Article 150 Where the net capital level or other risk control thresholds of a securities company is not in conformity with the specified level or threshholds, the securities regulatory authority under the State Council shall order the company to rectify within a specified time limit; if the company fails to do so at the expiration of the time limit, or its behavior severely threatens the steady operation of the company or jeopardizes the lawful rights and interests of the clients of the company, the securities regulatory authority under the State Council may take the following measures against the company as the case may be:

(1) to impose restrictions on the business activities of the company, order it to suspend part of its businesses, or to withhold approval with respect to its application for new businesses;

(2) to withhold approval with respect to its application for increasing or acquiring business branches;

(3) to impose restrictions on the profit distribution of the company, or on the compensation payments or benefit availabilities to its directors, supervisors or senior managers;

(4) to impose restrictions on the alienation of the property of the company, or the creation of other rights on its property;

(5) to order the company to replace its directors, supervisors or senior managers, or to impose restrictions on their rights;

(6) to order the controlling shareholders to divest their interests in the company or to impose restrictions on the exercise of the shareholder rights of relevant shareholders; or

(7) to revoke the relevant business permits.

Upon completion of rectification, the securities company shall submit a report to the securities regulatory authority under the State Council. The securities regulatory authority under the State Council shall go through the procedure of check and acceptance thereupon. Where the risk control thresholds are met, the relevant measures taken against the company under the provisions of the preceding paragraph shall be removed within three days after completion of check and acceptance.

Article 151 Where a shareholder of a securities company makes false capital contribution to or illegally draws back capital contribution from the company, the securities regulatory authority under the State Council shall order him to set it right within a specified time limit, and may also order him to divest his interests in the company.

Before the shareholder mentioned under the preceding paragraph sets right his illegal activities or divests his interests in the company, the securities regulatory authority under the State Council may impose restrictions on his shareholder rights.

Article 152 Where a director, supervisor or senior manager of a securities company fails to perform his duties diligently, resulting in the company’s gross violation of laws or rules or exposing the company to tremendous risks, the securities regulatory authority under the State Council may disqualify him for the post and order the company to replace him.

Article 153 Where a securities company conducts business against law or incurs tremendous risks, thus severely undermining the order of the securities markets or jeopardizing the interests of investors, the securities regulatory authority under the State Council may take such regulatory measures as ordering the company to suspend business operation for rectification, putting the company under the trusteeship of, or having it taken over by, a designated institution, or terminating the company.

Article 154 During the period when a securities company is ordered to suspend business operation for rectification, or is put under trusteeship or, is to be taken over by, a designated institution, or is to go into liquidation pursuant to law, or incurs tremendous risks, with the approval of the securities regulatory authority under the State Council, the following measures may be taken against the directors, supervisors or senior managers who are directly accountable to the company and other persons who are directly responsible:

(1) to notify the boarder control authorities to prevent them, pursuant to law, from leaving the country; and

(2) to apply to the judicial organ for banning them from removing or alienating their property or disposing of the property by other means, or creating other rights on their property.

Chapter VII Securities Registrar and Clearance Institutions

Article 155 A securities registrar and clearance institution is a not-for-profit legal person that provides centralized registration, depository and clearance services for securities trading.

The establishment of a securities registrar and clearance institution shall be subject to approval by the securities regulatory authority under the State Council.

Article 156 The following conditions shall be met to establish a securities registrar and clearance institution:

(1) Its self-owned funds are not less than 200 million yuan;

(2) It has the premises and facilities essential to services for securities registration, depository and clearance;

(3) Its principal managers and employees possess the requisite qualifications for securities business; and

(4) Such other conditions as may be so prescribed by the securities regulatory authority under the State Council.

The name of a securities registrar and clearance institution shall include the words “securities registrar and clearance”.

Article 157 A securities registrar and clearance institution shall perform the following functions:

(1) to open securities accounts and clearing accounts;

(2) to process the deposit and transfer of securities;

(3) to maintain the registers of securities holders;

(4) to process the clearance and settlement of securities listed and traded on stock exchanges;

(5) to distribute the gains from securities as entrusted by an issuer;

(6) to respond to inquiries regarding the aforementioned businesses; and

(7) such other businesses as may be so approved by the securities regulatory authority under the State Council.

Article 158 Registration and clearance of securities shall be done in a centralized and unified manner nationwide.

The articles of association and the rules of business of a securities registrar and clearance institution shall be formulated in accordance with law and shall be subject to approval by the securities regulatory authority under the State Council.

Article 159 Prior to listing for trading, the holder of securities shall have all of his securities deposited with a securities registrar and clearance institution.

The securities registrar and clearance institution shall not misappropriate the securities of its clients’.

Article 160 A securities registrar and clearance institution shall furnish the issuers of securities with the register of securities holders and related materials.

The securities registrar and clearance institution shall, based on its processed results of securities registration and clearance, confirm the fact that an identified securities holder does own the securities, and make available the registration materials of securities holders.

The securities registrar and clearance institution shall ensure the truthfulness, accuracy and completeness of the register of securities holders and the records of registration and transfer, and shall not conceal, forge, distort or destroy these materials.

Article 161 A securities registrar and clearance institution shall adopt the following measures to ensure the regular operation of business:

(1) to maintain indispensable service equipment and sufficient procedures to protect data safety;

(2) to maintain sufficient management systems for its business, finance and safety precautions; and

(3) to maintain a sufficient system for risk control.

Article 162 A securities registrar and clearance institution shall properly preserve the original vouchers of registration, depository and clearance and the related documents and materials. The aforementioned materials shall be preserved for a period of not less than 20 years.

Article 163 A securities registrar and clearance institution shall establish a fund for securities clearing risks, which is to be used to pay for or make up the losses suffered by the securities registrar and clearance institution due to settlement breach, technical failures, operational errors or force majeure.

The fund for securities clearing risks shall be allocated from the business revenues and gains of the securities registrar and clearance institution, and may also be contributed by the clearing participants on a proportional basis reflecting their respective volumes of securities traded.

The measures for raising and controlling the fund for securities clearing risks shall be prescribed by the securities regulatory authority under the State Council in conjunction with the finance department of the State Council.

Article 164 The proceeds of the fund for securities clearing risks shall be deposited in a special account at a designated bank and managed under a separate entry.

After settling compensation claims with the proceeds of the securities clearing fund, the securities registrar and clearance institution shall seek recovery from the relevant liable persons.

Article 165 The application for dissolution submitted by a securities registrar and clearance institution shall be subject to approval by the securities regulatory authority under the State Council.

Article 166 To entrust a securities company with the processing of securities trading, an investor shall apply for opening a securities account. A securities registrar and clearance institution shall, in accordance with relevant regulations, open a securities account for the investor in the investor’s own name.

In applying for opening an account, the investor must present the legal documentations to establish his identity as a Chinese citizen or his qualifications as a Chinese legal person, except as may otherwise be prescribed by the State.

Article 167 When providing settlement netting services for securities trading, a securities registrar and clearance institution shall request the participants in clearing to adhere to the principle of delivery versus payment, to deliver securities and funds in full and to pledge performance bonds.

No one shall use the securities, funds or performance bonds for a settlement prior to completion of the settlement.

Where a participant in clearing fails to discharge its settlement obligations, the securities registrar and clearance institution shall have the right to dispose of the property, mentioned in the preceding paragraph, in accordance with its business rules.

Article 168 The funds and securities collected for clearance by a securities registrar and clearance institution in accordance with the business rules must be deposited in the special accounts for clearance and settlement, may only be used in accordance with the business rules for the clearance and settlement of the completed securities transactions, and shall not be subject to compulsory enforcement.

Chapter VIII Securities Service Institutions

Article 169 To engage in securities service business, investment consultancy institutions, financial advisory institutions, credit rating institutions, asset valuation institutions and accounting offices must obtain approval of the securities regulatory authority under the State Council and the relevant departments in charge.

The administrative measures for examination and approval of investment consultancy institutions, financial advisory institutions, credit rating institutions, asset valuation institutions and accounting offices, which intend to engage in securities service business, shall be formulated by the securities regulatory authority under the State Council and the relevant departments in charge.

Article 170 Persons from investment consultancy institutions, financial advisory institutions and credit rating institutions, who engage in securities service business, must possess the professional knowledge of securities and have at least two years of experience in securities business or in securities service business. The standards for determining the qualifications for securities business and the administrative measures in this regard shall be formulated by the securities regulatory authority under the State Council.

Article 171 When conducting securities service business, an investment consultancy institution and its employees shall not engage in the following activities:

(1) making securities investment as an agent of entrusting parties;

(2) undertaking to share the gains and losses from securities investment with the entrusting parties;

(3) purchasing and selling the shares of the listed companies to which the consultancy institution provides services;

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

(5) such other activities as may be so prohibited by laws or administrative regulations.

Where the institution causes losses to investors due to any of the activities mentioned under the preceding paragraph, it shall be liable for compensation pursuant to law.

Article 172 Investment consultancy institutions and credit rating institutions engaged in securities service business shall charge service fees in compliance with the rates or the measures therefor prescribed by the relevant department in charge under the State Council.

Article 173 When preparing and producing such documents as audit reports, asset valuation reports, financial advisory reports, credit rating reports or legal opinions for such securities business activities as securities issuing, listing and trading, a securities service institution shall perform its duties diligently in examining and verifying the truthfulness, accuracy and completeness of the contents of the documents and materials on which their report, etc. are based. Where there are false entries, misleading statements, or major omission in the documents prepared and produced by them, which cause losses to others, they shall be held jointly and severally liable for compensation together with the issuers or listed companies, unless they can establish that they are faultless.

Chapter IX Securities Industry Association

Article 174 The securities industry association is a self-regulatory organization of the securities industry and is a public organization with the status of a legal person.

Securities companies shall join the securities industry association.

The organ of power of the securities industry association is the assembly composed of all members.

Article 175 The charter of the securities industry association shall be drawn up by the assembly of the members and submitted to the securities regulatory authority under the State Council for the record.