Securities Law of the People's Republic of China (2020)

Securities Law of the People's Republic of China

(Adopted at the sixth meeting of the Standing Committee of the Ninth National People’s Congress on December 29, 1998 The Decision of the Law” was revised for the first time on October 27, 2005, at the 18th meeting of the Standing Committee of the Tenth National People’s Congress. The first revision was based on the Standing Committee of the Twelfth National People’s Congress on June 29, 2013. The third meeting "Decision on Amending Twelve Laws including the "Law on the Protection of Cultural Relics of the People's Republic of China"" The second amendment was based on the "Regarding the Tenth Meeting of the Standing Committee of the Twelfth National People's Congress on August 31, 2014". The Decision to Amend the "Insurance Law of the People's Republic of China" and other five laws" for the third amendment on December 28, 2019, the 13th National People's Congress Standing Committee

(Revised for the second time at the 15th meeting of the Council)

table of Contents

Chapter One 　 General Provisions

Chapter 2 　 Securities Issuance

Chapter Three 　 Securities Trading

Section 1 　 General Provisions

Section 2 　 Securities Listing

Section 3 　Prohibited Trading Activities

Chapter Four: Acquisition of Listed Companies

Chapter 5: Information Disclosure

Chapter VI 　 Investor Protection

Chapter 7 　 Securities Trading Places

Chapter 8 　 Securities Company

Chapter 9 　 Securities Depository and Clearing Institutions

Chapter 10: Securities Service Institutions

Chapter 11: Securities Industry Association

Chapter 12: Securities Regulatory Agency

Chapter 13 Legal Liability

Chapter 14 Supplementary Provisions

Chapter One 　 General Provisions

Article 1: This law is formulated in order to regulate the issuance and trading of securities, protect the legitimate rights and interests of investors, maintain social economic order and social public interests, and promote the development of the socialist market economy.

Article 2 Within the territory of the People’s Republic of China, the issuance and trading of stocks, corporate bonds, depository receipts and other securities recognized by the State Council in accordance with the law shall be governed by this law; otherwise, the “Company Law of the People’s Republic of China” and other laws shall apply , Administrative regulations.

The listing and trading of government bonds and securities investment fund shares shall be governed by this law; if other laws and administrative regulations provide otherwise, their provisions shall apply.

The administrative measures for the issuance and trading of asset-backed securities and asset management products shall be formulated by the State Council in accordance with the principles of this law.

Securities issuance and trading activities outside of the People’s Republic of China disrupt the market order in the People’s Republic of China and damage the legitimate rights and interests of domestic investors. They shall be dealt with and be held accountable in accordance with the relevant provisions of this Law.

Article 3 　The issuance and trading activities of securities must follow the principles of openness, fairness and justice.

Article 4 The parties involved in securities issuance and trading activities shall have equal legal status and shall abide by the principles of voluntariness, compensation, honesty and credibility.

Article 5: The issuance and trading activities of securities must comply with laws and administrative regulations; fraud, insider trading, and manipulation of the securities market are prohibited.

Article 6 ``Separate operation and management shall be implemented in the securities industry and the banking, trust, and insurance industries, and the securities companies shall be established separately from the banks, trust, and insurance business institutions. Except as otherwise provided by the state.

Article 7: The State Council’s securities regulatory agency shall implement centralized and unified supervision and management of the national securities market in accordance with the law.

The securities regulatory agency of the State Council may set up dispatched offices as needed to perform supervisory and administrative duties as authorized.

Article 8: State audit institutions shall conduct audit and supervision of securities trading venues, securities companies, securities registration and settlement institutions, and securities supervision and management institutions in accordance with the law.

Chapter 2 　 Securities Issuance

Article 9: Public issuance of securities must meet the conditions prescribed by laws and administrative regulations, and be registered in accordance with the law by the securities regulatory agency of the State Council or the department authorized by the State Council. Without registration according to law, no unit or individual may publicly issue securities. The specific scope and implementation steps of the registration system for securities issuance shall be prescribed by the State Council.

Under any of the following circumstances, it is a public offering:

(1) Issuing securities to unspecified objects;

(2) A total of more than 200 people have issued securities to specific targets, but the number of employees who have implemented the employee stock ownership plan in accordance with the law shall not be counted;

(3) Other issuance activities stipulated by laws and administrative regulations.

Non-public issuance of securities shall not use advertising, public solicitation, and public disclosure in disguised forms.

Article 10: Where an issuer applies for the public issuance of stocks or corporate bonds that can be converted into stocks, and adopts underwriting methods in accordance with the law, or the public issuance of other securities that are subject to the sponsorship system as prescribed by laws and administrative regulations, it shall hire a securities company as a sponsor.

Sponsors shall abide by business rules and industry standards, be honest and trustworthy, diligent and conscientious, conduct prudential verification of the issuer's application documents and information disclosure materials, and supervise the issuer's standardized operations.

The measures for the management of sponsors shall be formulated by the securities regulatory authority of the State Council.

Article 11 The establishment of a joint stock limited company to issue shares to the public shall meet the conditions stipulated in the "Company Law of the People's Republic of China" and other conditions stipulated by the State Council’s securities regulatory agency approved by the State Council, and submit a stock offering application and The following documents:

(1) The articles of association of the company;

(2) Promoter agreement;

(3) The name or title of the promoter, the number of shares subscribed by the promoter, the type of capital contribution and the capital verification certificate;

(4) Prospectus;

(5) The name and address of the bank that collects funds on behalf of the company;

(6) The name of the underwriting agency and related agreements.

Where a sponsor is hired in accordance with the provisions of this Law, the sponsorship letter issued by the sponsor shall also be submitted.

Where laws and administrative regulations stipulate that the establishment of a company must be reported for approval, the corresponding approval documents shall also be submitted.

Article 12: A company's initial public offering of new shares shall meet the following conditions:

(1) Have a sound and well-functioning organization;

(2) Having the ability to continue operations;

(3) An unqualified audit report has been issued in the financial accounting report of the last three years;

(4) The issuer and its controlling shareholder and actual controller have not committed any criminal crimes of corruption, bribery, embezzlement of property, misappropriation of property, or disrupting the order of the socialist market economy in the past three years;

(5) Other conditions required by the State Council’s securities regulatory agency approved by the State Council.

The issuance of new shares by a listed company shall meet the conditions prescribed by the State Council’s securities regulatory agency approved by the State Council. The specific management measures shall be formulated by the State Council’s securities regulatory agency.

The public issuance of depositary receipts shall meet the conditions for the initial public issuance of new shares and other conditions prescribed by the securities regulatory authority of the State Council.

Article 13: When a company publicly issues new shares, it shall submit a stock offering application and the following documents:

(1) The company's business license;

(2) The articles of association of the company;

(3) Resolutions of the general meeting of shareholders;

(4) Prospectus or other public offering documents;

(5) Financial accounting report;

(6) The name and address of the bank that collects funds on behalf of the company.

Where a sponsor is hired in accordance with the provisions of this Law, the sponsorship letter issued by the sponsor shall also be submitted. If underwriting is carried out in accordance with the provisions of this law, the name of the underwriting institution and related agreements shall also be submitted.

Article 14 　The company must use the funds raised in the public offering of shares in accordance with the use of funds listed in the prospectus or other public offering documents; changing the use of funds must be resolved by the general meeting of shareholders. If the purpose is changed without authorization, and no correction is made, or without the approval of the general meeting of shareholders, no new shares shall be issued publicly.

Article 15 　 The public issuance of corporate bonds shall meet the following conditions:

(1) Have a sound and well-functioning organization;

(2) The average distributable profit in the last three years is sufficient to pay the interest of the corporate bonds for one year;

(3) Other conditions stipulated by the State Council.

The funds raised by the public issuance of corporate bonds must be used in accordance with the use of funds listed in the corporate bond raising measures; changes to the use of funds must be resolved by the bondholders’ meeting. The funds raised from the public issuance of corporate bonds shall not be used to make up for losses and non-productive expenditures.

When a listed company issues corporate bonds that can be converted into stocks, in addition to meeting the conditions specified in the first paragraph, it shall also comply with the provisions of the second paragraph of Article 12 of this Law. However, in accordance with the corporate bond offering method, the listed company is except for the conversion of corporate bonds through the acquisition of the company's shares.

Article 16 　 To apply for the public issuance of corporate bonds, the following documents shall be submitted to the department authorized by the State Council or the securities regulatory agency of the State Council:

(1) The company's business license;

(2) The articles of association of the company;

(3) Measures for the issuance of corporate bonds;

(4) Other documents required by the department authorized by the State Council or the securities regulatory agency of the State Council.

Where a sponsor is hired in accordance with the provisions of this Law, the sponsorship letter issued by the sponsor shall also be submitted.

Article 17: Under any of the following circumstances, corporate bonds may not be issued again:

(1) The fact that there is a breach of contract or a delay in the payment of principal and interest on corporate bonds or other debts that have been publicly issued is still in a continuous state;

(2) Violating the provisions of this law, changing the use of funds raised in the public issuance of corporate bonds.

Article 18: The format and method of application documents submitted by the issuer in applying for a public offering of securities in accordance with the law shall be prescribed by the agency or department responsible for registration in accordance with the law.

Article 19: The securities issuance application documents submitted by the issuer shall fully disclose the information necessary for investors to make value judgments and investment decisions, and the contents shall be true, accurate and complete.

Securities service institutions and personnel that issue relevant documents for securities issuance must strictly perform statutory duties and ensure the authenticity, accuracy and completeness of the documents issued.

Article 20: When an issuer applies for an IPO, after submitting the application documents, it shall disclose the relevant application documents in advance in accordance with the regulations of the securities regulatory authority under the State Council.

Article 21: The securities regulatory agency of the State Council or the department authorized by the State Council shall be responsible for the registration of securities issuance applications in accordance with statutory conditions. The specific measures for the registration of public offerings of securities shall be formulated by the State Council.

In accordance with the provisions of the State Council, stock exchanges and others may review applications for public offerings of securities, determine whether the issuer meets the issuance conditions and information disclosure requirements, and urge the issuer to improve the content of information disclosure.

Persons who participate in the registration of securities issuance applications in accordance with the provisions of the preceding two paragraphs shall not have an interest in the issuance applicant, shall not directly or indirectly accept gifts from the issuance applicant, shall not hold the securities registered for the issuance application, and shall not privately communicate with the issuance applicant. Make contact.

Article 22 The securities regulatory agency of the State Council or the department authorized by the State Council shall, within three months from the date of accepting the application documents for securities issuance, make a decision on whether to grant registration or not in accordance with statutory conditions and procedures. The issuer shall make a decision on whether to grant registration or not in accordance with the requirements. The time for supplementing and modifying the issuance application documents is not included in the calculation. If the registration is not granted, the reasons shall be explained.

Article 23: After a securities issuance application is registered, the issuer shall, in accordance with the provisions of laws and administrative regulations, announce the public offering documents before the public issuance of securities, and place the documents in designated places for public inspection.

Before the information on the issuance of securities is disclosed in accordance with the law, no insider shall disclose or divulge the information.

The issuer shall not issue securities before announcing the public offering documents.

Article 24: If the securities regulatory agency of the State Council or a department authorized by the State Council finds that the securities issuance registration decision that has been made does not meet the statutory conditions or statutory procedures, and the securities have not yet been issued, it shall be revoked and the issuance shall be stopped. If the issue has been issued but has not been listed, the issuance registration decision shall be cancelled, and the issuer shall return the securities holders according to the issue price plus the interest on bank deposits during the same period; the controlling shareholder, actual controller and sponsor of the issuer shall bear joint and several liabilities with the issuer. But unless you can prove that you have no fault.

Where the issuer of stocks conceals important facts or fabricates major false content in the prospectus and other securities issuance documents, and has issued and listed on the stock market, the securities regulatory authority under the State Council may order the issuer to repurchase the securities, or order the responsible controlling shareholder or actual The controller buys back the securities.

Article 25 　 After the issuance of stocks in accordance with the law, the issuer shall be responsible for the changes in its operations and income; the investors shall be responsible for the investment risks caused by such changes.

Article 26: If the securities issued by the issuer to unspecified objects shall be underwritten by the securities company as required by laws and administrative regulations, the issuer shall sign an underwriting agreement with the securities company. The securities underwriting business takes the form of agency sales or underwriting sales.

Securities agency underwriting refers to the underwriting method in which a securities company sells securities on behalf of the issuer and returns all unsold securities to the issuer at the end of the underwriting period.

Securities underwriting refers to the underwriting method in which the securities company purchases all the securities of the issuer in accordance with the agreement or purchases all remaining securities after the sale at the end of the underwriting period.

Article 27: Issuers that publicly issue securities have the right to independently select securities companies to underwrite in accordance with the law.

Article 28 　 When a securities company underwrites securities, it shall sign a commission or underwriting agreement with the issuer, stating the following items:

(1) The name, domicile and name of the legal representative of the party concerned;

(2) The type, quantity, amount, and issuance price of the securities sold on a commission or underwriting basis;

(3) The period and start and end dates of agency sales and underwriting sales;

(4) The payment method and date of agency sales and underwriting sales;

(5) Expenses and settlement methods for agency sales and underwriting sales;

(6) Liability for breach of contract;

(7) Other matters stipulated by the securities regulatory agency of the State Council.

Article 29: When underwriting securities, a securities company shall verify the authenticity, accuracy and completeness of the public offering documents. If false records, misleading statements or major omissions are found, no sales activities shall be carried out; if sales have already been made, the sales activities must be stopped immediately and corrective measures shall be taken.

Securities companies underwriting securities shall not have the following behaviors:

(1) Carrying out false or misleading advertising or other promotional activities for investors;

(2) Soliciting underwriting business by means of unfair competition;

(3) Other violations of securities underwriting business regulations.

If a securities company commits the acts listed in the preceding paragraph and causes losses to other securities underwriting institutions or investors, it shall be liable for compensation in accordance with the law.

Article 30: Where an underwriting syndicate is hired to issue securities to an unspecified target, the underwriting syndicate shall be composed of the lead underwriter and the securities companies participating in the underwriting.

Article 31: The longest period of securities underwriting or underwriting shall not exceed 90 days.

During the period of consignment or underwriting, the securities company shall ensure that the securities it sells on consignment or underwriting shall be sold to subscribers in advance. The securities company shall not reserve the securities for consignment for the company or purchase and retain the securities underwritten in advance.

Article 32: Where stocks are issued at a premium, the issue price shall be negotiated and determined by the issuer and the underwriting securities company.

Article 33 　The stock issuance adopts the method of consignment, and the consignment period expires and the number of shares sold to investors does not reach 70% of the number of shares to be issued publicly, it is a failure of the issuance. The issuer shall return to the stock subscribers based on the issue price plus interest on bank deposits during the same period.

Article 34 　 When the time limit for public offering of stocks expires, the issuer shall report the issuance of stocks to the securities regulatory authority of the State Council for the record.

Chapter Three 　 Securities Trading

Section 1 　 General Provisions

Article 35 　The securities bought and sold by the parties to a securities transaction must be securities issued and delivered in accordance with the law.

Securities not issued in accordance with the law may not be bought or sold.

Article 36: Securities issued in accordance with the law, where the "Company Law of the People's Republic of China" and other laws have restrictive provisions on the transfer period, shall not be transferred within the limited period.

Shareholders, actual controllers, directors, supervisors, and senior managers of listed companies holding more than 5% of the shares, as well as other shareholders holding shares issued by the issuer before the initial public offering or shares issued by the listed company to specific objects, Anyone who transfers the company’s shares held by him shall not violate laws, administrative regulations and the State Council’s securities regulatory agency’s provisions on holding period, time of sale, quantity of sale, method of sale, information disclosure, etc., and shall comply with the stock exchange Business rules.

Article 37 　The publicly issued securities shall be listed and traded on a stock exchange established in accordance with the law or traded on other national securities trading venues approved by the State Council.

Non-publicly issued securities may be transferred on stock exchanges, other national securities trading venues approved by the State Council, and regional equity markets established in accordance with the provisions of the State Council.

Article 38: When securities are listed and traded on a stock exchange, public and centralized trading methods or other methods approved by the securities regulatory authority of the State Council shall be adopted.

Article 39 　The securities bought and sold by the parties to a securities transaction may be in paper form or other forms prescribed by the securities regulatory authority of the State Council.

Article 40 Employees of securities trading venues, securities companies and securities registration and clearing institutions, staff of securities regulatory agencies, and other personnel who are prohibited from participating in stock trading as prescribed by laws and administrative regulations shall not directly or within the term of office or statutory deadline. Holding or buying or selling stocks or other stocks with a pseudonym or borrowing the name of others, and may not accept stocks or other stocks with the nature of stocks presented by others.

When any person becomes the person listed in the preceding paragraph, the stocks or other securities with the nature of equity that he originally held must be transferred in accordance with the law.

Practitioners of securities companies that implement equity incentive plans or employee stock ownership plans may hold or sell their company’s stocks or other equity securities in accordance with the regulations of the State Council’s securities regulatory authority.

Article 41: Securities trading venues, securities companies, securities registration and clearing institutions, securities service institutions and their staff shall keep investor information confidential in accordance with the law, and shall not illegally trade, provide or disclose investor information.

Securities trading venues, securities companies, securities registration and clearing institutions, securities service institutions and their staff shall not disclose business secrets that they know.

Article 42 　 Securities service institutions and personnel that issue audit reports or legal opinions for securities issuance shall not buy or sell such securities during the underwriting period of the securities and within six months after the expiration of the period.

In addition to the provisions of the preceding paragraph, securities service institutions and personnel that issue audit reports or legal opinions and other documents for the issuer, its controlling shareholder, actual controller, or purchaser, or major asset transaction party, shall start from the date of accepting the entrustment to the above No trading of the securities is allowed within five days after the document is published. If the above-mentioned relevant work is actually carried out earlier than the date of accepting the entrustment, the securities shall not be bought or sold within five days after the above-mentioned documents are published from the date of actual carrying out of the above-mentioned relevant work.

Article 43: The charges for securities transactions must be reasonable, and the charging items, charging standards and management methods shall be disclosed.

Article 44 Shareholders, directors, supervisors, and senior managers of listed companies and companies whose stocks are traded on other national securities exchange venues approved by the State Council that hold more than 5% of the shares of the company shall transfer the shares of the company that they hold Or other securities with equity nature are sold within six months after the purchase, or purchased again within six months after the sale, and the income derived therefrom belongs to the company, and the company’s board of directors shall recover its income. However, the securities company holds more than 5% of the shares due to the purchase of the remaining stocks after the package sale, and other circumstances stipulated by the securities regulatory authority of the State Council are excluded.

The stocks held by directors, supervisors, senior managers, natural person shareholders, or other equity securities as mentioned in the preceding paragraph include stocks held by their spouses, parents, children, and using other people’s accounts or other equity securities Securities.

If the company’s board of directors does not comply with the provisions of the first paragraph, shareholders have the right to request the board of directors to implement it within 30 days. If the company’s board of directors fails to implement it within the above-mentioned time limit, the shareholders have the right to directly file a lawsuit in the people’s court in their own name for the benefit of the company.

If the company’s board of directors fails to comply with the provisions of the first paragraph, the responsible directors shall be jointly and severally liable in accordance with the law.

Article 45: “Any computer program automatically generates or issues trading instructions for programmatic trading, it shall comply with the regulations of the State Council’s securities regulatory authority and report to the stock exchange, and shall not affect the security of the stock exchange system or normal trading order.

Section 2 　 Securities Listing

Article 46 ``To apply for the listing and trading of securities, an application shall be submitted to the stock exchange, which shall be reviewed and approved by the stock exchange in accordance with the law, and a listing agreement shall be signed by both parties.

The stock exchange arranges the listing and trading of government bonds in accordance with the decision of the department authorized by the State Council.

Article 47 　Applying for the listing and trading of securities shall meet the listing conditions stipulated in the listing rules of the stock exchange.

The listing conditions stipulated in the listing rules of the stock exchange shall set requirements on the issuer’s operating life, financial status, minimum public offering ratio, corporate governance, and integrity records.

Article 48: If the securities listed and traded are subject to the circumstances of termination of listing as prescribed by the stock exchange, the stock exchange shall terminate its listing and trading in accordance with the business rules.

Where the stock exchange decides to terminate the listing and trading of securities, it shall make a timely announcement and report to the securities regulatory authority of the State Council for the record.

Article 49: Anyone who is dissatisfied with the decision made by the stock exchange not to approve or terminate the listing may apply to the review agency established by the stock exchange for review.

Section 3 　Prohibited Trading Activities

Article 50: It is prohibited for insiders of securities trading insider information and those who illegally obtain insider information to use insider information to engage in securities trading activities.

Article 51: Insiders of securities trading inside information include:

(1) The issuer and its directors, supervisors, and senior management personnel;

(2) Shareholders and their directors, supervisors, and senior managers who hold more than 5% of the company's shares, the actual controller of the company and its directors, supervisors, and senior managers;

(3) Companies controlled or actually controlled by the issuer and their directors, supervisors, and senior managers;

(4) Persons who can obtain inside information about the company due to their position in the company or because of business dealings with the company;

(5) The purchaser or major asset transaction party of a listed company and its controlling shareholders, actual controllers, directors, supervisors and senior management personnel;

(6) Relevant personnel of securities trading venues, securities companies, securities registration and clearing institutions, and securities service institutions that can obtain inside information due to their duties and work;

(7) Staff members of securities regulatory agencies who can obtain inside information due to their duties and work;

(8) Staff members of relevant competent authorities and regulatory agencies who can obtain inside information for the management of securities issuance and trading, or the management of listed companies and their acquisitions, and major asset transactions due to their statutory duties;

(9) Other personnel who can obtain inside information as required by the securities regulatory agency of the State Council.

Article 52: In securities trading activities, information that involves the issuer’s operations, finances, or has a significant impact on the issuer’s securities market price, which has not yet been made public, is inside information.

The major events listed in the second paragraph of Article 80 and the second paragraph of Article 81 of this law are inside information.

Article 53: Insiders of securities trading insider information and those who illegally obtain insider information shall not buy or sell the company’s securities, or divulge the information, or advise others to buy or sell the securities before the insider information is disclosed.

Natural persons, legal persons, or unincorporated organizations that hold or jointly hold more than 5% of the company’s shares through agreements or other arrangements with others to purchase shares in listed companies shall apply to the provisions of this law if they are otherwise provided.

If insider trading causes losses to investors, it shall be liable for compensation in accordance with the law.

Article 54 It is prohibited for employees of securities trading venues, securities companies, securities registration and clearing institutions, securities service institutions, and other financial institutions, relevant supervisory departments or industry associations to use other information other than inside information obtained conveniently by their duties. Undisclosed information, in violation of regulations, engages in securities trading activities related to the information, or expressly or implies that others are engaged in related trading activities.

Those who use undisclosed information to conduct transactions that cause losses to investors shall be liable for compensation in accordance with the law.

Article 55: Anyone is prohibited from manipulating the securities market by the following means to influence or intend to influence the price or volume of securities trading:

(1) Separately or through collusion, concentrating capital advantage, shareholding advantage, or using information advantage to jointly or continuously buy and sell;

(2) Colluding with others to conduct securities transactions with each other at the time, price and method agreed in advance;

(3) Conducting securities transactions between accounts that they actually control;

(4) Frequent or large numbers of declarations and cancellation of declarations are not made for the purpose of closing transactions;