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>>>> Chinese Securities Law of the People's Republic of China
【Promulgation Date】1998.12.29
【Effective Date】1999.07.01
【Text】
Securities Law of the People's Republic of China
Order of the President of the People's Republic of China
[No.12]
The Securities Law of the People's Republic of China, adopted at the 6th Meeting of the Standing Committee of the Ninth National People's Congress of the People's Republic of China on December 29,1998,is hereby promulgated and shall go into effect as of July 1,1999.
Jiang Zemin
President of the People's Republic of China
December 29,1998
Securities Law of the People's Republic of China
Contents
ChapterⅠGeneral Provisions
ChapterⅡ Issuing of Securities
Chapter Ⅲ Trading of Securities
SectionⅠGeneral Regulations
SectionⅡListing of Securities
Section Ⅲ Continuing Disclosure of Information
Section Ⅳ Prohibited Trading Acts
Chapter Ⅳ Takeover of Listed Companies
Chapter Ⅴ Stock Exchanges
ChapterⅥ Securities Firms
Chapter Ⅶ Securities Registration and Clearing Institutions
Chapter Ⅷ Securities Trading Service Organizations
Chapter Ⅸ The Securities Industry Association
Chapter ⅩSecurities Regulatory Authority
Chapter Ⅺ Legal Liability
Chapter Ⅻ Supplementary Provisions
ChapterⅠ General Provisions
Article 1 This Law is enacted in order to standardize the issuing and trading of securities, protect the lawful rights and interests of investors, safeguard the economic order and public interests of society and promote the development of the socialist market economy.
Article 2 This Law is applicable to the issuing and trading in China of shares, corporate bonds and such other securities as are lawfully recognized by the State Council. Where their issuing and trading are not covered by this Law, the provisions of the Company Law and other laws and administrative regulations shall apply.
The issuing and trading of government bonds shall be separately provided for in laws and administrative regulations.
Article 3 Securities shall be issued and traded in line with the principles of openness, fairness and equitability.
Article 4 The parties involved in the issuing and trading of securities shall have equal legal status and adhere to the principles of voluntariness, compensation and good faith.
Article 5 Securities shall be issued and traded in accordance with laws and administrative regulations. Fraudulent and insider trading and manipulation of the securities trading market are prohibited.
Article 6 Securities business shall be engaged in and administered as a business separate from the banking business, trust business and insurance business. Securities firms shall be established separately from banks, trust companies and insurance companies.
Article 7 The securities regulatory authority under the State Council shall, in accordance with law, implement centralized and unified regulation of the securities market nationwide.
The securities regulatory authority under the State Council may, where necessary, establish offices which shall perform the regulatory functions as authorized.
Article 8 On condition that the State regulates the issuing and trading of securities on a centralized and unified basis, a Securities Industry Association shall, in accordance with law, be established for self-regulation.
Article 9 The State audit authority shall, in accordance with law and through auditing, supervise stock exchanges, securities firms, securities registration and clearing institutions and the securities regulatory authority.
ChapterⅡ Issuing of Securities
Article 10 Public offers of securities shall meet the conditions prescribed in laws and administrative regulations and shall, in accordance with law, be reported to the securities regulatory authority under the State Council or the department authorized by the State Council for verification or examination and approval. No unit or individual may make a public offer of securities if the same has not been verified or examined and approved according to law.
Article 11 Public offers of shares shall, in compliance with the conditions provided for in the Company law, be reported to the securities regulatory authority under the State Council for verification. The issuer shall submit to the said authority the application documents prescribed in the Company Law and the relevant documents specified by the authority.
The issuing of corporate bonds shall, in compliance with the conditions provided for in the Company Law, be reported to the department authorized by the State Council for examination and approval. The issuer shall submit to the department authorized by the State Council the application documents prescribed in the Company Law and the relevant documents specified by the said department.
Article 12 The formats and ways of delivery of the application documents to be submitted by an issuer who applies, according to law, for public offer of securities shall be prescribed by the authority or department legally responsible for verification or examination and approval.
Article 13 The application documents for the issuing of securities submitted by an issuer to the securities regulatory authority under the State Council or the department authorized by the State Council shall be truthful, accurate and complete.
Professional institutions and individuals that produce relevant documents for the issuance of securities shall strictly perform their statutory duties and warrant the truthfulness, accuracy and completeness of the documents that they produce.
Article 14 In the securities regulatory authority under the State Council an issuance examination commission shall be established to examine according to law applications for issuance of shares.
The issuance examination commission shall be composed of professionals from the securities regulatory authority under the State Council and other relevant specialists engaged from outside the said authority, who shall vote on applications for issuance of shares and state their opinions after examination.
The specific measures for forming the issuance examination commission, the term of office of its members and its working procedures shall be formulated by the securities regulatory authority under the State Council and submitted to the State Council for approval.
Article 15 The securities regulatory authority under the State Council shall,in accordance with the statutory conditions,be responsible for verification of applications for issuance of shares. The verification procedures shall be made public and shall be subject to supervision according to law.
The persons involved in the verification of an application for issuance of shares may not have any interests to share with or accept gifts from the applicant, or hold shares the application for the issuance of which they have verified, or have any private contact with the applicant.
The department authorized by the State Council shall examine and approve applications for issuance of corporate bonds by reference to the provisions in the preceding two paragraphs.
Article 16 The securities regulatory authority under the State Council or the department authorized by the State Council shall make a decision on application documents for the issuing of securities within three months from the date of acceptance of the same. If it refuses to verify the application documents or to grant approval to the same upon examination, it shall state its reasons.
Article l7 Once an application for issuance of securities has been verified or approved upon examination, the issuer shall announce the public offer documents prior to the public issuing of the securities, as prescribed in laws and administrative regulations, and make the said documents available at the designated places for the public to consult.
Before information about the issuing of securities is announced according to law, no person in the know may make public or divulge such information.
No issuer may issue securities before announcing the public offer documents.
Article 18 If the securities regulatory authority under the State Council or the department authorized by the State Council discovers that a decision it has made to verify or approve upon examination the issuing of securities does not conform to the provisions of laws or administrative regulations, it shall revoke the decision. If the relevant securities have not yet been issued, they shall be kept from being issued; if they have already been issued, the holders of the securities may require the issuer to refund their money at the issue price plus bank deposit interest for the same period.
Article 19 After shares have been issued according to law, the issuer shall itself be responsible for any change in its operation or earnings; and the investors shall themselves be responsible for any investment risks caused by such change.
Article 20 To issue new shares, listed companies shall meet the conditions provided for in the Company Law for the issuance of new shares. Such shares may be issued in the form of a public offer or be rationed among existing shareholders.
The proceeds of a share issue by a listed company shall be used in adherence to the purpose of the funds as described in the share prospectus. Any change in the purpose of the funds described in the share prospectus shall be subject to approval by the shareholders' general meeting. If a change in the purpose is made without authorization and is not rectified, or if such a change is not subsequently ratified by the shareholders' general meeting, no new shares may be issued.
Article 21 Securities firms shall, in accordance with the provisions of laws and administrative regulations, underwrite the securities to be issued to the public by issuers. Securities shall be underwritten on an agency basis or on a sole agency basis.
"Underwriting securities on an agency basis " means the way whereby the securities firm sells securities as the agent of the issuer and, at the end of the underwriting period, returns to the issuer all the securities that remain unsold.
"Underwriting securities on a sole agency basis" means the way whereby the securities firm purchases, pursuant to an agreement, all the securities to be issued by the issuer or whereby it purchases, at the end of the underwriting period, all the securities that remain after sale.
Article 22 An issuer that makes a public offer of securities shall have the right, independently and according to law, to select a securities firm to underwrite its securities. Securities firms may not solicit securities underwriting business by means of unfair competition.
Article 23 To underwrite securities, the securities firm shall enter into an agreement with the issuer for underwriting as an agent or as a sole agent .Such agreement shall include the following:
(1) the names and domiciles of the parties and the names of their legal representatives;
(2) the type, quantity, amount and issuing price of the securities to be underwriten on an agency basis or on a sole agency basis;
(3) the period during which securities are issued on an agency basis or on a sole agency basis, including the commencement and termination dates of the period;
(4) the means and date of payment of the proceeds from sale on an agency basis or on a sole agency basis;
(5) the fees for sale on an agency basis or on a sole agency basis and the means of settlement thereof;
(6) liability for breach of contract; and
(7) other matters prescribed by the securities regulatory authority under the State Council.
Article 24 To underwrite securities, a securities firm shall examine the truthfulness, Accuracy and completeness of the public offer documents. If it finds any falsehoods, misleading statements or major omissions in such documents, it may not carry out the sales activities. If it has already begun to sell the securities, it shall immediately discontinue the sales activities and adopt remedial measures.
Article 25 Securities to be offered to the public with a total face value exceeding RMB50m shall be underwritten by an underwriting syndicate.An underwriting syndicate shall be composed of a securities firm acting as the lead underwriter and securities firms acting as participating underwriters.
Article 26 The maximum period for underwriting securities on an agency basis or on a sole agency basis shall be 90 days.
During the period for securities underwritten on an agency basis or on a sole agency basis, securities firms shall ensure that such securities are first sold to subscribers. Securities firms may not reserve, in advance, for themselves securities which they underwrite as agents, or purchase, in advance, and retain securities which they underwrite as the sole agents.
Article 27 Securities firms that underwrite securities as the sole agents, shall within 15 days after the expiration of the period for underwriting as the sole agents, report the details of such underwriting to the securities regulatory authority under the State Council for the record.
Securities firms that underwrite securities as agents shall, in conjunction with the issuer and within 15 days after the expiration of the period for underwriting as agents, report the details of such underwriting to the securities regulatory authority under the State Council for the record.
Article 28 Where shares are issued at premium, the issue price shall be determined through consultation between the issuer and the securities underwriting company and reported to the securities regulatory authority under the State Council for verification.
Article 29 Enterprises in China that intend to directly or indirectly issue securities abroad or to list their securities for trading abroad shall be subject to approval by the securities regulatory authority under the State Council.
ChapterⅢ Trading of Securities
Section 1 General Regulations
Article 30 Securities purchased or sold according to law by the parties to a securities transaction shall be securities that have been issued and delivered according to law.
Securities that have not been issued according to law may not be purchased or sold.
Article 31 Where the transfer of shares, corporate bonds and other securities issued
according to law is prohibited by law within a certain period, they may not be purchased or sold during the period.
Article 32 Share, corporate bonds and other securities that have been lawfully approved for trading shall be quoted and traded on stock exchanges.
Article 33 Securities that are quoted and traded on stock exchanges shall be traded in the manner of public, centralized trading at competing prices.
Centralized competitive pricing for securities trading shall follow the principle of price precedence and time precedence.
Article 34 The securities purchased and sold by the parties to a securities transaction may be in the form of scrip or such other forms as prescribed by the securities regulatory authority under the State Council
Article 35 Securities trading shall take the form of spot transaction.
Article 36 Securities firms may not engage in securities trading activities that are
financed by funds or securities obtained from their clients.
Article 37 Employees of stock exchanges, securities firms and securities registration and clearing institutions ,staff members of the securities regulatory authority ,and other persons prohibited by laws and administrative regulations from participating in share trading may not , while in office or during the statutory period, hold, purchase or sell shares directly or under an assumed name or under the name of another, nor may they receive or accept shares as gifts.
When anyone becomes an employee, a staff member or a person as mentioned in the preceding paragraph ,he shall, in accordance with law, transfer all the shares he is holding .
Article 38 Stork exchanges, securities firms and securities registration and clearing institutions shall, in accordance with law, keep confidential the accounts opened for their clients.
Article 39 Professional institutions and individuals that produce documents such as audit reports, asset appraisal reports and legal opinions for share issuance may not purchase or sell the shares in question during the underwriting period for such shares and for a period of six months after the expiration thereof.
In addition to the provisions of the preceding paragraph, professional institutions and individuals that produce documents such as audit reports ,asset appraisal reports and legal opinions for listed companies may not purchase or sell the shares in question from the date on which they accept the entrustment by the listed company to the sixth day after the said documents are made public.
Article 40 The fees charged for securities trading shall be reasonable. The items for which fees are charged, the rates for the tees and the collection methods shall be made public.
The items for which fees are charged, the rates for the fees and administrative measures in securities trading shall be prescribed by the relevant administrative department under the State Council in a unified manner.
Article 41 A shareholder that holds 5 percent of the shares issued by a company limited by shares shall, within three days from the date on which the number of shares held by him reaches this percentage, report the same to the company ,which shall, within three days from the date on which it receives the report ,report the same to the securities regulatory authority under the State Council. If the company is a listed company, it shall report the matter to the stock exchange at the same time.
Article 42 If the shareholder described in the preceding Article sells , within six months of purchase, the shares he holds of the said company or repurchases the shares within six months after selling the same , the earnings so obtained by the shareholder shall belong to the company and be recovered by the board of directors of the company. However, a securities firm that has a shareholding of not less than 5 percent due to purchase of the remaining shares not he capacity of a company that underwrites as the sole agent shall not be subject to the restriction of six months when selling the said shares.
If the company's board of directors fails to comply with the provisions of the preceding paragraph, the other shareholders shall have the right to require the board of directors to comply.
If the company 's board of directors fails to comply with the provisions of the first paragraph and thereby causes losses to the company, the directors responsible therefor shall bear joint and several liability for the losses.
Section 2 Listing of Securities
Article 43 Before a company limited by shares applies for listing of its shares, it shall report to the securities regulatory authority under the State Council for verification.
The securities regulatory authority under the State Council may authorize a stock exchange, pursuant to the statutory conditions and procedures, to verify the application for share listing.
Article 44 The State encourages companies that conform to industrial policies and meet the conditions for listing to have their shares listed.
Article 45 When applying for share listing to the securities regulatory authority under the State Council, the company shall provide the following documents:
(1) the listing report;
(2) the resolution adopted at the shareholders' general meeting concerning the application for listing;
(3) the company's articles of association;
(4) the company's business license;
(5) the financial and accounting reports of the company for the last three years, or since establishment , verified by the statutory verification authority;
(6)legal opinions in writing, and a letter of recommendation from a securities firm; and
(7) the most recent share prospectus.
Article 46 After an application for share listing is verified by the securities regulatory authority under the State Council, the issuer shall submit to the stock exchange the verification document and the relevant documents specified in the preceding Article.
The stock exchange shall make arrangements for the listing and trading of the said shares within six months from the date of receiving the documents specified in the preceding paragraph and submitted by the issuer of the shares.
Article 47 After an application for share listing obtains consent from the stock exchange, the listed company shall, five days prior to the listing, announce the verified documents relating to the said share listing and make such documents available at designated places for the public to consult.
Article 48 In addition to announcing the listing application documents mentioned in the preceding Article, listed companies shall make the following matters known to the general public:
(1) the date on which the shares are approved for trading on the stock exchange;
(2) a name list of the 10 shareholders who hold the largest numbers of the shares in the company and the number of shares held by each of them;
(3) the names of the directors, supervisors, manager and related senior management persons, and particulars of their holding of the company's share and /or bonds.
Article 49 When a listed company ceases to meet the condition for listing prescribed in the Company Law, the listing of its shares shall be suspended or terminated in accordance with law.
Article 50 Companies that apply for listing and trading of corporate bonds to be issued by them shall be subject to verification by the securities regulatory authority under the State Council.
The securities regulatory authority under the State Council may authorize a stock exchange, pursuant to the statutory conditions and procedures, to verify an application for listing of corporate bonds.
Article 51 A company that applies for listing and trading of its corporate bonds shall meet the following conditions:
(1) The term of the corporate bonds is not less than one year;
(2) the amount of corporate bonds to be actually issued is not less than RMB50m; and
(3) the company still meets the statutory conditions for the issuing of corporate bonds at the time of application for the listing of its bonds.
Article 52 When applying for listing of corporate bonds to the securities regulatory authority under the State Council, the company shall provide the following documents:
(1) the listing report;
(2) the resolution adopted by the board of directors concerning the application for listing;
(3) the company's articles of association;
(4) the company's business license;
(5) measures for offer of the corporate bonds; and
(6) the number of corporate bonds to be actually issued.
Article 53 After an application for listing of corporate bonds is verified by the securities regulatory authority under the State Council, the issuer shall submit to the stock exchange the verification document and the relevant documents specified in the preceding Article.
The stock exchange shall make arrangements for the listing and trading of the said bonds within three months from the date of receiving the documents specified in the preceding paragraph and submitted by the issuer of the bonds.
Article 54 After an application for listing of corporate bonds obtains consent from the stock exchange, the issuer shall, five days prior to the listing of the corporate bonds, announce its report for listing of the corporate bonds, the verification document and the documents relating to its application for the listing and make its application documents available at the designated places for the public to consult.
Article 55 After corporate bonds are listed, the securities regulatory authority under the State Council may decide to suspend their listing:
(1) if the company commits a major illegal act;
(2) if the company no longer meets the conditions for listing corporate bonds due to a major change in it;
(3) if the proceeds of the corporate bond issuance are not used for purposes approved by the examination and approval authority;
(4) if the company fails to perform its obligations stipulated in the measures for offer of corporate bonds;
(5) if the company has been operating at a loss over the past two years.
Article 56 If a company is in the situation described in sub-paragraph (1) or (4) of the preceding Article and the consequences are verified to be serious, or if a company is in the situation described in sub - paragraph (2), (3), or (5) of the preceding Article and fails to eliminate the same within a specified time limit, the securities regulatory authority under the State Council shall decide to terminate the listing of the company's bonds.
If a company is dissolved, lawfully ordered to close down or declared bankrupt, the stock exchange shall terminate the listing of the company's bonds and report the same to the securities regulatory authority under the State Council for the record.
Article 57 The securities regulatory authority under the State Council may authorize stock exchanges to lawfully suspend or terminate the listing of shares or corporate bonds.
Section 3 Continuing Disclosure of Information
Article 58 Pursuant to the Company Law, a share prospectus or measures for offer of corporate bonds shall be announced where shares are issued according to law upon verification by the securities regulatory authority under the State Council or where corporate bonds are issued according to law upon approval by the department authorized by the State Council. When new shares or corporate bonds are issued according to law, financial and accounting reports shall, in addition, be announced.
Article 59 The documents for the issuing and listing of shares or corporate bonds announced by companies shall be truthful, accurate and complete; they may not contain any falsehoods, misleading statements or major omissions.
Article 60 Companies whose shares or bonds are listed for trading shall, within two months following the end of the first half of each fiscal year, submit to the securities regulatory authority under the State Council and the stock exchange an interim report with the following contents and announce the same:
(1) the company's financial and accounting reports and business situation;
(2) major litigation involving the company;
(3) the particulars of any changes in the shares or corporate bonds already issued;
(4) any important matters submitted to the shareholders' general meeting for consideration; and
(5) other matters specified by the securities regulatory authority under the State Council.
Article 61 Companies whose shares or bonds are listed for trading shall, within four months following the end of each fiscal year, submit to the securities regulatory authority under the State Council and the stock exchange an annual report with the following contents and announce the same:
(1) a brief account of the company's general situation;
(2) the company's financial and accounting reports and business situation;
(3) a brief introduction to the directors, supervisors, managers and the senior management persons and information with respect to their shareholdings;
(4) the details of shares and corporate bonds already issued, including the name list of the 10 shareholders who hold the largest numbers of the shares in the company and the number of shares held by each of them; and
(5) other matters specified by the securities regulatory authority under the State Council.
Article 62 When a major event occurs that may considerably affect the price at which a listed company's shares are traded and that is not yet known to the investors, the listed company shall immediately submit an ad hoc report on the details of such major event to the securities regulatory authority under the State Council and to the stock exchange and make the same known to the general public. In the report the essence of the event shall be stated clearly.
For purposes of the preceding paragraph, the term" major event" means:
(1) a major change in the company's business guidelines or scope of business;
(2) a decision made by the company concerning a major investment or major asset purchase;
(3) conclusion by the company of an important contract which may have an important effect on the company's assets, liabilities, rights, interests or business results;
(4) incurrence by the company of a major debt or default on an overdue major debt;
(5) incurrence by the company of a major deficit or incurrence of a major loss exceeding 10 percent of the company's net assets;
(6) a major change in the external conditions of the company's production or business;
(7) a change in the chairman of the board of direction, not less than one - third of the directors or the manager of the company;
(8) a considerable change in the holdings of shareholders who each hold not less than 5 percent of the company's shares;
(9) a decision made by the company to reduce its capital, to merge, to divide, to dissolve, or to apply for bankruptcy;
(10)major litigation involving the company, or lawful cancellation by a court of a resolution adopted by the shareholders' general meeting or the board of directors; or
(11) other events specified in laws or administrative regulations.
Article 63 If the share prospectus, measures for offer of corporate bonds, financial or accounting report, listing report document, annual report, interim report or ad hoc report announced by an issuer or securities underwriting company contain or contains any falsehood, misleading statement or major omission, thus causing losses to investors in the course of securities trading, the issuer or the company shall be liable for the losses and the responsible director(s), supervisor(s) and/or the manager of the issuer or the company shall be jointly and severally liable for such losses.
Article 64 Announcements to be made in accordance with laws or administrative regulations shall be published in the newspapers, periodicals or the dedicated gazette specified by the relevant department of the State. In addition, such announcements shall be made available at the company's domicile and the stock exchange for the public to consult.
Article 65 The securities regulatory authority under the State Council shall supervise the annual reports, interim reports, ad hoc reports and announcements of listed companies, as well as the distribution or rationing of new shares of such companies.
Before company announcements are made as required by laws or administrative regulations, the securities regulatory authority, the stock exchanges, the securities underwriting companies and the individuals concerned may not divulge the contents of such announcements.
Article 66 When the securities regulatory authority under the State Council disqualifies for listing a listed company that commits a major illegal act or does not meet other listing conditions, it shall announce the same without delay.
When a stock exchange, pursuant to its authorization, makes a decision as specified in the preceding paragraph, it shall, without delay, announce the decision and submit it to the securities regulatory authority under the State Council for the record.
Section 4 Prohibited Trading Activities
Article 67 Persons with knowledge of inside information on securities trading are prohibited to take advantage of such inside information to engage in securities trading.
Article 68 The following persons are persons with knowledge of inside information on securities trading:
(1) directors, supervisors, managers, deputy managers and other senior management persons concerned of companies that issue shares or corporate bonds;
(2) shareholders who hold not less than 5 percent of the shares in a company;
(3) the senior management persons of the holding company of a company that issues shares;
(4) persons who are able to obtain company information concerning the trading of its securities by virtue of the positions they hold in the company;
(5) staff members of the securities regulatory authority, and other persons who administer securities trading pursuant to their statutory duties;
(6) the relevant staff members of public intermediary organizations who participate in securities trading pursuant to their statutory duties and the relevant staff members of securities registration and clearing institutions and securities trading service organizations; and
(7) other persons specified by the securities regulatory authority under the State Council.
Article 69 Inside information is information that is not made public because, in the course of securities trading, it concerns the company's business or financial affairs or may have a major effect on the market price of the company's securities.
The following information belongs to inside information:
(1) the major events listed in the second paragraph of Article 62 of this Law;
(2) company plans concerning distribution of dividends or increase of capital;
(3) major changes in the company's equity structure;
(4) major changes in security for the company's debts;
(5) any single mortgage, sale or write-off of a major asset used in the business of the company that exceeds 30 percent of the said asset;
(6) potential liability for major losses to be assumed in accordance with law as a result of an act committed by a company's director(s), supervisor(s), manager, deputy manager(s) or other senior management person(s);
(7) plans concerning the takeover of listed companies; and
(8) other important information determined by the securities regulatory authority under the State Council to have a marked effect on the trading prices of securities.
Article 70 No person with knowledge of inside information on securities trading of a company or other person who has illegally obtained such inside information may purchase the securities of the company or sell such securities he is holding, divulge such information or counsel another person to purchase or sell such securities.
Where there are other provisions in this Law that govern the purchase of shares of a listed company by a shareholder who holds not less than 5 percent of the company's shares, such provisions shall apply.
Article 71 It is prohibited for anyone to obtain illegitimate benefits or to shift risks to others by any of the following means:
(1) whether independently or in collusion with others, carrying out combined or successive purchases or sales by building up an advantage in terms of funds or shareholdings or using one's advantage in terms of information, thereby manipulating the trading prices of securities.
(2) collaborating with another person to mutually trade securities or to mutually buy or sell securities not held by them, at a prearranged time and price and by prearranged means, thereby affecting the price or volume of the securities traded;
(3) buying or selling securities from or to oneself without transfer of ownership of the securities by means of making oneself the other party to the transaction, thereby affecting the price or volume of the securities traded; or
(4) manipulating the trading prices of securities by other means.
Article 72 It is prohibited for state functionaries, employees of the news media and other persons concerned to fabricate and disseminate false information, thereby seriously affecting securities trading.
It is prohibited for stock exchanges, securities firms, securities registration and clearing institutions, securities trading service organizations and public intermediary organizations and their employees, as well as the Securities Industry Association and the securities regulatory authority and their staff members, to make false statements or give misleading information in the course of securities trading.
Securities trading information disseminated by any mass medium shall be truthful and objective. Disseminating of misleading information is prohibited.
Article 73 It is prohibited for securities firms and their employees to commit any of the following fraudulent acts in the course of securities trading that is detrimental to the interests of their clients:
(1) purchasing or selling securities on behalf of a client contrary to the client's instructions;
(2) failing to provide a client with written confirmation of a transaction within the prescribed period of time;
(3) misappropriating the securities entrusted by a client for purchase or sale or the funds in a client's account;
(4) purchasing or selling securities in a client's account without the client's authorization, or purchasing or selling securities under the name of a client;
(5) inveigling a client into making an unnecessary purchase or sale of securities in order to obtain a commission; or
(6) any other act contrary to a client's authentic declaration of intention and detrimental to the client's interests.
Article 74 In the course of securities trading, it is prohibited for a legal person to open an account and purchase or sell securities in the name of an individual.
Article 75 In the course of securities trading, it is prohibited for anyone to misappropriate public funds to trade in securities.
Article 76 State - owned enterprises and enterprises where State - owned assets constitute a controlling interest may not speculate in listed shares.
Article 77 When stock exchanges, securities firms, securities registration and clearing institutions, securities trading service organizations, public intermediary organizations and their employees discover any prohibited trading activities in the course of securities trading, they shall immediately report such activities to the securities regulation authority.
Chapter IV Takeover of Listed Companies
Article 78 A listed company may be taken over by offer or by agreement.
Article 79 When, through securities trading at a stock exchange, an investor comes to hold 5 percent of the shares issued by a listed company, the investor shall, within three days from the date on which such shareholding becomes a fact, submit a written report to the securities regulatory authority under the State Council and the stock exchange, notify the listed company and make the fact known to the general public. During the period specified above, the investor may not continue to purchase or sell shares of the listed company.
Once an investor holds 5 percent of the shares issued by a listed company, he shall, pursuant to the provisions of the preceding paragraph, report and make announcement of each 5 percent increase or decrease in the proportion of the issued shares he holds of the said company through securities trading on a stock exchange. During the reporting period, and for two days after the report and announcement are made, the investor may not continue to purchase or sell shares of the listed company.
Article 80 The written report and announcement made in accordance with the provisions in the preceding Article shall include the following:
(1) the name and domicile of the shareholder;
(2) the description and quantity of the shares held; and
(3) the date on which the shareholding or the increase or decrease in the shareholding reaches the statutory percentage.
Article 81 When, through securities trading on a stock exchange, an investor comes to hold 30 percent of the issued shares of a listed company and continues to buy such shares, the investor shall, in accordance with law, issue a takeover offer to all the shareholders of the listed company, unless he is exempted by the securities regulation authority under the State Council from issuing such an offer.
Article 82 Before issuing a takeover offer pursuant to the provisions in the preceding Article, the purchaser shall submit a report on the takeover of the listed company to the securities regulatory authority under the State Council. The following particulars shall be clearly stated in the report:
(1) the name and domicile of the purchaser;
(2) the decision of the purchaser concerning the takeover;
(3) the name of the listed company to be taken over;
(4) the purpose of the takeover;
(5) a detailed description of the shares to be bought up and the number of shares scheduled to buy up;
(6) the term and price of the takeover;
(7) the amount and guaranteed availability of the funds required for the takeover; and
(8) the ratio between the total number of the issued shares of the company to be taken over and the number of such shares held at the time the takeover report is submitted.
The purchaser shall simultaneously submit to the stock exchange a copy of the report on the takeover of the company, as specified in the preceding paragraph.
Article 83 The purchaser shall announce his takeover offer 15 days after the date on which, pursuant to the provisions in the preceding Article, he submits the report regarding the takeover of the listed company.
The term of a takeover offer shall be not less than 30 days but not more than 60 days.
Article 84 During the effective term of a takeover offer, the purchaser may not withdraw his takeover offer.
If, during the effective term of a takeover offer, the purchaser needs to alter any item in the takeover offer, he shall submit a report to the securities regulatory authority under the State Council and the stock exchange in advance and, upon approval thereof, he shall make an announcement with respect thereto.
Article 85 All the terms proposed in the takeover offer shall apply to all the shareholders of the company to be taken over.
Article 86 Where, upon the expiration of the term of the takeover offer, the number of shares of the company under takeover held by the purchaser accounts for not less than 75 percent of the total number of the shares issued by the company, the listing and trading of the shares of the said company shall be terminated on the stock exchange.
Article 87 Where, upon the expiration of the term of the takeover offer, the number of shares of the company under takeover held by the purchaser accounts for not less than 90 percent of the total number of the shares issued by the company, the remaining holders of the shares of the said company shall have the right to sell their shares on the same terms as those in the takeover offer, and the purchaser, on his part, shall buy up the same.
Where, upon completion of the takeover, the company that is taken over no longer meets the conditions prescribed in the Company Law, it shall change its enterprise form according to law.
Article 88 In the case of takeover by offer, the purchaser, during the term of the takeover offer, may not buy or sell shares of the company under takeover in a way different from, or on terms in excess of, those as prescribed in the offer.
Article 89 In the case of takeover by agreement, the purchaser may effect the equity transfer by entering into an agreement with the shareholders of the company under takeover, as prescribed in laws and administrative regulations.
When a listed company is to be taken over by agreement, the purchaser shall, within three days after the agreement is reached, submit a written report on the takeover agreement to the securities regulatory authority under the State Council and the stock exchange and make the same known to the general public.
The takeover agreement may not be performed until the announcement is made.
Article 90 In the case of takeover by agreement, the parties to the agreement may, on an ad hoc basis, entrust a securities registration and clearing institution with custody of the shares to be transferred pursuant to the agreement and with deposit of the funds with the designated bank.
Article 91 During the takeover of a listed company, the shares in such company which are held by the purchaser of the listed company may not be transferred for six months following completion of the takeover.
Article 92 Where a person acquires the shares of a company through a takeover offer or takeover agreement and closes down the company so taken over, it is a case of merger, and the purchaser shall have the existing shares of the closed - down company replaced according to law.
Article 93 After conclusion of the takeover of a listed company the purchaser shall, within 15 days, report the particulars of the takeover to the securities regulatory authority under the State Council and the stock exchange and make the same known to the general public.
Article 94 Where the takeover of a listed company involves shares held by an investment organization authorized by the State, the matter shall be subject to approval by the relevant department in charge in accordance with the regulations of the State Council.
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