership, considering the buyer or seller himself as the trading object; and (4) Manipulating the prices of securities trading through other means.

Article 72. State functionaries, journalists, mass communications workers, and other relevant personnel are not allowed to disseminate falsified information that will seriously affect securities trading. During securities trading, securities exchanges, securities companies, organs for securities registration and settlement, organs providing securities trading services, and intermediary organs and their workers, and securities regulatory organs and their workers are now allowed to give falsified statements or provide misleading information. Securities trading information disseminated by all media must be factual and objective and not misleading.

Article 73. During the course of securities trading, securities company and their workers are now allowed to engage in any of the following fraud that is harmful to clients' interests:

(1) Buying or selling securities for clients against their trust; (2) Failing to provide clients written confirmation within a prescribed period; (3) Misappropriating the funds entrusted by clients for securities trading, or funds in the clients' accounts; (4) Trading the securities in clients' accounts without their authorization, trading securities in the name of clients; (5) Inducing clients to proceed with unnecessary security trading for the sake of earning commissions; or (6) Other conduct that is against the clients' real intentions and is detrimental to clients' interests.

Article 74. During securities trading, corporate entities are now allowed to open accounts in the name of individuals for conducting securities trading.

Article 75. During securities trading, no one may use public funds for securities trading.

Article 76. State‑owned enterprises and enterprises holding stocks purchased with state‑owned assets may not speculate in stocks being traded on the market.

Article 77. Securities exchanges, securities companies, organs for securities registration and account settlement, and organs providing security trading services, intermediary organs and their workers must promptly report to securities regulatory organs any trading activity banned in securities trading.

Chapter IV Acquisition of Listed Companies

Article 78. A listed company may be purchased by offer or by agreement.

Article 79. Where an investor possesses five percent of the stocks issued by a listed company through trading at the stock exchange, he shall, within three days of this happening, submit a written report to the securities regulatory body of the State Council and the stock exchange, notify the listed company, and make a public announcement; he is prohibited from buying or selling that list company's stocks in the period prescribed above. After an investor already possesses five percent of the stocks of a listed company, he shall submit a report or makes a public announcement in accordance with provisions of the preceding paragraph whenever the stocks of that company in his possession increase or decrease ‑‑ through trading at the stock exchange ‑‑ by five percentage points of the company's total stocks. He is prohibited from buying or selling stocks of that company during the period of submitting the report and within two days after he makes a public announcement.

Article 80. A written report or public announcement made in accordance with the preceding article shall have the following information:

(1)  The stockholder's name and address; (2) The name and amount of stock in his possession; and (3) The date when the stocks in his possession reach the legally prescribed ratio or the date the stocks increase or decrease to the legally prescribed ratio.

Article 81. When an investor, through trading at the stock exchange, possesses 30 percent of the stocks issued by a listed company and plans to make more purchases, he shall make a purchase offer to the company's stockholders as is required by law, except where such an offer is exempted by the securities regulatory body of the State Council.

Article 82. Where a purchase offer is made to a listed company in accordance with provisions of the preceding paragraph, the buyer shall submit in advance a buying report to the securities regulatory body of the State Council; the report shall contain the following information:

(1) The buyer's name and address; (2) The buyer's decision to make the purchase; (3) Name of the listed company to be purchased; (4) Purpose of the purchase; (5) The exact name of the stocks and the amount of stocks subject to purchase; (6) The duration and price of the purchase; (7) The amount of capital needed for the purchase and collateral for the capital; (8) The amount of stocks in possession as a ratio of all the stocks issued by the listed company at the time when the report is submitted. The buyer shall also simultaneously submit a company purchase report as described in the preceding paragraph to the stock exchange.

Article 83. The buyer shall make a public announcement of the purchase offer 15 days after he submits a listed company purchase report in pursuance with provisions of the preceding paragraph. The duration of an offer shall not be less than 30 days and shall not be more than 60 days.

Article 84. A purchaser is not allowed to cancel his purchasing order within its valid term. If the purchaser wishes to change the contents of the purchasing order within its valid term, he must submit a report to the securities regulatory body under the State Council and to the stock exchanges and he must publish the change after approval.

Article 85. All the conditions stated in a purchasing order are applicable to all the stockholders of the company being purchased.

Article 86. By the time when the term of a purchasing order is expired and the number of a purchased company's stocks held by a purchaser is more than 75 percent of the total amount of stocks issued by the company, the listed company shall stop listing its stocks in the stock exchanges.

Article 87. By the time the term of a purchasing order is expired and the number of a purchased company's stocks held by a purchaser is more than 90 percent of the total amount of stocks issued by the company, other stockholders who still hold the stocks of the purchased company are entitled to sell their stocks to the purchaser with the same conditions stated in the purchasing order and the purchaser shall purchase their stocks. After the purchase is made, if the purchased company no longer meets the conditions stipulated in the Company Law, it shall change its form of enterprise in accordance with the law.

Article 88. A purchaser who purchases stocks by order is not allowed, within the term of his purchasing order, to buy or sell the stocks of a purchased company by using methods and conditions other than the ones stated in the purchasing order.

Article 89. A purchaser who purchases stocks by agreement can carry out the transference of stock rights by negotiating with other stockholders of a purchased company in according with the regulations of laws and administrative rules. When an agreement for purchasing a listed company by agreement is reached, the purchaser shall file in written form, within three days, a report on the purchase agreement with the securities regulatory body under the State Council and with the stock exchanges. Such a report shall also be published. The purchasing agreement shall not be carried out before the proclamation.

Article 90. For the purchases under agreement, either party of the agreement may temporarily entrust the institutions of securities registration and account balancing with safekeeping the agreed transfer securities, and deposit the capital into the designated bank.

Article 91. On purchasing a listed company, the purchaser shall not transfer the purchased stocks within six months after the purchase has been completed.

Article 92. Purchasing stocks from a company that is being purchased under offer or agreement and the subsequent dissolution of the company amount to a corporate merger. The purchaser will convert in accordance with law the stocks held originally by the dissolved company.

Article 93. After purchase of the listed company has been completed, the purchaser shall report the purchase to the securities regulatory body of the State Council and the stock exchange, and make a public announcement.

Article 94 When purchasing a listed company involves the stocks held by an investment institution authorized by the state, it is necessary to obtain approval from the relevant department in charge in accordance with the stipulations of the State Council.

Chapter V. Stock Exchanges

Article 95. The stock exchange is a non‑profit legal entity which provides a venue in which securities are collectively traded by bidding. The establishment and dissolution of a stock exchange is decided by the State Council.

Article 96. Setting up a stock exchange requires formulation of regulations. Formulation and revision of the regulations concerning a stock exchange must be approved by the securities regulatory body of the State Council.

Article 97. A stock exchange must include in its name the words which indicate stock exchange. Any other units or individuals shall not adopt a name that indicates stock exchange or words of a similar meaning.

Article 98. All costs and revenues which can be allocated by the stock exchange itself shall first be used to guarantee a normal operation of the stock exchange venue and facilities, and improve gradually. The accumulated gain of a stock exchange belongs to the members, who jointly share the right to the accumulation. In the time the stock exchange exists, the accumulation shall not be allocated to the members.

Article 99. A board of directors is set up in a stock exchange.

Article 100. A stock exchange is provided with a general manager, who is appointed or dismissed by the securities regulatory body of the State Council.

Article 101. If any of the following situations or those stipulated in article 57 of the Corporation Law can be applied to any individuals, they shall not assume the positions of being the responsible people of a stock exchange:

(1) The responsible people of a stock exchange or a securities registration and account balancing institution, or the directors, supervisors, or managers of a stock exchange who have been removed from office due to practices in violation of the law or of discipline, and it has been less than five years since the day of their removal. (2) Lawyers, registered accountants, or professionals at assets assessment or verification institutions who have been disqualified due to practices in violation of the law or of discipline, and it has been less than five years since the day of their disqualification.

Article 102. Employees of a stock exchange, securities registration or account balancing institution, or securities company who have been dismissed due to practices in violation of the law or of discipline, or dismissed state organ employees shall not be recruited as employees of a stock exchange.

Article 103. The securities companies that participate in collective trading through bidding at a stock exchange must be those that hold stock exchange membership.

Article 104. Investors shall open stock exchange accounts with securities companies, and in written form, by telephone, or through other means entrust the company with buying and selling securities for them. Investors who sell and buy securities through the securities companies with which they have opened accounts shall entrust the companies by adopting market price or limit price.

Article 105. Entrusted by investors, securities companies will file trading declarations based on the rule of time precedence, and participate in the collective trading through bidding at the stock exchange. The securities registration and account balancing institutions conduct stock clearing and delivery of securities and capital, and handle the procedures of security registration and transfer ownership based on transaction results and in accordance with the rules of clearing and delivery.

Article 106. The securities companies, either entrusted or self‑operating, shall not sell the securities on the same day they are purchased.

Article 107. The stock exchange shall provide guarantee for organized and fair collective trading through bidding, promptly publicize stock market prices, and create and publicize stock quotations lists based on the situation of the transaction day.

Article 108. The stock exchange handles affairs regarding suspension, resumption, and termination of the listing of stocks and corporate bonds on the basis of law and administrative regulations. The concrete procedures are formulated by the securities regulatory body of the State Council.

Article 109. When an emergency affects the normal operation of a stock exchange, it can introduce technical measures to stop listings; in the event of an irresistible emergency or to preserve its normal operation, it can decide to temporarily halt trading. If a stock exchange introduces technical measures to stop listings or decides to temporarily halt trading, it must immediately report this to the State Council's securities regulatory body.

Article 110. A stock exchange monitors and supervises securities trading and, in accordance with the requirements of the State Council's securities regulatory body, report on abnormal trading. A stock exchange shall supervise the information released by the company on the listing, and it shall also supervise the company in lawfully, promptly, and accurately releasing information.

Article 111. A stock exchange shall deduct a proportionate amount of money from the trading costs, membership fees, and seat fees to set up a risk‑bearing fund, which will be managed by the stock exchange administrative board. The detailed percentage of deduction and the procedures to use the fund will be decided by the State Council's securities regulatory and financial institutions.

Article 112. A stock exchange shall deposit in a special bank account the trading guarantee fund and risk‑bearing fund it has collected, and unauthorized use of these funds is not allowed.

Article 113. A stock exchange shall, in accordance with the Securities Law and the Administrative Law, formulate detailed rules on competitive trading, regulations governing its members, and rules concerning its employees, and shall submit these to the State Council's securities regulatory body for approval.

Article 114. Leaders or employees of a stock exchange shall avoid performing any securities trading linked to their interests or their relatives' interests.

Article 115. Trading that has proceeded in compliance with trading rules worked out according to law brooks no change. A breach of trading rules cannot be exempted from civil liability, and the profits obtained from this violation will be treated according to the relevant regulations.

Article 116. Those engaged in securities trading at a stock exchange who violate the stock exchange's regulations will be given disciplinary punishment by the stock exchange. If their violation is serious, they will be disqualified and forbidden to enter the stock exchange for any trading.

Chapter VI Securities Companies

Article 117. The establishment of a securities company must be examined and approved by the State Council's securities regulatory body. Without the approval of this institution, no one is allowed to engage in securities business.

Article 118. The securities company mentioned by this law refers to a company with limited liabilities or a shareholding company, which are both permitted by the Company Law and the preceding article to engage in securities business.

Article 119. The state exercises management over securities companies, dividing them into comprehensive securities companies and brokerage securities companies. The State Council's securities regulatory body will provide them with licenses according to their different types.

Article 120. Securities companies must use the names of securities companies with limited liabilities or shareholding securities companies. Brokerage securities companies must use the word "brokerage" for their names.

Article 121. The establishment of a comprehensive securities company must conform with the following requirements: (1) A minimum registered capital of 500 million yuan; (2) Qualified managerial personnel and employees; (3) A fixed operational site and up‑to‑standard trading facilities; (4) A perfect management system and a standard operational system for its business and brokers.

Article 122. A brokerage securities company must have a minimum registered capital of 50 million yuan, qualified managerial personnel and employees, a fixed operational site and up‑to‑standard trading facilities, and a perfect management system.

Article 123. A securities company must obtain the approval of the State Council's securities regulatory body if it wants to set up or dissolve a branch, change its business scope or registered capital, alter its regulations, merge with another company, spin off, change the company form, or abolish itself.

Article 124. A securities company's total external debt must not exceed the prescribed multiple amount of its net assets; its floating debt must not exceed the prescribed percentage of its floating assets. The State Council's securities regulatory body will provide regulations on the specific multiple amount, percentage, and management procedures.

Article 125. Those who fall into the provisions of Article 57 of the Company Law or into one of the following situations are not allowed to sit on the board of directors or the board of supervisors or to be appointed as managers: Persons in charge of a stock exchange or a stock registration and accounting institution, members of the board of directors or the board of supervisors, and managers who have been removed from their posts for violation of law or discipline within the last five years. Lawyers, registered accountants, and professionals of statutory asset assessment and verification institutions whose qualifications have been revoked for violation of law or discipline within the last five years.

Article 126. Employees of a stock exchange, a stock registration and accounting institution, and a securities company, as well as government functionaries who are fired for violation of law or discipline are not allowed to be recruited by securities companies.

Article 127. Government office personnel and other personnel who are forbidden by law and administrative regulations to take up concurrent posts at companies are not allowed to hold concurrent posts at securities companies. Members of the board of directors, members of the board of supervisors, managers, and employees of a securities company are not allowed to take up concurrent posts at other securities companies.

Article 128. Securities companies shall withhold from their yearly after‑tax earnings a securities transaction risk reserve to cover losses incurred from securities transactions. The specific ratio of withholding shall be regulated by the State Council securities regulatory body.

Article 129. Comprehensive securities companies shall operate the following types of securities business:

(1) Securities brokerage business; (2) Securities proprietary business; (3) Securities underwriting business; (4) Other securities businesses approved by the State Council securities regulatory body.

Article 130. Brokerage‑type securities companies are allowed to operate brokerage business only.

Article 131. Securities companies shall submit application for the scope of business allowed to the State Council securities regulatory body for approval in accordance with the provisions specified in the preceding two articles. Securities companies shall not operate securities or other types of business beyond the approved scope of business.

Article 132. Comprehensive securities companies shall separate their brokerage business from proprietary business, and their business personnel and business accounts shall also be separated accordingly and they shall not be mixed together. Customers' funds for transaction settlement must be placed in full in a designated commercial bank on a separate account. Use of customers' transaction settlement funds for other purposes is strictly prohibited.

Article 133. Banks are prohibited from putting funds in the stock market in violation of regulations. Securities companies shall use their own funds or funds raised in accordance with the law when operating proprietary business.

Article 134. Securities companies' proprietary business shall be conducted in the names of the securities companies themselves and not in other's names or in the names of individuals. Securities companies shall not lend the accounts of their proprietary business to others.

Article 135. Securities companies shall have the right to operate independently in accordance with the law, and their legitimate operations shall not be interfered.

Article 136. Where a securities company's registered capital is less than what is required for operating business in a given field as provided for under this law, the State Council securities regulatory body shall withdraw the approval of its right to operate business in that field.

Article 137. A securities company that buys and sells securities on behalf of customers and operates as an intermediary shall be a securities brokerage with the credentials of a legal person.

Article 138. When operating brokerage business, securities companies shall set up separate securities and money accounts for customers and shall separately manage the securities and money delivered to them by the customers. They shall truthfully record the transactions and shall not falsify records. When opening accounts, customers shall present legal documents certifying their identification as Chinese citizens or Chinese legal persons.

Article 139. When operating brokerage business, securities companies shall prepare uniform certificates of authorization for securities transaction for use by the clients. When other forms of authorization are used, records of authorization must be noted. When customers authorize purchase or sale of securities, securities companies shall retain the records of authorization for safekeeping within a prescribed period, regardless of whether the transaction is effected or not.

Article 140. When accepting authorization to purchase or sell securities, securities companies shall purchase or sell securities based on the securities names, volumes, methods of payment, and offering prices specified in the letter of authorization, and in accordance with the transaction rules and regulations. When transactions are completed, securities companies shall prepare transaction reports to customers in accordance with the regulations. The account statements confirming securities transactions and their results must be truthful. Auditing personnel other than those undertaking the transactions shall audit every transaction to ensure that the balance of the securities in the accounts are identical to the securities actually in possession.

Article 141. Securities companies shall only sell, by authorization, securities held in the customers' accounts and shall not finance securities transactions on behalf of customers.

Securities companies shall only purchase, by authorization, securities with funds actually held in the customers' accounts and shall not finance securities transactions on behalf of customers.

Article 142. When operating brokerage business, securities companies shall not accept customers' powers of attorney carte blanche and determine the purchase and sale of securities by selecting the securities and deciding on the volumes or prices on their behalf.

Article 143 Securities companies shall not make promises, in any form, concerning the profitability of securities transactions or commit themselves to compensate customers for losses incurred as a result of securities transactions.

Article 144. Securities companies and their employees shall not privately accept customers' authorization to purchase or sell securities at business venues that are not established in accordance with the law.

Article 145. During securities transaction, when the employees of a securities company act in accordance with the company's instruction or act in violation of transaction rules and regulations while performing their jobs, the securities companies shall assume full responsibility for the employees' action.

Chapter VII. Securities Registration and Settlement Organizations

Article 146. Securities registration and settlement organizations are non‑profit legal entities that provide centralized services including registration and safekeeping of securities, and settlement of stock transactions. Before securities registration and settlement organizations are established, they must attain prior approval from the securities regulatory body under the State Council.

Article 147. Before a securities registration and settlement organization is established, it shall have the following conditions: Its own funds shall be no less than 200 million yuan. (2) It has premises and facilities required for rendering services including registration and safekeeping of securities, and settlement of stock transactions. Its key managers and personnel must be qualified to deal in securities. (4) Other conditions stipulated by the securities regulatory body under the State Council. The names of securities registration and settlement organizations shall include "securities registration and settlement."

Article 148. Securities registration and settlement organizations are to execute the following functions: (1) Opening securities accounts and accounts for settlement of stock transactions. (2) Facilitating the safekeeping and transfer of securities; (3) Record lists of securities owners; (4) Settlement and entrustment of stocks listed on stock exchanges; (5) Distributing the rights and interests of securities as entrusted by issuers; (6) Handling inquiries related to the above operations; (7) Other businesses approved by the securities regulatory body under the State Council.

Article 149. Registration of securities and settlement of stock transactions shall be centralized and unified in China. Securities registration and settlement organizations shall formulate their organization articles and rules of operations according to law, and must attain prior approval from the securities regulatory body under the State Council in this regard.

Article 150. Before selling their listed securities, owners of the securities shall leave all their securities to be transacted with a securities registration and settlement organization which will hold them in trust. Securities registration and settlement organizations shall not mortgage their clients' securities or lend them to others.

Article 151. Securities registration and settlement organizations shall supply the list of securities owners and other relevant information to the securities issuers. In accordance with the actual registrations of securities and settlement of stock transactions, securities registration and settlement organizations shall verify the amount of various securities held by securities owners and supply the registered list of securities owners. Securities registration and settlement organizations shall truthfully, accurately, and thoroughly maintain the list of securities owners and a record of transfers of securities. They shall not fabricate, change without authorization, or destroy them.

Article 152. Securities registration and settlement organizations shall take the following measures to ensure that their operations will proceed normally: (1) They have the necessary service facilities and shall take effective measures to ensure the security of their data. (2) They shall establish effective administrative systems to safeguard their operations, finances, and security. They shall establish very effective systems to handle risks.

Article 153. Securities registration and settlement organizations shall properly keep the original evidences for the registration and safekeeping of securities, and settlement of stock transactions. The period for keeping important original evidences shall be no less than 20 years.

Article 154. A securities registration and settlement organization shall establish a settlement risk fund to be deposited in a special account of a designated bank. The settlement risk fund shall be used to pay for losses incurred by the securities registration and settlement organization due to technical malfunctions, operational mistakes, and other uncontrollable factors. Securities registration and settlement organizations shall contribute to securities settlement risk funds by withdrawing from their business incomes and revenues. Meanwhile, securities companies shall also contribute to securities settlement risk funds in accordance with a certain ratio of their total stock transactions. Together with relevant finance departments under the State Council, the securities regulatory body under the State Council shall jointly formulate procedures governing the collection and administration of securities settlement risk funds.

Article 155. Securities settlement risk funds shall be under special management. After paying compensations from its risk fund, the relevant securities registration and settlement organization shall seek compensations from those who are responsible for the losses.

Article 156. Before filing for dissolution, securities registration and settlement organizations shall attain prior approval from the securities regulatory body under the State Council.

Chapter VIII. Stock Exchange Service Organizations

Article 157. Professional securities investment consultation institutions and credit evaluation institutions may be set up to meet the needs of securities investments and transactions. The State Council's securities regulatory body shall stipulate the conditions and approval procedures, as well as the operating rules for setting up and governing such institutions.

Article 158. Professionals in securities investment consultation institutions and credit evaluation institutions must possess professional knowledge and more than two years of experience in the securities business area. The State Council's securities regulatory body shall establish the standards and administrative procedures for assessing the qualifications of these securities professionals.

Article 159. The professionals in securities investment consultation institutions are not allowed to carry out the following activities: (1) Invest in securities on behalf of their clients; (2) Arrange to share the profits or losses of their clients' securities investments; (3) Buy or sell the stocks of listed companies served by their institutions; or Other activities prohibited by laws or administrative regulations.

Article 160. Professional securities investment consultation institutions and credit evaluation institutions shall charge service fees according to the standards or procedures stipulated by the relevant administrative department of the State Council.

Article 161. Professional institutions and personnel in charge of issuing documents such as audit reports, asset evaluation reports, or legal advice related to the issuance, listing, or transactions of securities must issue such documents according to the work procedures specified by professional rules. They must verify and confirm the truthfulness, accuracy, and completeness of the contents of such reports, and assume joint liability for those parts they are responsible for.

Chapter IX. The Stock Brokers' Association

Article 162. The stock brokers' association is a self‑regulatory organization and a social legal entity.

Securities firms shall join the stock brokers' association. The Stock Brokers' Association's power organ is its general assembly consisting of all members of the association.

Article 163. The general assembly shall formulate the statutes of the association and submit them to the State Council's securities regulatory body for filing.

Article 164 The Stock Brokers' Association shall carry out the following duties:

(1) Assist the securities supervision and administrative organization in educating the association's members on securities laws and administrative regulations and organizing the members to implement these laws and regulations; (2) Protect the members' legal rights and interests according to law and provide feedback to the securities supervision and administration organization on the members' suggestions and requests; (3) Gather and organize securities information as a service to the members; (4) Formulate rules for the members to abide by, organize training for professionals of member institutions and promote communications among members; (5) Resolve disputes among members and between members and clients; (6) Organize the members to study the development, operation, and other relevant issues of the securities sector. (7) Supervise and inspect the members' activities, and take disciplinary actions according to regulations against those who violate laws, administrative regulations, or the association's statutes; and (8) Other duties entrusted by the State Council's securities regulatory body.

Article 165. The Stock Brokers' Association shall set up a council. Members of the council shall be elected according to the association's statutes.

Chapter X. The Securities Regulatory Body

Article 166. The State Council's securities regulatory body shall supervise and administer the securities market according to law, maintain order in the market, and ensure the market operates in a lawful manner.

Article 167. The State Council's securities regulatory body shall carry out the following supervisory and administrative duties in regards to the securities market: (1) Formulate rules and regulations related to the supervision and administration of the securities market according to law and exercise its examination and approval power according to law; (2) Supervise and administer according to law the issuance, transactions, registration, trusteeship, and settlement of securities; (3) Supervise and administer according to law the securities‑related activities of securities issuers, listed companies, stock exchanges, securities firms, securities registration and settlement institutions, securities investment fund management institutions, securities investment consultation institutions, and credit evaluation institutions, as well as law firms, accounting firms, and asset evaluation institutions involved in the securities business; (4) Formulate standards of qualifications and codes of conduct for securities professionals and supervise the implementation of such standards and codes according to the law; (5) Supervise and inspect according to the law the public disclosure of information on securities issuance and transactions; (6) Guide and supervise according to the law the activities of the stock brokers' association; (7) Investigate and handle according to the law any conduct that violates the laws and administrative regulations formulated for the supervision and administration of the securities market; and (8) Other duties stipulated by laws and administrative regulations.

Article 168. While executing its duties according to the law, the securities regulatory body under the State Council is entitled to take the following measures: (1) To enter premises where an illegal act has been committed to investigate and to attain evidence;( 2) To question people involved, and units and individuals related to the incident under investigation, and to demand that they explain relevant issues related to the incident under investigation; (3) To read, check, and duplicate the records of securities transactions, the records of transfers of securities, financial accounts, and other relevant documents and materials of the people involved, and the units and individuals related to the incident under investigation. It can seal up and keep documents and materials that may be removed or hidden. (4) To check the funds accounts and securities accounts of the people involved, and the units and individuals related to the incident under investigation. When there is evidence that such funds and securities may be transferred or hidden, it can apply to freeze them at a judicial organ.

Article 169. While executing their duties according to law to supervise an inspection or investigation, personnel of the securities regulatory body under the State Council shall show their relevant identification papers. They are also obligated to protect the secrecy of business secrets that they have learned from relevant units and individuals.

Article 170. Personnel of the securities regulatory body under the State Council must faithfully carry out their duties, operate according to law, and be just and honest. They shall not abuse their powers to obtain illegitimate interests.

Article 171. While the securities regulatory body under the State Council is executing its duties according to law, units and individuals under investigation shall be cooperative, and truthfully provide relevant documents and materials required. They shall not refuse or obstruct it, or conceal any relevant documents and materials.

Article 172. 'The securities regulatory body under the State Council shall publish its rules and regulations, and its supervision and administration work system formulated according to law. After deciding to penalize an unlawful act of securities transaction based on its investigations, the securities regulatory body under the State Council shall publicize the decision.

Article 173.. While executing its duties according to law and discovering an unlawful act of securities transaction that may probably constitute a crime, the securities regulatory body under the State Council shall transfer the case to an judicial organ so that the latter will handle it.

Article 174 Personnel of the securities regulatory body under the State Council shall not concurrently occupy posts in organizations under their supervision and administration.

Chapter XI. Legal Liability

Article 175. Those who issue securities without the approval or examination and approval of a competent organ or who issue securities using false issuance documents are to be ordered to stop issuing, return all funds raised plus bank interests accrued during the period, and pay a fine of an amount of more than I percent but less than 5 percent of the illegally raised fund Persons in charge directly responsible for the case and other persons with direct responsibility are to be warned and are to pay a fine of more than 30,000 yuan but less than 300,000 yuan. Those involved in crimes are to be investigated for their criminal liability according to law.

Article 176. Securities companies which market securities or serve as agents in buying and selling securities that are issued without approval or examination are to be outlawed by securities regulatory bodies; their illegal earnings are to be confiscated and they are to pay a fine of an amount between one and five times of their illegal earnings. Persons in charge directly responsible for the case and other persons with direct responsibility are to be warned and are to pay a fine of more than 30,000 yuan but less than 300,000 yuan. Those involved in crimes are to be investigated for their criminal liability according to law.

Article 177. Issuers of securities that have been approved for transaction on the market according to relevant stipulations of this law but who have failed to disclose relevant information according to relevant regulations or the information disclosed by them is false, misleading, or contains important omissions, are to be ordered by securities regulatory bodies to make corrections, and are to pay a fine of more than 300,000 yuan but less than 600,000 yuan. Persons in charge directly responsible for the case and other persons with direct responsibility are to be warned and are to pay a fine of more than 30,000 yuan but less than 300,000 yuan. Those involved in crimes are to be investigated for their criminal liability according to law. If the aforementioned issuers do not duly announce their marketing documents or submit relevant reports, they are to be ordered by securities regulatory bodies to make corrections and are to pay a fine of more than 50,000 yuan but less than 100,000 yuan.

Article 178. Those who illegally operate securities trading sites are to be outlawed by securities regulatory bodies; their illegal earnings are to be confiscated and they are to pay a fine of an amount between one and five times their illegal earnings. Those who do not have any illegal earnings are to pay a fine of an amount between 100,000 yuan and 500,000 yuan. Persons in charge directly responsible for the case and other persons with direct responsibility are to be warned and are to pay a fine of more than 30,000 yuan but less than 300,000 yuan. Those involved in crimes are to be investigated for their criminal liability according to law.

Article 179. Those who establish securities companies and engage in securities business without approval and without having a securities business operation license are to be outlawed by securities regulatory bodies; their illegal earnings are to be confiscated and they are to pay a fine of an amount between one and five times their illegal earnings. Those who do not have any illegal earnings are to be fined an amount between 300,000 yuan and 100,000 yuan. Those involved in crimes are to be investigated for their criminal liability according to law.

Article 180. Those who are banned by law or administrative regulations from engaging in stock transaction and who directly own, buy, or sell stocks, or do so using an assumed name or in the name of other people, are to be ordered to dispose their illegally owned stocks according to law; their illegal earnings are to be confiscated and they are to be fined for an amount not more than the value of the stocks in question. If these people are state workers, they shall also be given administrative penalties according to the law.

Article 181. Workers of securities trading centers, securities companies, securities registration and settling organs, and securities trading service organs, and workers of associations of the securities trade and securities regulatory bodies, who intentionally provide false materials, or who falsify, alter, or destroy securities transaction records, in an attempt to trick investors into buying or selling securities, are to be deprived of their work eligibility and fined for an amount between 30,000 yuan and 50,000 yuan. If they are state workers, they shall also be given an administrative penalty. Those involved in crimes are to be investigated for their criminal liability according to law.

Article 182. Specialized organs providing auditing reports, assets assessment reports, legal opinion documents, or other documents, for the issuing or marketing of stocks, and their workers, who buy or sell stocks in violation of Article 39 of this law, are to be ordered to dispose according to the law of their illegally obtained stocks. Their illegal earnings are to be confiscated and they are to be fined for an amount not more than the value of the stocks in question.

Article 183. Those having access to or having illegally obtained inside information about securities transaction who, before information concerning securities issuance or transaction or other information that would have an important effect on the prices of securities is announced, buy or sell the securities in question, disclose relevant information, or suggest that other people buy or sell the securities in question, are to be ordered to dispose according to the law of their illegally obtained securities. Their illegal earnings are to be confiscated, and they are to be fined for an amount between one and five times their illegal earnings or an amount not more than the value of the said securities of the illegal transaction. Those involved in crimes are to be investigated for their criminal liability according to the law. Workers of securities regulatory bodies who engage in inside trading are to be given heavy punishment.

Article 184. Illegal earnings of those who, in violation of Article 71 of this law, manipulate securities transaction prices, or fabricate false securities transaction prices or volumes, in an attempt to gain illegitimate interests or shift risks to other people, are to be confiscated; they are to be fined for an amount between one and five times of their illegal earnings. Those involved in crimes are to be investigated for their criminal liability according to the law.

Article 185. Illegal earnings of those, in violation of relevant stipulations of this law, using public fund to engage in securities trading are to be confiscated, and they are to be fined for an amount between one and five times their illegal earnings. If they are state workers, they shall also be given an administrative penalty according to law. Those involved in crimes are to be investigated for their criminal liability according to law.

Article 186. Illegal earnings of securities companies which, in violation of relevant stipulations of this law, sell for their customers securities that are not actually in their customers' accounts, or which finance their customers in buying securities, are to be confiscated, and the companies in question are to be fined for an amount equal to the value of the securities traded. Persons in charge who are directly responsible for the case and other persons with direct responsibility are to be warned and fined for an amount between 30,000 yuan and 300,000 yuan. Those involved in crimes are to be investigated for their criminal liability according to law.

Article 187. Illegal earnings of securities companies which, in violation of relevant stipulations of this law, buy securities on behalf of their customers or on their own behalf and sell them on the same day are to be confiscated, and the companies in question are to be fined for an amount between five percent and twenty percent of the amount of the illegal securities transaction.

Article 188. Those who fabricate and disseminate false information that affect securities trading, which disturb securities trading markets, are to be fined for an amount between 30,000 yuan and 200,000 yuan. Those involved in crimes are to be investigated for their criminal liability according to law.

Article 189. Securities exchanges, securities companies, securities registration and settling organs, securities trading service organs, and social intermediary organs, and their workers, and associations of the securities trade and securities supervision and management organs and their workers, who make false statements or provide misleading information in securities trading activities, are to be ordered to make corrections and to be fined for an amount between 30,000 yuan and 200,000 yuan. If they are state workers, they shall also be given an administrative penalty according to the law. Those involved in crimes are to be investigated for their criminal liability according to the law.

Article 190. Legal persons who, in violation of relevant stipulations of this law, establish accounts in the name of individuals for securities trading, are to be ordered to make corrections. Their illegal earnings are to be confiscated and they are to be fined for an amount between one and five times of their illegal earnings. Their persons in charge directly responsible for the case and other persons with direct responsibility who are state workers are to be given administrative penalty according to law.

Article 191. General securities companies which, in violation of relevant stipulations of this law, engage in their own business in the name of other people or in the name of individuals are to be ordered to make corrections. Their illegal earnings are to be confiscated and they are to be fined for an amount between one and five times of their illegal earnings. Operations of those of which cases are serious are to be terminated.

Article 192. Securities companies which, in violation of their customers' commissions, trade securities or conduct other trading activities, or, in violation of their customers' real intentions, conduct activities other than securities trading, which result in their customers' losses, are to assume according to law responsibility to pay for the losses and are to be fined for an amount between 10,000 yuan and 100,000 yuan.

Article 193. Securities companies, securities registration and settling organs, and their workers who, without their customers' commissions, trade, misappropriate, or lend securities in their customers' accounts, who use their customers' securities as pledges, or who misappropriate funds in their customers' accounts, are to be ordered to make corrections. Their illegal earnings are to be confiscated and they are to be fined for an amount between one and five times their illegal earnings. In addition, the companies in question are to be closed down or the professional credentials of their persons in charge are to be revoked. Those involved in crimes are to be investigated for their criminal liability according to law.

Article 194. In conducting brokerage business, securities companies which trade securities with their customers' full commissions, or which make commitment to their customers' earnings from securities trading or to paying for the losses resulting from securities trading, are to be ordered to make corrections and to be fined for an amount between 50,000 yuan and 200,000 yuan.

Article 195. Those who violate the legal procedures on listed companies' purchases or seek illegitimate gains making use of listed companies' purchases are to be ordered to make corrections. Their illegal earnings are to be confiscated and they are to be fined for an amount between one and five times of their illegal earnings.

Article 196. Illegal earnings made by securities companies or their workers, in violation of relevant stipulations of this law, through trading securities over their customers' private commissions are to be confiscated, and they are to be fined for an amount between one and five times their illegal earnings.

Article 197. Securities companies which, in violation of relevant stipulations of this law and without approval, conduct trading of non‑listed securities are to be ordered to make corrections. Their illegal earnings are to be confiscated and they are to be fined for an amount between one and five times their illegal earnings.

Article 198. Business licenses of securities companies which do not begin to operate more than three months after they are established, if no valid reasons are given, and of those which suspend operations on their own for three consecutive months or longer, are to be revoked by a company registration organ.

Article 199. When a securities company violates the regulations of this law and does securities‑related businesses that exceed its authorized scope, it shall be instructed to mend its way, its illegitimate incomes shall be confiscated, and it shall be fined for a sum that is between one to five times that of its illegitimate income. If the case is serious, it shall be ordered to close.

Article 200. When a securities company also operates as a securities broker and sells securities by itself all at the same time instead of handling these businesses separately as required by the law, it shall be instructed to mend its ways, its illegitimate income shall be confiscated, and it shall be fined for a sum that is between one and five times that of its illegitimate income. If the case is serious, a security regulatory body shall retract the licensing of its business.

Article 201. Whoever has acquired a license for doing securities business through providing falsified documentation, or through concealing important facts by other deceptive means; or when a securities company is no longer qualified to operate after having been found to have committed serious lawless conduct during securities trading, a securities regulatory body shall retract its operating license and order it to close.

Article 202. If a specialized organ that provides auditing reports, capital assessment reports, written legal views, or other documents relevant to the issuance and marketing of securities and securities trading is found to have falsified anything that is in its charge, its illegitimate income shall be confiscated, it shall be fined for a sum that is between one and five times that of the illegitimate income, and the relevant authorities shall order this organ to suspend its business and shall revoke the credentials of its persons in charge. This organ shall also be liable for compensation for any loss. It shall also be held accountable for its criminal conduct by law if the falsification constitutes a crime.

Article 203. Whoever establishes organs for securities registration and account settlement, or organs that provide securities trading services, without a securities regulatory body's authorization, shall be ordered by the body to mend its ways. Its illegitimate income shall be confiscated, and it shall be fined for a sum that is between one and five times that of its illegitimate income. If the case is serious, it shall be ordered to close.

Article 204. When a securities regulatory body has approved the application of issuing and listing securities which are not in conformity with this law, or when it has approved the application for the establishment of a securities company, an organ for securities registration and account settlement, or an organ providing securities trading services, and the establishment is not in conformity with this law, the direct persons in charge and other personnel in charge shall be disciplined with administrative measures if the case is serious. They shall be held accountable for their criminal conduct if it constitutes a crime.

Article 205. When workers of a securities regulatory body or members of the committee that reviews the issuance of securities fail to discharge their duties prescribed in this law, practice favoritism, commit graft, neglect their duties, or deliberately make things difficult for relevant parties, they shall be disciplined by administrative measures. If their conduct constitute a crime, they shall be held accountable for their criminal conduct.

Article 206. Whoever issues and sells corporate securities in violation of this law, a department with the State Council's authorization shall mete out punishment to it in accordance with Articles 175, 176, and 202 of this law.

Article 207. When one who violates this law and must be held liable for civil compensation and paying a fine, but his property is insufficient for the two payments, he shall undertake the civil compensation first.

Article 208. Whoever uses force or coercion to obstruct a securities regulatory body from exercising its lawful regulatory responsibilities, he shall be held accountable for his criminal conduct by the law. Whoever rejects and obstructs a securities regulatory body from exercising its lawful regulatory responsibilities but has not resorted to force or coercion, he shall be punished according to the regulations for punishing public offenses.

Article 209. All the illegitimate incomes and fines lawfully confiscated and collected from issuing and trading securities against the law shall be delivered to the national treasury.

Article 210. If a party concerned disagrees with the punishment meted out by a securities regulatory body, or by any department authorized by the State Council, it may follow the legal procedures and request a review of the case. He may also directly file a suit at the people's court according to the law.

Chapter XII. Supplementary Provisions

Article 211. The trading of securities approved by administrative regulations to be listed and traded at securities exchanges before this law goes into effect may proceed according to those regulations. For those securities organs approved for establishment in accordance with administrative regulations, or regulations promulgated by financial administrative departments under the State Council, before this law goes into effect, but whose establishment is not fully in conformity with this law, shall meet the requirements set in this law within a prescribed period. Specific measures will be prescribed separately by the State Council.

Article 212. The State Council will prescribe separate procedures for implementing the regulations governing clients' funds for securities trading and account settlement.

Article 213. The State Council will prescribe specific measures separately for the purchase and trading of stocks of companies within China by people and organizations outside China with foreign currencies.

Article 214. This law goes into effect on I July 1999.