Article 77 No one is allowed to manipulate the securities markets in the following ways:

(1) conducting allied or incessant purchasing and selling individually or in conspiracy with another person by building up an ascendancy of funds or shareholdings or taking advantage of information, thus manipulating the price or volume of securities trading;

(2) conducting bidirectional securities transactions in collusion with another person by following previously fixed timing, price and manner, thus affecting the price or volume of securities trading;

(3) conducting securities transactions among the accounts actually controlled by oneself, thus affecting the price or volume of securities trading; and

(4)manipulating the securities markets by other means.

Where manipulation of the securities markets causes losses to investors, the manipulator shall be held liable for compensation pursuant to law.

Article 78 State functionaries and employees and the relevant persons of the media are prohibited from fabricating or disseminating false information so as to disrupt the securities markets.

In the course of securities trading, stock exchanges, securities companies, securities registrar and clearance institutions, securities service institutions and their employees as well as the association of securities industry and the securities regulatory authorities and their staff members are prohibited from making misrepresentation or rendering misleading information.

The media must disseminate information of the securities markets in a truthful and objective manner and are prohibited from misleading the public.

Article 79 Securities companies and their employees are prohibited from conducting any of the following fraudulent activities to the detriment of the interests of clients:

(1) purchasing and selling securities for clients against their entrustment;

(2) failing to provide, within the specified period of time, to clients written documents to confirm transactions;

(3) misappropriating the securities entrusted by clients for trading, or the funds in the accounts of clients;

(4) purchasing or selling securities for clients without their entrustment, or purchasing and selling securities by making use of the names of clients;

(5) inveigling clients into pursuing unwarranted securities transactions in order to charge commissions;

(6) via the media or other means, giving or spreading false information or information that misleads investors; and

(7) other activities against the clients’ expression of their true intention to the detriment of the interests of clients.

Where defrauding of a client causes losses to the client, the wrongdoer shall be held liable for the losses pursuant to law.

Article 80 Legal persons are prohibited from making illegal use of the accounts of other persons’ to conduct securities transactions, and are prohibited from lending the securities accounts of their own or other persons’.

Article 81 The channels for funds to flow into the markets shall be broadened pursuant to law, and funds are prohibited from flowing into the stock markets unlawfully.

Article 82 No one is allowed to misappropriate public funds for securities trading.

Article 83 Where enterprises owned by the State or controlled by State assets purchase and sell the shares listed for trading, they must observe the relevant provisions of the State.

Article 84 Where stock exchanges, securities companies, securities registrar and clearance institutions, securities service institutions and their employees find any prohibited trading activities in securities trading, they shall report such activities to the securities regulatory authorities without delay.

Chapter IV Acquisition of Listed Companies

Article 85 An investor may acquire a listed company through a tender offer, a negotiated acquisition, or other lawful means.

Article 86 When, through securities trading on a stock exchange, the shareholding of an investor, or the deemed joint-shareholding of an investor and others in virtue of agreements or other arrangements, has reached 5% of the issued shares of a listed company, the investor shall, within three days from the date on which such shareholding becomes a fact, report in writing to the securities regulatory authority under the State Council and the stock exchange, inform the said listed company of the fact and make an announcement thereof. The investor shall not continue to purchase or sell the share of the said listed company during the period of time mentioned above.

When the shareholding of an investor, or the deemed joint-shareholding of an investor and others in virtue of agreements or other arrangements, has reached 5% of the issued shares of a listed company, every 5% increase or decrease in such shareholdings thereafter shall be reported and announced in accordance with the provisions of the preceding paragraph. During the period of report and within two days after the report and announcement, the investor shall not further purchase or sell the shares of the listed company.

Article 87 The written report and announcement made in accordance with the provisions in the preceding Article shall include the following contents:

(1) the names and domiciles of the shareholders;

(2) the description and quantity of the shares held; and

(3) the date on which shareholding or the increase or decrease in shareholdings has reached the statutory percentage.

Article 88 Where through securities trading on a stock exchange, the shareholding of an investor, or the deemed joint-shareholding of an investor and others in virtue of agreements or other arrangements, has reached 30% of the issued shares of a listed company, if further acquisition is to be pursued, a tender offer of acquisition shall be launched pursuant to law to all of the shareholders of the listed company for acquiring all or part of the shares of the listed company.

In the tender offer for acquiring part of the shares of a listed company shall be stated that in case the number of the shares committed to sell by the shareholders of the company to be acquired exceeds the number of the shares proposed to acquire, the acquirer shall proceed on a prorating basis.

Article 89 In order to launch a tender offer of acquisition in accordance with the provisions in the preceding Article, the acquirer must submit a report on acquisition of the listed company in advance to the securities regulatory authority under the State Council clearly stating the following items:

(1) the name and domicile of the acquirer;

(2) the decision of the acquirer concerning the acquisition;

(3) the name of the listed company intended to acquire;

(4) the purposes of the acquisition;

(5) the detailed description of the shares under acquisition and the number of the shares proposed to acquire;

(6) the period and price of the acquisition;

(7) the funds needed for the acquisition and the assurance thereof; and

(8) the shareholding percentage of the acquirer in the total shares of the company to be acquired at the time of submitting the report on acquisition of the listed company.

The acquirer shall simultaneously submit the report on acquisition of the listed company to the stock exchange.

Article 90 After 15 days from the date of submitting its report on acquisition of a listed company in accordance with the provision in the preceding Article, the acquirer shall announce its tender offer of acquisition. During the period of time mentioned above, if the securities regulatory authority under the State Council finds that the said report is not in conformity with the provisions of laws or administrative regulations, it shall, in a timely manner, inform the acquirer of the fact, and the acquirer shall not announce its tender offer of acquisition.

The period of acquisition stated in a tender offer of acquisition shall be not less than 30 days but not more than 60 days.

Article 91 An acquirer shall not rescind its acquisition offer within the committed period of time stated in the tender offer of acquisition. In case the acquirer deems it necessary to modify the terms of its acquisition offer, it must submit a report in advance to the securities regulatory authority under the State Council and the stock exchange, and make the announcement thereof upon approval.

Article 92 All the terms stated in a tender offer of acquisition shall be equally applicable to all the shareholders of the company to be acquired.

Article 93 Where a tender offer of acquisition is pursued, the acquirer shall not, within the period of acquisition, sell the shares of the company to be acquired, or purchase the shares of the said company in a manner other than the one as stipulated in the tender offer of acquisition, or on terms more favorable than the ones as stipulated in such offer. Article 94 Where negotiated acquisition is pursued, the acquirer and the shareholders of the company to be acquired may effect an assignment of shares through negotiation in accordance with the provisions of laws or administrative regulations.

When acquiring a listed company by way of negotiation, the acquirer shall, within three days upon reaching an agreement, submit a written report to the securities regulatory authority under the State Council and the stock exchange, and make an announcement thereof.

An acquisition agreement shall not be executed prior to its announcement.

Article 95 Where negotiated acquisition is pursued, the parties to the agreement may provisionally entrust a securities registrar and clearance institution with the safekeeping of the shares to be assigned under the agreement and deposit the funds for acquisition with the designated banks.

Article 96 Where negotiated acquisition is pursued, when the shareholding of an acquirer, or the deemed joint-shareholding of an acquirer and others in virtue of agreements or other arrangements, has reached 30% of the issued shares of a listed company and the acquirer intends to pursue further acquisition, a tender offer of acquisition shall be launched to all of the shareholders of the listed company for acquiring all or part of the shares of the company, except where exempted by the securities regulatory authority under the State Council from launching a tender offer of acquisition.

When acquiring the shares of listed company by way of a tender offer in accordance with the provisions in the preceding paragraph, the acquirer shall observe the provisions of Articles 89 through 93 of this Law.

Article 97 Where at the expiration of the period of acquisition, the spread of share ownership of the acquired company is no longer in conformity with the conditions for listing, the stock exchange shall, pursuant to law, terminate the listing and trading of the shares of the listed company; and the remaining holders of the shares of the acquired company shall have the right to sell their shares to the acquirer on the same terms as stipulated in the tender offer of acquisition, and the acquirer shall acquire such shares accordingly.

Where, after completion of the acquisition, the acquired company no longer possesses the qualifications of a company limited by shares, it shall be transformed into another form of enterprise pursuant to law.

Article 98 The shares of an acquired listed company held by the acquirer in the course of acquisition of a listed company shall not be assigned within 12 months after completion of the acquisition.

Article 99 Where, after completion of the acquisition, the acquired company is to be merged into the acquirer and is therefore to be dissolved, the original shares of the dissolved company shall be replaced by the acquirer pursuant to law.

Article100 An acquirer shall, within 15 days after completion of the acquisition, submit a report on the acquisition to the securities regulatory authority under the State Council and the stock exchange, and make an announcement thereof.

Article 101 With respect to acquisition of the shares of listed companies which are held by the investment institutions authorized by the State, such acquisition shall be pursued in accordance with the provisions of the State and shall be subject to approval by the relevant department in charge.

The securities regulatory authority under the State Council shall formulate specific measures for acquisition of listed companies in accordance with the principles of this Law.

Chapter V Stock Exchanges

Article 102 A stock exchange is a legal person performing self-regulatory governance which provides the premises and facilities for centralized trading of securities, organizes and supervises such securities trading.

The establishment and dissolution of a stock exchange shall be subject to decision by the State Council.

Article 103 The articles of association must be formulated where a stock exchange is established.

The formulation and modification of the articles of association of a stock exchange shall be subject to approval by the securities regulatory authority under the State Council.

Article 104 The words “stock exchange” shall be included in the name of a stock exchange. No other units or individuals shall use “stock exchange” or similar words in their names.

Article 105 A stock exchange may allocate fee-generated revenues at its discretion, and such revenues shall first be used to ensure the regular operation and gradual improvement of the premises and facilities of the stock exchange.

The accumulated property of a stock exchange applying a membership system shall belong to the members and the rights and interests embodied in such property shall be jointly enjoyed by the members. Such property shall not be distributed to the members so long as the stock exchange exists.

Article 106 A stock exchange shall have a board of governors.

Article 107 A stock exchange shall have a general manager, to be appointed and removed by the securities regulatory authority under the State Council.

Article 108 A person who is in one of the following circumstances or the circumstances as described in Article 147 of the Companies Law of the People’s Republic of China shall not be appointed a person in charge of a stock exchange:

(1) being a person in charge of a stock exchange or securities registrar and clearance institution or a director, supervisor or senior manager of a securities company who has been removed from office due to violations of law or rules of discipline, and a five-year period has not elapsed ever since; and

(2) being a lawyer, certified public accountant or a professional of an investment consultancy institution, financial advisory institution, credit rating institution, asset appraisal institution or verification institution who has been disqualified as such due to violations of law or rules of discipline, and a five-year period has not elapsed ever since.

Article 109 An employee of a stock exchange, securities registrar and clearance institution, securities service institution or securities company or a staff member of a State organ who has been expelled due to violations of law or rules of discipline shall not be recruited as an employee of a stock exchange.

Article 110 A person who enters a stock exchange for centralized trading of securities must be a member of the stock exchange.

Article 111 In order to trade securities, an investor shall enter into an entrustment agreement of securities trading with a securities company and open a securities trading account with the company, and entrust the company with the purchasing and selling of securities on his behalf in writing, through telephone or by other means.

Article 112 Upon entrustment by an investor, a securities company shall, in accordance with the rules of securities trading, put forward a transaction order and participate in the centralized floor trading at the stock exchange and shall bear the liabilities of clearance and settlement corresponding to the transaction completed; on the basis of the completed transaction and in accordance with the rules of clearance and settlement, the securities registrar and clearance institution shall process the clearance and settlement of securities and funds with the securities company and effect the procedure of securities registration and transfer for the client of the securities company.

Article 113 The stock exchanges shall ensure fairness of the centralized trading of securities, make available the real-time quotations and prices of securities trading, and formulate and publish the daily charts thereof.

No entities or individuals shall publish the real-time quotations and prices of securities trading without permission of the stock exchanges.

Article 114 In the event of an unexpected incident that prevents securities trading from operating regularly, the stock exchanges may take the measure of a technical halt on the markets; in the event of an unexpected incident which occurs due to force majeure, or for the purposes of maintaining the regular order of securities trading, the stock exchanges may decide to suspend the markets.

When stock exchanges take the measure of technical halt or decide to suspend the markets; they must report to the securities regulatory authority under the State Council in a timely manner.

Article 115 Stock exchanges shall excise real-time monitoring of securities trading and submit reports on suspicious trading situations in accordance with the requirements of the securities regulatory authority under the State Council.

Stock exchanges shall oversee the information disclosure by listed companies and by persons obligated to make such disclosure, and urge them to disclose information in a timely and accurate manner in accordance with law.

Where securities accounts display significantly suspicious trading situations, the stock exchange may, if necessary, impose restrictions on trading by such accounts and shall report such restrictions to the securities regulatory authority under the State Council for the record.

Article 116 A stock exchange shall allocate certain proportions of its revenues from transaction fees, membership dues and access fees to set up risk funds. The risk funds shall be administered by the board of governors of the stock exchange.

The specific proportion for allocation and the measures for use of the risk funds shall be prescribed by the securities regulatory authority under the State Council in conjunction with the finance department of the State Council.

Article 117 Stock exchanges shall deposit the collected and accumulated risk funds into the designated accounts at their current transaction banks, and shall not make use of the funds without authorization.

Article 118 Stock exchanges shall, in accordance with laws or administrative regulations, formulate rules for listing, trading, membership administration and other relevant rules and submit such rules to the securities regulatory authority under the State Council for approval.

Article 119 In performing his duties related to securities trading, the person in charge or the employee of a stock exchange shall recuse himself where he himself or one of his relatives is an interested party.

Article 120 Where trade is conducted in accordance with the trading rules formulated in accordance with law, the transaction results thereof shall not be altered. The civil liabilities to be borne by the persons who violate the rules in the course of trading shall not be exempted; and the gains obtained from trading in violation of the rules shall be dealt with according to relevant provisions.