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Notice of the General Office of the State Council on Regulating and Developing Regional Equity Markets

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Notice of the General Office of the State Council on Regulating and Developing Regional Equity Markets

Classification:
Legal Updates
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The people's governments of all provinces, autonomous regions, and municipalities directly under the Central Government; all ministries and commissions of the State Council; and all institutions directly under the State Council:

Regulating and developing regional equity markets is an important measure to improve the multiple-level capital market systems and is significant for the advancement of supply-side structural reform, promotion of entrepreneurship and innovation among all the people, service for innovation-driven development strategy, decrease in corporate leverage ratios and other aspects. For purposes of implementing the decisions and arrangements of the CPC Central Committee and the State Council, promoting the long-term stable and sound development of multiple-level capital markets, preventing and resolving financial risks, supporting the development of real economy, especially micro, small and medium-sized enterprises, and protecting the lawful rights and interests of investors, with the approval of the State Council, the matters with regard to regulating and developing regional equity markets are hereby announced as follows:

I. Regional equity markets are private equity markets mainly serving micro, small and medium-sized enterprises in the provincial-level administrative regions where such markets are located, an important part of the multiple-level capital market system, and a platform of comprehensive use of the measures and policies of the local people's governments supporting micro, small and medium-sized enterprises. The relation between supervision and development shall be effectively handled. According to the requirement of facilitating both regulation and development, the regulation and development of regional equity markets shall be vigorously, stably and properly advanced, financial risks shall be prevented and resolved, and fund raising by micro, small and medium-sized enterprises shall be expanded in an orderly manner and better facilitated.

II. Regional equity markets shall be subject to the supervision of the provincial-level people's governments in the place of the markets, and such governments shall be accordingly responsible for risk disposal. The China Securities Regulatory Commission ("CSRC") shall perform functions and duties in accordance with the laws and regulations and strengthen the guidance to, coordination and oversight of the supervision of regional equity markets by the provincial-level people's governments. The provincial-level people's governments shall, in accordance with relevant financial policies and regulations, develop specific detailed implementation rules and operation measures within the scope of their duties, establish and improve the regulatory mechanism, designate specific departments to take charge of routine supervision, constantly improve supervision ability and investigate and deal with illegal and irregular behavior. The CSRC shall be responsible for developing unified rules for the business and supervision of regional equity markets, supervise and inspect regulated market operations, issue warning of possible financial risks and supervise disposition. The CSRC shall prudentially assess the supervision capacity and conditions of the provincial-level people's governments, strengthen supervision training, adopt effective measures, and make the supervision capacity of the local governments match market development. The relevant departments of the State Council, including the CSRC, and the provincial-level people's governments shall enhance cooperation in supervision, prevent supervision vacuum and regulatory arbitrage, strictly crack down upon various illegal and irregular behavior, maintain market order, effectively protect the lawful rights and interests of investors, prevent and resolve financial risks, and promote the sound and stable development of regional equity markets.

III. A regional equity market operator (hereinafter referred to as "operator") shall be responsible for organizing the activities of a regional equity market, subject market participants to self-regulatory management, and ensure regulated and stable market operations. The list of operators shall be issued and published by the provincial-level people's governments and filed with the CSRC for recordation. Where there has been an established operator within the administrative region of a province, an autonomous region, a municipality directly under the Central Government or a city under separate state planning before this Notice is issued, no new operator shall be established; where there is no operator established, one may be established; and where there have been more than one operators established, the provincial-level people's government shall vigorously, steadily and properly promote the integration of them into one, which the CSRC shall guide and supervise.

IV. All activities of a regional equity market shall conform to the laws and regulations and the business and supervision rules as developed by the CSRC. Securities to be issued or negotiated on a regional equity market shall be restricted to stocks, cooperate bonds convertible into stocks and other securities recognized by the relevant departments of the State Council according to procedures, and private placement bonds shall not be issued or negotiated in violation of the regulations; securities shall not be issued by advertising, public persuasion or any public or disguised public means, and funds shall not be raised illegally in any form; securities shall not be negotiated by such centralized treading methods as competitive bidding or competitive trading by market makers, among others, and the interval between the buy and sale, or sale and buy, of the same securities by an investor shall not be less than five trading days; the number of holders of single securities shall not exceed the upper limit of the number of the holders of private placement bonds as specified by the laws and administrative regulations except as otherwise provided by the laws and administrative regulations; and the list of securities holders and records of registered negotiations shall be authentic, accurate and complete, and concealment, forgery, tempering or damage shall not be allowed. The funding by or negotiation of the equities of a limited liability company on a regional equity market shall not be contrary to the relevant provisions in this Notice.

V. A regional equity market shall be subject to the qualified investor system. A qualified investor shall be a legal person or a partnership enterprise, established in accordance with the law, with particular conditions, or an investment plan managed by a financial institution in accordance with the law, or a natural person with strong capacity to bear risks, having financial assets not less than 500,000 yuan. Neither the standards for qualified investors nor the upper limit of the number of holders of a single private placement bond shall be violated by dividing, holding on behalf or any other means. A regional equity market shall be encouraged and supported in adopting measures to attract qualified investors within the provincial-level administrative region where it is located to participate.

VI. The information system of a regional equity market shall conform to the laws, regulations and the information technology management specifications developed by the CSRC. An operator or a relevant institution which opens accounts for investors or handles registration and settlement business shall submit information to the provincial-level people's government in the place where it is located and the CSRC according to provisions and connect the relevant information system to the supervision information system designated by the CSRC.

VII. A regional equity market shall not provide the services of funding by or negotiation of private placement bonds or equities for enterprises from outside the provincial-level administrative region where it is located. The provincial-level people's governments shall regularly review according to the regulations any regional equity markets lacking conformity with the provisions of this paragraph and properly handle cross-regional operation issue. The provincial-level people's government in the place of an operator and that in the place of an enterprise shall enter into an agreement, specify the supervision responsibilities in the process of any review, and prevent and resolve any possible risk.

VIII. The relevant departments of the State Council and the local people's governments shall adopt necessary measures within the scope of their duties, create a good environment for the regulated and sound development of regional equity markets, and gradually establish regional equity markets with complete funding functions, by flexible service mode, operating in a safe and regulated manner, fully protecting the lawful rights and interests of investors. The relevant departments of the State Council may, when issuing relevant policies and measures, select a regional equity market operating in a safe and regulated manner and having strong capacity to manage risks to conduct a pilot program.