THE SECURITIES LAW OF THE PEOPLE'S REPUBLIC OF CHINA
(Adopted by the Sixth Session of the Ninth National People's Congress [NPC]Standing Committee on 29 December 1998)

Table of Contents

Chapter I General Provisions
Chapter II Stock Issuance
Chapter III Stock Transactions
Section I General Rules
Section II Stock Listing
Section III Continuous Dissemination of Information
Section IV Prohibited Transactions
Chapter IV Acquisition of Listed Companies
Chapter V Stock Exchanges
Chapter VI Securities Companies
Chapter VII Securities Registration and Settlement Organizations
Chapter VIII Stock Exchange Service Organizations
Chapter IX Stock Brokers' Associations
Chapter X Securities Supervision and Administration Organizations
Chapter XI Legal Responsibilities
Chapter XII Supplementary Provisions Chapter I General Provisions

Article 1 The formulation of this law aims to regulate stock issuance and transactions, toprotect investors' legitimate rights and interests, to safeguard economic order and publicinterests of the society, and to enhance the development of the socialist market economy.

Article 2 This law will be applicable to the issuance and transactions of shares, companybonds, and other securities designated by the State Council according to law within China'sterritory. Situations that are stipulated in this law will be covered by the provisions of theCompany Law, other laws, and administrative rules and regulations. The issuance andtransactions of government treasury bonds will be governed separately by the provisions ofother laws and administrative rules and regulations.

Article 3 When issuing and dealing in securities, all concerned must abide by the principlesof openness and fairness.

Article 4 All participants involved in issuing and dealing in securities enjoy equal legalstatus, and shall abide by the principles that their acts will be voluntary, reimbursable,honest, and trustworthy.

Article 5 When issuing and dealing in securities, all concerned must abide by laws andadministrative rules and regulations. Cheating, insider trading, and manipulation of stockmarkets are prohibited.

Article 6 Stock firms, banks, trust firms, and insurance agencies shall operate separatelyand be administered separately. Stock firms, banks, trust firms, and insurance agenciesshall be established separately.

Article 7 According to law, the securities regulatory body under the State Council shallcentralize and unify the supervision and administration of all stock markets in China. Ifnecessary, the securities regulatory body under the State Council may set up branches thatwill execute supervisory and administrative functions according to authorization.

Article 8 Under the prerequisite that the state shall centralize and unify the supervision andadministration of the issuance and transactions of securities, stock brokers shall establishtheir own associations so as to exercise self-disciplining administration.

Article 9 According to law, the state auditing organ shall supervise by auditing theaccounts of stock exchanges, securities companies, securities registration and settlementorganizations, and securities supervision and administration organizations.

Chapter II Stock Issuance

Article 10 Before publicly issuing securities, one must fulfill the provisions of laws andadministrative rules and regulations; report, according to law, to the securities regulatorybody under the State Council, or to a relevant department authorized by the State Council;and attain its prior approval. Without attaining prior approval according to law, no unit orindividual is allowed to openly issue securities to the public.

Article 11 Before publicly issuing shares, one must abide by the provisions of theCompany Law, and report to and attain prior approval from the securities regulatory bodyunder the State Council. The applicant-issuer must submit to the securities regulatory bodyunder the State Council, application documents as required by relevant provisions of theCompany Law and other relevant documents as stipulated by the securities regulatory bodyunder the State Council. Before issuing company bonds, one must abide by the provisionsof the Company Law, and report to and attain prior approval from a relevant departmentauthorized by the State Council. The applicant-issuer must submit to the relevantdepartment authorized by the State Council, application documents as required by relevantprovisions of the Company Law and other relevant documents as stipulated by the relevantdepartment authorized by the State Council.

Article 12 The organ or department legally in charge of examining and approving theapplication of an applicant-issuer who applies to publicly issue securities according to lawshall decide the formats of application documents and the modes for submitting them.

Article 13 When submitting application documents to the securities regulatory body underthe State Council or to a relevant department authorized by the State Council for theapproval to issue securities, the applicant-issuer must furnish truthful, accurate, andcomplete information. The special organizations and personnel in charge of issuingrelevant documents for securities issuance must strictly execute their legal duties, andensure that the documents issued by them are truthful, accurate, and complete.

Article 14 The securities regulatory body under the State Council shall establish anissuance examination committee that will examine and approve, according to law, theapplications for share issuance. The issuance examination committee will consist ofprofessionals from the securities regulatory body under the State Council and outsideexperts hired by the securities regulatory body under the State Council. They will decideby casting their votes on the applications for share issuance, and expressed views on theirdeliberations. The securities regulatory body under the State Council shall formulate thespecific provisions for establishing the issuance examination committee, and theappointment periods and work procedures for its personnel, and submit them to the StateCouncil for its approval.

Article 15 The securities regulatory body under the State Council shall be responsible forapproving stock issue applications in accordance with the law. The approval procedureshall be made public and subject to supervision in accordance with the law. Personnel whoare involved in approving stock issue applications shall not have any interests in unitsapplying for the issue; shall not receive gifts from units applying for the issue; shall nothold stocks of the approve issue; and shall not have private contact with units applying forthe stock issue. The examination and approval of a company's application for bond issueby State Council-authorized departments shall be implemented in accordance with thestipulations of the previous two paragraphs.

Article 16 The securities regulatory body under the State Council or StateCouncil-authorized departments shall make a decision within three months from the dateof receipt of stock issue application papers. The organizations or departments shall give anexplanation for applications that are not approved or examined.

Article 17 When a stock issue application is examined and approved, the stock issuer shall,in accordance with the stipulations of laws and administrative rules and regulations, issue apublic subscription notice before the public issue of the stock, and place the notice indesignated places for the public to read. Before making public the information on the stockissue in accordance with the law, any person who has information on the issue shall notdisclose such information. The issuer shall not issue stocks before issuing a publicsubscription notice.

Article 18 When the securities regulatory body under the State Council or StateCouncil-authorized departments discover that the approval or decision to examine andapprove a stock issue is not in compliance with the stipulations of laws and administrativerules and regulations, they shall annul the approval and decision. The stock issue shall becanceled if the issue has not commenced. For stocks already issued, stockholders shall askthe issuer to refund the issue price and the interest calculated on the price, using the bankdeposit interest rate for the corresponding period.

Article 19 After the issue of stock in accordance with the laws, the issuer shall beresponsible for changes in the operations and profits; and investors shall be responsible forinvestment risks arising from these changes.

Article 20 When a listed company issues new stocks, it shall comply with the conditionsrequired by the Company Law on new stock issue. It may sell the new stocks to the publicor to existing stockholders. A listed company shall utilize the capital it procures from stockissue in accordance with the uses explained in the public issue subscription notice.Changes in the listed capital uses in the stock issue explanations shall be approved by thegeneral shareholders' meeting. A company shall not issue new stocks if it makesunauthorized changes in the use of capital which are not corrected or which are notapproved by the shareholders' meeting.

Article 21 A securities company shall, in accordance with the stipulations of laws andadministrative rules and regulations, underwrite to sell the securities an issuer offers forpublic subscription. The underwriting business is operated on a commission or sole agencybasis. Commission underwriting refers to the method whereby a securities companyundertakes to sell securities on behalf of the issuer and return all unsold securities to theissuer at the end of the underwriting period. The sole agency method of underwriting refersto the method whereby a securities company acquires all securities of the issuer inaccordance with the agreement, or acquires all unsold securities after the public offer at theend of the underwriting period.

Article 22 An issuer who publicly issues securities has the right to select an underwritingsecurities company. Securities companies shall not procure the underwriting business withimproper means of competition.

Article 23 The following shall be included in the underwriting or sole agency agreementsigned between a securities company and a stock issuer:(1) Names, addresses, and legal representatives of the parties; (2) Types, quantity,monetary amount, and issue price of the stocks underwritten on the commission and soleagency methods; (3) The duration, including the commencement date and deadline of thesecurities underwriting on the commission and sole agency methods; (4) The paymentmethod and payment date for the securities underwriting on the commission and soleagency methods; (5) The fees and settlement method for the securities underwriting on thecommission and sole agency methods; (6) Liability for breach of contract. (7) Othermatters specified by the securities regulatory body under the State Council.

Article 24 A securities company shall verify the authenticity, correctness, andcompleteness of documents of the public stock issue it underwrites. It shall not proceedwith the sale if false records, misrepresentations, or major omissions are discovered in thedocuments. It shall immediately stop the sale and take remedial measures on stocks it hassold.

Article 25 Where the total face value of a public stock issue exceeds 50 million renminbi,the issue shall be underwritten by an underwriting syndicate, which shall include aprincipal underwriting securities company and other companies who participate as jointunderwriters of the share issue.

Article 26 The maximum period for underwriting the stock issue on a commission or soleagency basis shall not exceed 90 days. Within the period for underwriting the stock issueon a commission or sole agency basis, the securities company shall guarantee to first sellthe stocks to subscribers. The securities company shall not reserve the stocks it underwritesto sell or make advance purchases of the stocks it solely underwrites.

Article 27 Where a securities company solely underwrites a stock issue, it shall report thestock sale to the securities supervision and administration organizations for record within15 days after the expiry of the period of solely underwriting. Where a securities companyunderwrites stocks on a commission basis, it shall report the stock sale jointly with theissuer to the securities regulatory body under the State Council for record within 15 daysafter the expiry of the period for underwriting the stock issue on a commission basis.

Article 28 Where a stock is issued at a premium, the issue price shall be discussed anddetermined between the issuer and the underwriting securities company, and report to thesecurities regulatory body under the State Council for approval.

Article 29 Where adomestic enterprise directly or indirectly issues stocks abroad or lists its stocks for tradingabroad, the enterprise shall obtain approval from the securities regulatory body under theState Council.

Charpter III Trading of Securities

Section I General Regulations

Article 30 Stocks traded by parties to a stock transaction shall be the stocks issued and paidfor in accordance with the law. Stocks not issued in accordance with the law shall not betraded.

Article 31 Stocks, company bonds, and other securities issued in accordance with the lawshall be subject to restrictions stipulated by the law on the allotted times for transfer. Theyshall not be traded within the restricted allotted time periods.

Article 32 Stocks, company bonds, and other securities approved for listing and trading inaccordance with the law shall be listed for trading in stock exchanges.

Article 33 The method of open and centralized price bidding shall be adopted for trading ofstocks in stock exchanges. The principle of price and time preference shall be practiced incentralized price bidding in stock trading.

Article 34 Stocks traded by parties to a stock transaction shall be in paper form or otherforms specified by the securities regulatory body under the State Council.

Article 35 The spot transaction method shall be implemented in stock transactions.

Article 36 Securities companies shall not engage in stock trading activities to raise capitalor stocks from clients.

Article 37 Personnel working at stock exchanges, securitiescompanies, and securities registration and settlement institutions; personnel working atsecurities supervision and administration organizations; and other personnel prohibited bylaws and administrative rules and regulations from participating in stock trading shall nothold stocks, trade in stocks, and receive stocks given by other people, directly under theirnames or under false names or other people's names during the term of their office orwithin the allotted time periods specified by the law. When a person becomes one of thepersonnel listed in the preceding paragraph, he or she shall transfer his or her stocks inaccordance with the law.

Article 38 Stock exchanges, securities companies, and securities registration and settlementinstitutions shall keep their client accounts confidential in accordance with the law.

Article 39. Any special organization or its personnel that have prepared an auditing report,assets appraisal report, or legal advice for the issuance of a stock are prohibited frombuying or selling the stock in question while the stock is being underwritten and within sixmonth after the period of underwriting. In addition to provisions of the precedingparagraph, any special organization or its personnel that prepares an auditing report, assetsappraisal report, or legal advice for a listed company is prohibited from buying or sellingstocks of the company from the day it accepts the assignment until five days after theaforementioned document is published.

Article 40. Fees for security exchanges shall be reasonable; fees, fee standards, and feemethods shall be made public. Fees for securities exchanges, fee standards andmanagement procedures shall be standardized by relevant authorities under the StateCouncil.

Article 41. A stockholder shall notify the company within three days when the stocks in hispossession have reached five percent of the stocks issued by a limited liability company.The company shall report it to the securities regulatory body under the State Councilwithin three days of receipt of the report. Where is the company is listed, it shall alsoreport it to the security exchange.

Article 42. Where the stockholder in the preceding article sells the stocks of the companyin his possession within six months after he purchases them, or where he buys them backwithin six months after he sells them, profits from the transaction shall belong to thecompany and the company's board of directors shall take back the stockholder's profits.Where the securities company, as the sole underwriter, purchases all the unsold stocks andtherefore exceeds the five-percent possession limit, it is exempt from the six-monthrestriction when it resells the stocks. Where the board of directors refuses to comply withthe provisions of the preceding paragraph, other stockholders have the right to ask theboard to comply. Where the board of directors' refusal to comply with the first paragraphof this article has resulted in losses to the company, the responsible directors are liable forthe damages in accordance with the law.

Article 43. When a limited liability company applies to have its stocks listed, it shallsubmit an application to the securities regulatory body of the State Council for approval.The securities regulatory body of the State Council may empower a security exchange toapprove stock listings in line with legally prescribed conditions and procedures.

Article 44. The state encourages companies that conform with the policy for encouragingindustrial development and also meet the conditions for stock listing to have their stockslisted.

Article 45. The following documents shall be submitted together with an application to thesecurities regulatory body of the State Council to have one's stock listed and traded at theexchange:(1) The listing report; (2) The decision made by the shareholders' meeting to have thecompany listed; (3) The company's articles of incorporation; (4) The company's businesslicense; (5) Balance sheets for the most recent three years, or since the company'sfounding, certified by a certifying organization; (6) Legal advice and recommendation ofthe securities company; and (7) The latest prospectus.

Article 46. After the application for stock listing is approved by the securities regulatorybody under the State Council, the issuer shall submit to the stock exchange the approveddocument and relevant documents listed in the preceding article. The stock exchange shallarrange the listing of the said stock within six months after receipt from the issuer of thedocuments listed in the preceding paragraph.

Article 47 After the application for listing its stocks is approved by the stock exchanges, alisted company shall publish relevant documents concerning the approved listed stocks fivedays before trade of listed stocks begins. The said documents shall also be placed atappointed places for the public to read.

Article 48 In addition to the documents concerning the listing application stipulated by thepreceding article, a listed company shall also publish the following:(1) The date from which trade of stocks is approved to begin in the stock exchanges; (2)The name list of the top 10 stock holders of the company and the numbers of their stocks;and (3) The names of directors, supervisors, managers, and high-ranking administrators aswell as information on their stock and bond holdings in the company.

Article 49 When a listing company loses its listing conditions stipulated by the regulationsof the company law, the listing of its stocks shall be suspended or terminated.

Article 50 The application filed by a company for listing its bonds must be approved by thesecurities regulatory body under the State Council. The securities regulatory body underthe State Council can authorize the stock exchanges to approve a company's application forlisting its bonds in accordance with legal conditions and legal procedures.

Article 51 In applying for listing its bonds, a company must meet the following conditions:(1) The term of the company's bonds must be about one year; (2) The amount of the bondsissued shall be no less than 50 million yuan; and (3) The conditions for issuing the bondsshall be met at the time when a company applies for listing its bonds.

Article 52 When applying with the securities regulatory body under the State Council forlisting its bonds, a company shall submit the following documents:(1) The listing report; (2) The decision adopted by the board of directors regarding listingapplication; (3) The company charter; (4) The company's business license; (5) Thecompany's measures regarding raising its bonds; and (6) The actual amount of thecompany's bonds issued.

Article 53 After being approved by the securities regulatory body under the State Councilfor listing its bonds, the issuer shall submit to the stock exchanges the approved documentand relevant documents stipulated by the preceding article. The stock exchanges shallarrange the listing of the said bonds within three months after its has received from theissuer the documents stipulated in the preceding paragraph.

Article 54 After the stock exchanges have agreed to a company's application for listing itsbonds, the issuer shall publish the company's report on its bond listing, approveddocuments and documents concerning its listing application five day before listing itsbonds. The said documents shall also be placed at appointed places for the public to read.

Article 55 The securities regulatory body under the State Council shall order a company,after listing its bonds, to suspend its bond listing if one of the following conditions occur:(1) The company commits a major violation of law; (2) The company experiences majorchanges, which do not conform to the conditions for a company to list its bonds; (3) Thefunds raised by the company's bonds are not used in accordance with the purposesapproved by the authorities concerned; (4) The company fails to carry out its obligationsstipulated by the company's measures for raising bonds; and (5) The company experiencesconsecutive economic losses in the most recent two years.

Article 56 If a company experiences one of the situations enumerated in paragraphs (1) to(4) of the preceding article and is found to have severe consequences after investigations orone of the situations enumerated in paragraphs (2), (3), or (5) of the preceding article andthese situations have not been eliminated within a set period of time, the securitiesregulatory body under the State Council shall make a decision to terminate the listing ofthe company's bonds. When a company is disbanded, ordered to close in accordance withlaw, or announced bankrupt, the stock exchanges shall terminate the listing of its bondsand report for the record to the securities regulatory body under the State Council.

Article 57 The securities regulatory body under the State Council can authorize the stockexchanges to suspend or terminate the listing of a company's stocks or bonds in accordancewith the law.

Section III Continuous Dissemination of Information

Article 58 According to the regulations of the Company Law, a company that has beenapproved by the securities regulatory body under the State Council to list its stocks inaccordance with law or by the department authorized by the State Council to issue itsbonds in accordance with the law shall publish its prospectus or its measures for raisingbonds. The company that issues new stocks or bonds in accordance with the law shall alsopublish its financial accounting report.

Article 59 The documents published by a company regarding the issuance and listing of itsstocks or bonds shall be true, accurate, and complete and no fake records, misleadingstatements, or major omissions are allowed.

Article 60 A company that has listed its stocks or bonds shall submit a mid-term reportwith the following information to the securities regulatory body under the State Counciland to the stock exchanges within two months after the end of the first half year of eachaccounting year. Such documents shall also be published.(1) The company's financial accounting report and management situation; (2) Majorlawsuits involving the company; (3) The changes of stocks and bonds already issued; (4)Major matters submitted to the general meeting of stockholders for examination; and (5)Other matters stipulated by the securities regulatory body under the State Council.

Article 61 A company that has listed its stocks or bonds shall submit an annual report withfollowing information to the securities regulatory body under the State Council and to thestock exchanges within four months after the end of each accounting year. Such documentsshall also be published. (1) The company's general situation; (2) The company's financialaccounting report and management situation; (3) The resumes of directors, supervisors,managers, and high-ranking administrators as well as the situation regarding their holdingof the company's stocks and bonds; (4) The situation concerning stocks and bonds alreadyissued, including the name list of the top 10 stock holders of the company and the numbersof their stocks; and (5) Other matters stipulated by the securities regulatory body under theState Council.

Article 62 When a major incident occurs that might have a fairly large impact on the priceof its listed stocks and the investors have no knowledge of the incident, a listed companyshall immediately submit an interim report on the incident to the securities regulatory bodyunder the State Council and the stock exchanges. It shall also publish the report to explainthe true facts of the incident. The following situation can be termed as major incidentstated in the preceding paragraph:(1) Major changes of a company's management policy and management scope; (2) Thecompany's decision concerning its major investment and major property purchase. (3)Major contracts signed by the company which might have an important influence on thecompany's assets, liabilities, rights, interests, and management results; (4) The companyincurs major debts or fails to repay those debts that have come due in violation of anagreement; (5) The company experiences major economic losses or major economic losseswhich exceed more than 10 percent of its net assets; (6) Major changes occur in theexternal conditions of the company's production and management; (7) There is a change inthe chairman or more than one third of directors or managers of the company; (8) There isa fairly large change in the holding of stockholders who hold more than 5 percent of thecompany's stocks; (9) The company's decisions to reduce capital, merge with anothercompany, establish a separate company, disband, and apply for bankruptcy; (10) Majorlawsuits involving the company and the court's canceling in accordance with law thedecisions adopted by the general meeting of stockholders and the board of directors; and(11) Other matters stipulated by the regulations of laws and administrative rules.

Article 63. When the prospectus released by an issuer, or an underwriting securitiescompany, and its corporate bonds placement measures, financial and accounting reports,listed reports, annual reports, interim reports, and provisional reports contain falsified ormisleading information or important omissions that result in losses for investors duringsecurities trading, the issuer and the underwriting securities company shall be liable forcompensation, and the issuer and the liable board directors, supervisors, and managers ofthe underwriting securities company shall also be liable for compensation.

Article 64. Announcements that must be made by the law or by administrative regulationsshall be published in newspapers and magazines authorized by relevant departments of thestate, or in special bulletins. These announcements shall also be available at variouscompanies and securities trade centers for the public to read.

Article 65. The securities regulatory body under the State Council shall supervise listedcompanies' annual reports, interim reports, and provisional reports, as well as the state ofthe announcements. They shall also supervise the state of listed companies' new stockapportionment and distribution. Securities regulatory bodies, securities exchanges, andunderwriting securities companies and their personnel shall not prematurely leak out thecontents of the public announcements which these companies are required to announce bythe law and administrative regulations.

Article 66. The securities regulatory body under the State Council shall make timelyannouncements of the names of those listed companies which have had their listingcredentials revoked owing to major lawless conduct, or which are not qualified to operateas listed companies. When a security exchange makes the decision mentioned in theparagraph above, it shall promptly make the announcement and report the announcementto the securities regulatory body of the State Council for the record.

Section IV Prohibited Trading Activities

Article 67. Security exchange personnel with inside information are not allowed to engagein securities trading activities using inside information.

Article 68. The following personnel are personnel with inside securities tradinginformation:(1) Board directors, supervisors, managers, deputy managers, and other relevant senioradministrators of companies that issue stocks or corporate bonds; (2) Stockholders holding5 percent of more of a company's stocks; (3) Senior administrators of a company thatcontrols companies that issue stocks; (4) Personnel who, because of their offices in thecompany they serve, can have access to information relevant to the company's securitiestrading; (5) Personnel working for securities regulatory organs, and other personnel who,because of their official responsibilities, supervise securities exchanges; (6) Personnel ofintermediary organs, organs of securities registration and settlement, and organs providingsecurity exchange services, who take part in securities trading because of their officialresponsibilities; (7) Other personnel prescribed by the securities regulatory body under theState Council.

Article 69. During securities trading, non-publicized information concerning a company'soperations and financial situation, and information having an important impact on themarket prices of the company's securities, is inside information. The information below isinside information:(1) Important events listed under the second clause of Article 62 of this law; (2) Acompany's plan for distributing dividends and increasing capital; (3) Important changes inthe structure of a company's stock ownership; (4) Major changes in the company's securityfor debts; (5) The mortgaging, selling, and scrapping of a company's principal businessproperty that exceeds one-third of the company's property at one time; (6) The conduct of acompany board directors, supervisors, managers, deputy managers, or other senioradministrators that may undertake major compensatory responsibilities according to thelaw; (7) Plans relevant to the acquisition of listed companies; and (8) Other informationwhich the securities regulatory body of the State Council identifies as having conspicuouseffects on the prices of securities trading.

Article 70. Personnel with inside information about a company's securities trading, or otherpersonnel having illegitimate access to inside information, shall not buy or sell thecompany's securities, leak the information, or suggest that other people buy or sell thesecurities. If this law has separate provisions governing the acquisition of stocks of a listedcompany by a stockholder who holds 5 percent or more of the company's stocks, theprovisions shall apply.

Article 71. Nobody may use any of the following measures to acquire illegitimate interests,or pass risks onto others:(1) Controlling the prices of securities trading through pooling capital, stocks, orinformation to jointly or continuously buy or sell securities, either acting individually orcollectively; (2) Affecting the prices of securities trading or trading volumes by working incollusion with others to buy or sell securities at time, prices, and methods previouslyagreed upon; (3) Affecting the prices of securities trading, or the volume of securitiestrading, through purchase or sale that does not transfer ownership, considering the buyer orseller himself as the trading object; and (4) Manipulating the prices of securities tradingthrough other means.

Article 72. State functionaries, journalists, mass communications workers, and otherrelevant personnel are not allowed to disseminate falsified information that will seriouslyaffect securities trading. During securities trading, securities exchanges, securitiescompanies, organs for securities registration and settlement, organs providing securitiestrading services, and intermediary organs and their workers, and securities regulatoryorgans and their workers are now allowed to give falsified statements or providemisleading information. Securities trading information disseminated by all media must befactual and objective and not misleading.

Article 73. During the course of securities trading, securities company and their workersare now allowed to engage in any of the following fraud that is harmful to clients' interests:(1) Buying or selling securities for clients against their trust; (2) Failing to provide clientswritten confirmation within a prescribed period; (3) Misappropriating the funds entrustedby clients for securities trading, or funds in the clients' accounts; (4) Trading the securitiesin clients' accounts without their authorization, trading securities in the name of clients; (5)Inducing clients to proceed with unnecessary security trading for the sake of earningcommissions; or (6) Other conduct that is against the clients' real intentions and isdetrimental to clients' interests.

Article 74. During securities trading, corporate entities are now allowed to open accountsin the name of individuals for conducting securities trading.

Article 75. During securities trading, no one may use public funds for securities trading.

Article 76. State-owned enterprises and enterprises holding stocks purchased withstate-owned assets may not speculate in stocks being traded on the market.

Article 77. Securities exchanges, securities companies, organs for securities registrationand account settlement, and organs providing security trading services, intermediaryorgans and their workers must promptly report to securities regulatory organs any tradingactivity banned in securities trading.

Charpter IV Takeover of list companies

Article 78. A listed company may be purchased by offer or by agreement.

Article 79. Where an investor possesses five percent of the stocks issued by a listedcompany through trading at the stock exchange, he shall, within three days of thishappening, submit a written report to the securities regulatory body of the State Counciland the stock exchange, notify the listed company, and make a public announcement; he isprohibited from buying or selling that list company's stocks in the period prescribed above.After an investor already possesses five percent of the stocks of a listed company, he shallsubmit a report or makes a public announcement in accordance with provisions of thepreceding paragraph whenever the stocks of that company in his possession increase ordecrease -- through trading at the stock exchange -- by five percentage points of thecompany's total stocks. He is prohibited from buying or selling stocks of that companyduring the period of submitting the report and within two days after he makes a publicannouncement.

Article 80. A written report or public announcement made in accordance with thepreceding article shall have the following information:(1) The stockholder's name and address; (2) The name and amount of stock in hispossession; and (3) The date when the stocks in his possession reach the legally prescribedratio or the date the stocks increase or decrease to the legally prescribed ratio.

Article 81. When an investor, through trading at the stock exchange, possesses 30 percentof the stocks issued by a listed company and plans to make more purchases, he shall makea purchase offer to the company's stockholders as is required by law, except where such anoffer is exempted by the securities regulatory body of the State Council.

Article 82. Where a purchase offer is made to a listed company in accordance withprovisions of the preceding paragraph, the buyer shall submit in advance a buying report tothe securities regulatory body of the State Council; the report shall contain the followinginformation:(1) The buyer's name and address; (2) The buyer's decision to make the purchase; (3)Name of the listed company to be purchased; (4) Purpose of the purchase; (5) The exactname of the stocks and the amount of stocks subject to purchase; (6) The duration andprice of the purchase; (7) The amount of capital needed for the purchase and collateral forthe capital; (8) The amount of stocks in possession as a ratio of all the stocks issued by thelisted company at the time when the report is submitted. The buyer shall alsosimultaneously submit a company purchase report as described in the preceding paragraphto the stock exchange.

Article 83. The buyer shall make a public announcement of the purchase offer 15 daysafter he submits a listed company purchase report in pursuance with provisions of thepreceding paragraph. The duration of an offer shall not be less than 30 days and shall notbe more than 60 days.

Article 84 A purchaser is not allowed to cancel his purchasing order within its valid term.If the purchaser wishes to change the contents of the purchasing order within its valid term,he must submit a report to the securities regulatory body under the State Council and to thestock exchanges and he must publish the change after approval.

Article 85 All the conditions stated in a purchasing order are applicable to all thestockholders of the company being purchased.

Article 86 By the time when the term of a purchasing order is expired and the number of apurchased company's stocks held by a purchaser is more than 75 percent of the totalamount of stocks issued by the company, the listed company shall stop listing its stocks inthe stock exchanges.

Article 87 By the time the term of a purchasing order is expired and the number of apurchased company's stocks held by a purchaser is more than 90 percent of the totalamount of stocks issued by the company, other stockholders who still hold the stocks ofthe purchased company are entitled to sell their stocks to the purchaser with the sameconditions stated in the purchasing order and the purchaser shall purchase their stocks.After the purchase is made, if the purchased company no longer meets the conditionsstipulated in the Company Law, it shall change its form of enterprise in accordance withthe law.

Article 88 A purchaser who purchases stocks by order is not allowed, within the term ofhis purchasing order, to buy or sell the stocks of a purchased company by using methodsand conditions other than the ones stated in the purchasing order.

Article 89 A purchaser who purchases stocks by agreement can carry out the transferenceof stock rights by negotiating with other stockholders of a purchased company in accordingwith the regulations of laws and administrative rules. When an agreement for purchasing alisted company by agreement is reached, the purchaser shall file in written form, withinthree days, a report on the purchase agreement with the securities regulatory body underthe State Council and with the stock exchanges. Such a report shall also be published. Thepurchasing agreement shall not be carried out before the proclamation.

Article 90 For the purchases under agreement, either party of the agreement maytemporarily entrust the institutions of securities registration and account balancing withsafekeeping the agreed transfer securities, and deposit the capital into the designated bank.

Article 91 On purchasing a listed company, the purchaser shall not transfer the purchasedstocks within six months after the purchase has been completed.

Article 92 Purchasing stocks from a company that is being purchased under offer oragreement and the subsequent dissolution of the company amount to a corporate merger.The purchaser will convert in accordance with law the stocks held originally by thedissolved company.

Article 93 After purchase of the listed company has been completed, the purchaser shallreport the purchase to the securities regulatory body of the State Council and the stockexchange, and make a public announcement.

Article 94 When purchasing a listed company involves the stocks held by an investmentinstitution authorized by the state, it is necessary to obtain approval from the relevantdepartment in charge in accordance with the stipulations of the State Council.

Charpter V

Article 95 The stock exchange is a non-profit legal entity which provides a venue in whichsecurities are collectively traded by bidding. The establishment and dissolution of a stockexchange is decided by the State Council.

Article 96 Setting up a stock exchange requires formulation of regulations. Formulationand revision of the regulations concerning a stock exchange must be approved by thesecurities regulatory body of the State Council.

Article 97 A stock exchange must include in its name the words which indicate stockexchange. Any other units or individuals shall not adopt a name that indicates stockexchange or words of a similar meaning.

Article 98 All costs and revenues which can be allocated by the stock exchange itself shallfirst be used to guarantee a normal operation of the stock exchange venue and facilities,and improve gradually. The accumulated gain of a stock exchange belongs to the members,who jointly share the right to the accumulation. In the time the stock exchange exists, theaccumulation shall not be allocated to the members.

Article 99 A board of directors is set up in a stock exchange.

Article 100 A stock exchange is provided with a general manager, who is appointed ordismissed by the securities regulatory body of the State Council.

Article 101 If any of the following situations or those stipulated in article 57 of theCorporation Law can be applied to any individuals, they shall not assume the positions ofbeing the responsible people of a stock exchange:(1) The responsible people of a stock exchange or a securities registration and accountbalancing institution, or the directors, supervisors, or managers of a stock exchange whohave been removed from office due to practices in violation of the law or of discipline, andit has been less than five years since the day of their removal. (2) Lawyers, registeredaccountants, or professionals at assets assessment or verification institutions who havebeen disqualified due to practices in violation of the law or of discipline, and it has beenless than five years since the day of their disqualification.

Article 102 Employees of a stock exchange, securities registration or account balancinginstitution, or securities company who have been dismissed due to practices in violation ofthe law or of discipline, or dismissed state organ employees shall not be recruited asemployees of a stock exchange.

Article 103 The securities companies that participate in collective trading through biddingat a stock exchange must be those that hold stock exchange membership.

Article 104 Investors shall open stock exchange accounts with securities companies, and inwritten form, by telephone, or through other means entrust the company with buying andselling securities for them. Investors who sell and buy securities through the securitiescompanies with which they have opened accounts shall entrust the companies by adoptingmarket price or limit price.

Article 105 Entrusted by investors, securities companies will file trading declarationsbased on the rule of time precedence, and participate in the collective trading throughbidding at the stock exchange. The securities registration and account balancinginstitutions conduct stock clearing and delivery of securities and capital, and handle theprocedures of security registration and transfer ownership based on transaction results andin accordance with the rules of clearing and delivery.

Article 106 The securities companies, either entrusted or self-operating, shall not sell thesecurities on the same day they are purchased.

Article 107 The stock exchange shall provide guarantee for organized and fair collectivetrading through bidding, promptly publicize stock market prices, and create and publicizestock quotations lists based on the situation of the transaction day.

Article 108 The stock exchange handles affairs regarding suspension, resumption, andtermination of the listing of stocks and corporate bonds on the basis of law andadministrative regulations. The concrete procedures are formulated by the securitiesregulatory body of the State Council.

Article 109 When an emergency affects the normal operation of a stock exchange, it canintroduce technical measures to stop listings; in the event of an irresistible emergency or topreserve its normal operation, it can decide to temporarily halt trading. If a stock exchangeintroduces technical measures to stop listings or decides to temporarily halt trading, it mustimmediately report this to the State Council's securities regulatory body.

Article 110 A stock exchange monitors and supervises securities trading and, inaccordance with the requirements of the State Council's securities regulatory body, reporton abnormal trading. A stock exchange shall supervise the information released by thecompany on the listing, and it shall also supervise the company in lawfully, promptly, andaccurately releasing information.

Article 111 A stock exchange shall deduct a proportionate amount of money from thetrading costs, membership fees, and seat fees to set up a risk-bearing fund, which will bemanaged by the stock exchange administrative board. The detailed percentage of deductionand the procedures to use the fund will be decided by the State Council's securitiesregulatory and financial institutions.

Article 112 A stock exchange shall deposit in a special bank account the trading guaranteefund and risk-bearing fund it has collected, and unauthorized use of these funds is notallowed.

Article 113 A stock exchange shall, in accordance with the Securities Law and theAdministrative Law, formulate detailed rules on competitive trading, regulations governingits members, and rules concerning its employees, and shall submit these to the StateCouncil's securities regulatory body for approval.

Article 114 Leaders or employees of a stock exchange shall avoid performing anysecurities trading linked to their interests or their relatives' interests.

Article 115 Trading that has proceeded in compliance with trading rules worked outaccording to law brooks no change. A breach of trading rules cannot be exempted fromcivil liability, and the profits obtained from this violation will be treated according to therelevant regulations.

Article 116 Those engaged in securities trading at a stock exchange who violate the stockexchange's regulations will be given disciplinary punishment by the stock exchange. Iftheir violation is serious, they will be disqualified and forbidden to enter the stockexchange for any trading.

Charpter VI Security Companies

Article 117 The establishment of a securities company must be examined and approved bythe State Council's securities regulatory body. Without the approval of this institution, noone is allowed to engage in securities business.

Article 118 The securities company mentioned by this law refers to a company withlimited liabilities or a shareholding company, which are both permitted by the CompanyLaw and the preceding article to engage in securities business.

Article 119 The state exercises management over securities companies, dividing them intocomprehensive securities companies and brokerage securities companies. The StateCouncil's securities regulatory body will provide them with licenses according to theirdifferent types.

Article 120 Securities companies must use the names of securities companies with limitedliabilities or shareholding securities companies. Brokerage securities companies must usethe word "brokerage" for their names.

Article 121 The establishment of a comprehensive securities company must conform withthe following requirements: (1) A minimum registered capital of 500 million yuan; (2)Qualified managerial personnel and employees; (3) A fixed operational site andup-to-standard trading facilities; (4) A perfect management system and a standardoperational system for its business and brokers.

Article 122 A brokerage securities company must have a minimum registered capital of 50million yuan, qualified managerial personnel and employees, a fixed operational site andup-to-standard trading facilities, and a perfect management system.

Article 123 A securities company must obtain the approval of the State Council's securitiesregulatory body if it wants to set up or dissolve a branch, change its business scope orregistered capital, alter its regulations, merge with another company, spin off, change thecompany form, or abolish itself.

Article 124 A securities company's total external debt must not exceed the prescribedmultiple amount of its net assets; its floating debt must not exceed the prescribedpercentage of its floating assets. The State Council's securities regulatory body will provideregulations on the specific multiple amount, percentage, and management procedures.

Article 125 Those who fall into the provisions of Article 57 of the Company Law or intoone of the following situations are not allowed to sit on the board of directors or the boardof supervisors or to be appointed as managers: Persons in charge of a stock exchange or astock registration and accounting institution, members of the board of directors or theboard of supervisors, and managers who have been removed from their posts for violationof law or discipline within the last five years. Lawyers, registered accountants, andprofessionals of statutory asset assessment and verification institutions whosequalifications have been revoked for violation of law or discipline within the last fiveyears.

Article 126 Employees of a stock exchange, a stock registration and accounting institution,and a securities company, as well as government functionaries who are fired for violationof law or discipline are not allowed to be recruited by securities companies.

Article 127 Government office personnel and other personnel who are forbidden by lawand administrative regulations to take up concurrent posts at companies are not allowed tohold concurrent posts at securities companies. Members of the board of directors, membersof the board of supervisors, managers, and employees of a securities company are notallowed to take up concurrent posts at other securities companies.

Article 128 Securities companies shall withhold from their yearly after-tax earnings asecurities transaction risk reserve to cover losses incurred from securities transactions. Thespecific ratio of withholding shall be regulated by the State Council securities regulatorybody.

Article 129 Comprehensive securities companies shall operate the following types ofsecurities business:(1) Securities brokerage business; (2) Securities proprietary business; (3) Securitiesunderwriting business; (4) Other securities businesses approved by the State Councilsecurities regulatory body.

Article 130 Brokerage-type securities companies are allowed to operate brokerage businessonly.

Article 131 Securities companies shall submit application for the scope of businessallowed to the State Council securities regulatory body for approval in accordance with theprovisions specified in the preceding two articles. Securities companies shall not operatesecurities or other types of business beyond the approved scope of business.

Article 132 Comprehensive securities companies shall separate their brokerage businessfrom proprietary business, and their business personnel and business accounts shall also beseparated accordingly and they shall not be mixed together. Customers' funds fortransaction settlement must be placed in full in a designated commercial bank on a separateaccount. Use of customers' transaction settlement funds for other purposes is strictlyprohibited.

Article 133 Banks are prohibited from putting funds in the stock market in violation ofregulations. Securities companies shall use their own funds or funds raised in accordancewith the law when operating proprietary business.

Article 134 Securities companies' proprietary business shall be conducted in the names ofthe securities companies themselves and not in other's names or in the names ofindividuals. Securities companies shall not lend the accounts of their proprietary businessto others.

Article 135 Securities companies shall have the right to operate independently inaccordance with the law, and their legitimate operations shall not be interfered.

Article 136 Where a securities company's registered capital is less than what is required foroperating business in a given field as provided for under this law, the State Councilsecurities regulatory body shall withdraw the approval of its right to operate business inthat field.

Article 137 A securities company that buys and sells securities on behalf of customers andoperates as an intermediary shall be a securities brokerage with the credentials of a legalperson.

Article 138 When operating brokerage business, securities companies shall set up separatesecurities and money accounts for customers and shall separately manage the securities andmoney delivered to them by the customers. They shall truthfully record the transactionsand shall not falsify records. When opening accounts, customers shall present legaldocuments certifying their identification as Chinese citizens or Chinese legal persons.

Article 139 When operating brokerage business, securities companies shall prepareuniform certificates of authorization for securities transaction for use by the clients. Whenother forms of authorization are used, records of authorization must be noted. Whencustomers authorize purchase or sale of securities, securities companies shall retain therecords of authorization for safekeeping within a prescribed period, regardless of whetherthe transaction is effected or not.

Article 140 When accepting authorization to purchase or sell securities, securitiescompanies shall purchase or sell securities based on the securities names, volumes,methods of payment, and offering prices specified in the letter of authorization, and inaccordance with the transaction rules and regulations. When transactions are completed,securities companies shall prepare transaction reports to customers in accordance with theregulations. The account statements confirming securities transactions and their resultsmust be truthful. Auditing personnel other than those undertaking the transactions shallaudit every transaction to ensure that the balance of the securities in the accounts areidentical to the securities actually in possession.

Article 141 Securities companies shall only sell, by authorization, securities held in thecustomers' accounts and shall not finance securities transactions on behalf of customers.Securities companies shall only purchase, by authorization, securities with funds actuallyheld in the customers' accounts and shall not finance securities transactions on behalf ofcustomers.

Article 142 When operating brokerage business, securities companies shall not acceptcustomers' powers of attorney carte blanche and determine the purchase and sale ofsecurities by selecting the securities and deciding on the volumes or prices on their behalf.

Article 143 Securities companies shall not make promises, in any form, concerning theprofitability of securities transactions or commit themselves to compensate customers forlosses incurred as a result of securities transactions.

Article 144 Securities companies and their employees shall not privately accept customers'authorization to purchase or sell securities at business venues that are not established inaccordance with the law.

Article 145 During securities transaction, when the employees of a securities company actin accordance with the company's instruction or act in violation of transaction rules andregulations while performing their jobs, the securities companies shall assume fullresponsibility for the employees' action.

Charpter VII

Article 146 Securities registration and settlement organizations are non-profit legal entitiesthat provide centralized services including registration and safekeeping of securities, andsettlement of stock transactions. Before securities registration and settlement organizationsare established, they must attain prior approval from the securities regulatory body underthe State Council.

Article 147 Before a securities registration and settlement organizationis established, it shall have the following conditions: Its own funds shall be no less than200 million yuan. (2) It has premises and facilities required for rendering servicesincluding registration and safekeeping of securities, and settlement of stock transactions.Its key managers and personnel must be qualified to deal in securities. (4) Other conditionsstipulated by the securities regulatory body under the State Council. The names ofsecurities registration and settlement organizations shall include "securities registration andsettlement."

Article 148 Securities registration and settlement organizations are to execute thefollowing functions: (1) Opening securities accounts and accounts for settlement of stocktransactions. (2) Facilitating the safekeeping and transfer of securities; (3) Record lists ofsecurities owners; (4) Settlement and entrustment of stocks listed on stock exchanges; (5)Distributing the rights and interests of securities as entrusted by issuers; (6) Handlinginquiries related to the above operations; (7) Other businesses approved by the securitiesregulatory body under the State Council.

Article 149 Registration of securities and settlement of stock transactions shall becentralized and unified in China. Securities registration and settlement organizations shallformulate their organization articles and rules of operations according to law, and mustattain prior approval from the securities regulatory body under the State Council in thisregard.

Article 150 Before selling their listed securities, owners of the securities shall leave alltheir securities to be transacted with a securities registration and settlement organizationwhich will hold them in trust. Securities registration and settlement organizations shall notmortgage their clients' securities or lend them to others.

Article 151 Securities registration and settlement organizations shall supply the list ofsecurities owners and other relevant information to the securities issuers. In accordancewith the actual registrations of securities and settlement of stock transactions, securitiesregistration and settlement organizations shall verify the amount of various securities heldby securities owners and supply the registered list of securities owners. Securitiesregistration and settlement organizations shall truthfully, accurately, and thoroughlymaintain the list of securities owners and a record of transfers of securities. They shall notfabricate, change without authorization, or destroy them.

Article 152 Securities registration and settlement organizations shall take the followingmeasures to ensure that their operations will proceed normally: (1) They have thenecessary service facilities and shall take effective measures to ensure the security of theirdata. (2) They shall establish effective administrative systems to safeguard their operations,finances, and security. They shall establish very effective systems to handle risks.

Article 153 Securities registration and settlement organizations shall properly keep theoriginal evidences for the registration and safekeeping of securities, and settlement of stocktransactions. The period for keeping important original evidences shall be no less than 20years.

Article 154 A securities registration and settlement organization shall establish a settlementrisk fund to be deposited in a special account of a designated bank. The settlement riskfund shall be used to pay for losses incurred by the securities registration and settlementorganization due to technical malfunctions, operational mistakes, and other uncontrollablefactors. Securities registration and settlement organizations shall contribute to securitiessettlement risk funds by withdrawing from their business incomes and revenues.Meanwhile, securities companies shall also contribute to securities settlement risk funds inaccordance with a certain ratio of their total stock transactions. Together with relevantfinance departments under the State Council, the securities regulatory body under the StateCouncil shall jointly formulate procedures governing the collection and administration ofsecurities settlement risk funds.Article 155 Securities settlement risk funds shall be under special management. Afterpaying compensations from its risk fund, the relevant securities registration and settlementorganization shall seek compensations from those who are responsible for the losses.

Article 156 Before filing for dissolution, securities registration and settlementorganizations shall attain prior approval from the securities regulatory body under the StateCouncil.

Chapter VIII

Article 157 Professional securities investment consultation institutions and creditevaluation institutions may be set up to meet the needs of securities investments andtransactions. The State Council's securities regulatory body shall stipulate the conditionsand approval procedures, as well as the operating rules for setting up and governing suchinstitutions.

Article 158 Professionals in securities investment consultation institutions and creditevaluation institutions must possess professional knowledge and more than two years ofexperience in the securities business area. The State Council's securities regulatory bodyshall establish the standards and administrative procedures for assessing the qualificationsof these securities professionals.

Article 159 The professionals in securities investment consultation institutions are notallowed to carry out the following activities: (1) Invest in securities on behalf of theirclients; (2) Arrange to share the profits or losses of their clients' securities investments; (3)Buy or sell the stocks of listed companies served by their institutions; or Other activitiesprohibited by laws or administrative regulations.

Article 160 Professional securities investment consultation institutions and creditevaluation institutions shall charge service fees according to the standards or proceduresstipulated by the relevant administrative department of the State Council.

Article 161 Professional institutions and personnel in charge of issuing documents such asaudit reports, asset evaluation reports, or legal advice related to the issuance, listing, ortransactions of securities must issue such documents according to the work proceduresspecified by professional rules. They must verify and confirm the truthfulness, accuracy,and completeness of the contents of such reports, and assume joint liability for those partsthey are responsible for.

Charpter IX

Article 162 The stock brokers' association is a self-regulatory organization and a sociallegal entity.Securities firms shall join the stock brokers' association. The Stock Brokers' Association'spower organ is its general assembly consisting of all members of the association.

Article 163 The general assembly shall formulate the statutes of the association andsubmit them to the State Council's securities regulatory body for filing.

Article 164 The Stock Brokers' Association shall carry out the following duties:(1) Assist the securities supervision and administrative organization in educating theassociation's members on securities laws and administrative regulations and organizing themembers to implement these laws and regulations; (2) Protect the members' legal rightsand interests according to law and provide feedback to the securities supervision andadministration organization on the members' suggestions and requests; (3) Gather andorganize securities information as a service to the members; (4) Formulate rules for themembers to abide by, organize training for professionals of member institutions andpromote communications among members; (5) Resolve disputes among members andbetween members and clients; (6) Organize the members to study the development,operation, and other relevant issues of the securities sector. (7) Supervise and inspect themembers' activities, and take disciplinary actions according to regulations against thosewho violate laws, administrative regulations, or the association's statutes; and (8) Otherduties entrusted by the State Council's securities regulatory body.

Article 165 The Stock Brokers' Association shall set up a council. Members of the councilshall be elected according to the association's statutes.

Charpter X

Article 166 The State Council's securities regulatory body shall supervise and administerthe securities market according to law, maintain order in the market, and ensure the marketoperates in a lawful manner.

Article 167 The State Council's securities regulatory body shall carry out the followingsupervisory and administrative duties in regards to the securities market: (1) Formulaterules and regulations related to the supervision and administration of the securities marketaccording to law and exercise its examination and approval power according to law; (2)Supervise and administer according to law the issuance, transactions, registration,trusteeship, and settlement of securities; (3) Supervise and administer according to law thesecurities-related activities of securities issuers, listed companies, stock exchanges,securities firms, securities registration and settlement institutions, securities investmentfund management institutions, securities investment consultation institutions, and creditevaluation institutions, as well as law firms, accounting firms, and asset evaluationinstitutions involved in the securities business; (4) Formulate standards of qualificationsand codes of conduct for securities professionals and supervise the implementation of suchstandards and codes according to the law; (5) Supervise and inspect according to the lawthe public disclosure of information on securities issuance and transactions; (6) Guide andsupervise according to the law the activities of the stock brokers' association; (7)Investigate and handle according to the law any conduct that violates the laws andadministrative regulations formulated for the supervision and administration of thesecurities market; and (8) Other duties stipulated by laws and administrative regulations.

Article 168 While executing its duties according to the law, the securities regulatory bodyunder the State Council is entitled to take the following measures: (1) To enter premiseswhere an illegal act has been committed to investigate and to attain evidence;( 2) Toquestion people involved, and units and individuals related to the incident underinvestigation, and to demand that they explain relevant issues related to the incident underinvestigation; (3) To read, check, and duplicate the records of securities transactions, therecords of transfers of securities, financial accounts, and other relevant documents andmaterials of the people involved, and the units and individuals related to the incident underinvestigation. It can seal up and keep documents and materials that may be removed orhidden. (4) To check the funds accounts and securities accounts of the people involved,and the units and individuals related to the incident under investigation. When there isevidence that such funds and securities may be transferred or hidden, it can apply to freezethem at a judicial organ.

Article 169 While executing their duties according to law to supervise an inspection orinvestigation, personnel of the securities regulatory body under the State Council shallshow their relevant identification papers. They are also obligated to protect the secrecy ofbusiness secrets that they have learned from relevant units and individuals.

Article 170 Personnel of the securities regulatory body under the State Council mustfaithfully carry out their duties, operate according to law, and be just and honest. Theyshall not abuse their powers to obtain illegitimate interests.

Article 171 While the securities regulatory body under the State Council is executing itsduties according to law, units and individuals under investigation shall be cooperative, andtruthfully provide relevant documents and materials required. They shall not refuse orobstruct it, or conceal any relevant documents and materials.

Article 172 The securities regulatory body under the State Council shall publish its rulesand regulations, and its supervision and administration work system formulated accordingto law. After deciding to penalize an unlawful act of securities transaction based on itsinvestigations, the securities regulatory body under the State Council shall publicize thedecision.

Article 173 While executing its duties according to law and discovering an unlawful act ofsecurities transaction that may probably constitute a crime, the securities regulatory bodyunder the State Council shall transfer the case to an judicial organ so that the latter willhandle it.

Article 174 Personnel of the securities regulatory body under the State Council shall notconcurrently occupy posts in organizations under their supervision and administration.

Charpter XI

175. Those who issue securities without the approval or examination and approvalof a competent organ or who issue securities using false issuance documents are to beordered to stop issuing, return all funds raised plus bank interests accrued during theperiod, and pay a fine of an amount of more than 1 percent but less than 5 percent of theillegally raised fund. Persons in charge directly responsible for the case and other personswith direct responsibility are to be warned and are to pay a fine of more than 30,000 yuanbut less than 300,000 yuan. Those involved in crimes are to be investigated for theircriminal liability according to law.

Article 176. Securities companies which market securities or serve as agents in buying andselling securities that are issued without approval or examination are to be outlawed bysecurities regulatory bodies; their illegal earnings are to be confiscated and they are to paya fine of an amount between one and five times of their illegal earnings. . Persons in chargedirectly responsible for the case and other persons with direct responsibility are to bewarned and are to pay a fine of more than 30,000 yuan but less than 300,000 yuan. Thoseinvolved in crimes are to be investigated for their criminal liability according to law.

Article 177. Issuers of securities that have been approved for transaction on the marketaccording to relevant stipulations of this law but who have failed to disclose relevantinformation according to relevant regulations or the information disclosed by them is false,misleading, or contains important omissions, are to be ordered by securities regulatorybodies to make corrections, and are to pay a fine of more than 300,000 yuan but less than600,000 yuan. Persons in charge directly responsible for the case and other persons withdirect responsibility are to be warned and are to pay a fine of more than 30,000 yuan butless than 300,000 yuan. Those involved in crimes are to be investigated for their criminalliability according to law. If the aforementioned issuers do not duly announce theirmarketing documents or submit relevant reports, they are to be ordered by securitiesregulatory bodies to make corrections and are to pay a fine of more than 50,000 yuan butless than 100,000 yuan.

Article 178. Those who illegally operate securities trading sites are to be outlawed bysecurities regulatory bodies; their illegal earnings are to be confiscated and they are to paya fine of an amount between one and five times their illegal earnings. Those who do nothave any illegal earnings are to pay a fine of an amount between 100,000 yuan and500,000 yuan. Persons in charge directly responsible for the case and other persons withdirect responsibility are to be warned and are to pay a fine of more than 30,000 yuan butless than 300,000 yuan. Those involved in crimes are to be investigated for their criminalliability according to law.

Article 179. Those who establish securities companies and engage in securities businesswithout approval and without having a securities business operation license are to beoutlawed by securities regulatory bodies; their illegal earnings are to be confiscated andthey are to pay a fine of an amount between one and five times their illegal earnings. Thosewho do not have any illegal earnings are to be fined an amount between 300,000 yuan and100,000 yuan. Those involved in crimes are to be investigated for their criminal liabilityaccording to law.

Article 180. Those who are banned by law or administrative regulations from engaging instock transaction and who directly own, buy, or sell stocks, or do so using an assumedname or in the name of other people, are to be ordered to dispose their illegally ownedstocks according to law; their illegal earnings are to be confiscated and they are to be finedfor an amount not more than the value of the stocks in question. If these people are stateworkers, they shall also be given administrative penalties according to the law.

Article 181. Workers of securities trading centers, securities companies, securitiesregistration and settling organs, and securities trading service organs, and workers ofassociations of the securities trade and securities regulatory bodies, who intentionallyprovide false materials, or who falsify, alter, or destroy securities transaction records, in anattempt to trick investors into buying or selling securities, are to be deprived of their workeligibility and fined for an amount between 30,000 yuan and 50,000 yuan. If they are stateworkers, they shall also be given an administrative penalty. Those involved in crimes areto be investigated for their criminal liability according to law.

Article 182. Specialized organs providing auditing reports, assets assessment reports, legalopinion documents, or other documents, for the issuing or marketing of stocks, and theirworkers, who buy or sell stocks in violation of Article 39 of this law, are to be ordered todispose according to the law of their illegally obtained stocks. Their illegal earnings are tobe confiscated and they are to be fined for an amount not more than the value of the stocksin question.

Article 183. Those having access to or having illegally obtained inside information aboutsecurities transaction who, before information concerning securities issuance or transactionor other information that would have an important effect on the prices of securities isannounced, buy or sell the securities in question, disclose relevant information, or suggestthat other people buy or sell the securities in question, are to be ordered to disposeaccording to the law of their illegally obtained securities. Their illegal earnings are to beconfiscated, and they are to be fined for an amount between one and five times their illegalearnings or an amount not more than the value of the said securities of the illegaltransaction. Those involved in crimes are to be investigated for their criminal liabilityaccording to the law. Workers of securities regulatory bodies who engage in inside tradingare to be given heavy punishment.

Article 184. Illegal earnings of those who, in violation of Article 71 of this law, manipulatesecurities transaction prices, or fabricate false securities transaction prices or volumes, inan attempt to gain illegitimate interests or shift risks to other people, are to be confiscated;they are to be fined for an amount between one and five times of their illegal earnings.Those involved in crimes are to be investigated for their criminal liability according to thelaw.

Article 185. Illegal earnings of those, in violation of relevant stipulations of this law, usingpublic fund to engage in securities trading are to be confiscated, and they are to be finedfor an amount between one and five times their illegal earnings. If they are state workers,they shall also be given an administrative penalty according to law. Those involved incrimes are to be investigated for their criminal liability according to law.

Article 186. Illegal earnings of securities companies which, in violation of relevantstipulations of this law, sell for their customers securities that are not actually in theircustomers' accounts, or which finance their customers in buying securities, are to beconfiscated, and the companies in question are to be fined for an amount equal to the valueof the securities traded. Persons in charge who are directly responsible for the case andother persons with direct responsibility are to be warned and fined for an amount between30,000 yuan and 300,000 yuan. Those involved in crimes are to be investigated for theircriminal liability according to law.

Article 187. Illegal earnings of securities companies which, in violation of relevantstipulations of this law, buy securities on behalf of their customers or on their own behalfand sell them on the same day are to be confiscated, and the companies in question are tobe fined for an amount between five percent and twenty percent of the amount of theillegal securities transaction.

Article 188. Those who fabricate and disseminate false information that affect securitiestrading, which disturb securities trading markets, are to be fined for an amount between30,000 yuan and 200,000 yuan. Those involved in crimes are to be investigated for theircriminal liability according to law.

Article 189. Securities exchanges, securities companies, securities registration and settlingorgans, securities trading service organs, and social intermediary organs, and their workers,and associations of the securities trade and securities supervision and management organsand their workers, who make false statements or provide misleading information insecurities trading activities, are to be ordered to make corrections and to be fined for anamount between 30,000 yuan and 200,000 yuan. If they are state workers, they shall alsobe given an administrative penalty according to the law. Those involved in crimes are to beinvestigated for their criminal liability according to the law.

Article 190. Legal persons who, in violation of relevant stipulations of this law, establishaccounts in the name of individuals for securities trading, are to be ordered to makecorrections. Their illegal earnings are to be confiscated and they are to be fined for anamount between one and five times of their illegal earnings. Their persons in chargedirectly responsible for the case and other persons with direct responsibility who are stateworkers are to be given administrative penalty according to law.

Article 191. General securities companies which, in violation of relevant stipulations ofthis law, engage in their own business in the name of other people or in the name ofindividuals are to be ordered to make corrections. Their illegal earnings are to beconfiscated and they are to be fined for an amount between one and five times of theirillegal earnings. Operations of those of which cases are serious are to be terminated.

Article 192. Securities companies which, in violation of their customers' commissions,trade securities or conduct other trading activities, or, in violation of their customers' realintentions, conduct activities other than securities trading, which result in their customers'losses, are to assume according to law responsibility to pay for the losses and are to befined for an amount between 10,000 yuan and 100,000 yuan.

Article 193. Securities companies, securities registration and settling organs, and theirworkers who, without their customers' commissions, trade, misappropriate, or lendsecurities in their customers' accounts, who use their customers' securities as pledges, orwho misappropriate funds in their customers' accounts, are to be ordered to makecorrections. Their illegal earnings are to be confiscated and they are to be fined for anamount between one and five times their illegal earnings. In addition, the companies inquestion are to be closed down or the professional credentials of their persons in charge areto be revoked. Those involved in crimes are to be investigated for their criminal liabilityaccording to law.

Article 194. In conducting brokerage business, securities companies which trade securitieswith their customers' full commissions, or which make commitment to their customers'earnings from securities trading or to paying for the losses resulting from securitiestrading, are to be ordered to make corrections and to be fined for an amount between50,000 yuan and 200,000 yuan.

Article 195. Those who violate the legal procedures on listed companies' purchases or seekillegitimate gains making use of listed companies' purchases are to be ordered to makecorrections. Their illegal earnings are to be confiscated and they are to be fined for anamount between one and five times of their illegal earnings.

Article 196. Illegal earnings made by securities companies or their workers, in violation ofrelevant stipulations of this law, through trading securities over their customers' privatecommissions are to be confiscated, and they are to be fined for an amount between one andfive times their illegal earnings.

Article 197. Securities companies which, in violation of relevant stipulations of this lawand without approval, conduct trading of non-listed securities are to be ordered to makecorrections. Their illegal earnings are to be confiscated and they are to be fined for anamount between one and five times their illegal earnings.

Article 198. Business licenses of securities companies which do not begin to operate morethan three months after they are established, if no valid reasons are given, and of thosewhich suspend operations on their own for three consecutive months or longer, are to berevoked by a company registration organ.

Article 199. When a securities company violates the regulations of this law and doessecurities-related businesses that exceed its authorized scope, it shall be instructed to mendits way, its illegitimate incomes shall be confiscated, and it shall be fined for a sum that isbetween one to five times that of its illegitimate income. If the case is serious, it shall beordered to close.

Article 200. When a securities company also operates as a securities broker and sellssecurities by itself all at the same time instead of handling these businesses separately asrequired by the law, it shall be instructed to mend its ways, its illegitimate income shall beconfiscated, and it shall be fined for a sum that is between one and five times that of itsillegitimate income. If the case is serious, a security regulatory body shall retract thelicensing of its business.

Article 201. Whoever has acquired a license for doing securities business throughproviding falsified documentation, or through concealing important facts by otherdeceptive means; or when a securities company is no longer qualified to operate afterhaving been found to have committed serious lawless conduct during securities trading, asecurities regulatory body shall retract its operating license and order it to close.

Article 202. If a specialized organ that provides auditing reports, capital assessmentreports, written legal views, or other documents relevant to the issuance and marketing ofsecurities and securities trading is found to have falsified anything that is in its charge, itsillegitimate income shall be confiscated, it shall be fined for a sum that is between one andfive times that of the illegitimate income, and the relevant authorities shall order this organto suspend its business and shall revoke the credentials of its persons in charge. This organshall also be liable for compensation for any loss. It shall also be held accountable for itscriminal conduct by law if the falsification constitutes a crime.

Article 203. Whoever establishes organs for securities registration and account settlement,or organs that provide securities trading services, without a securities regulatory body'sauthorization, shall be ordered by the body to mend its ways. Its illegitimate income shallbe confiscated, and it shall be fined for a sum that is between one and five times that of itsillegitimate income. If the case is serious, it shall be ordered to close.

Article 204. When a securities regulatory body has approved the application of issuing andlisting securities which are not in conformity with this law, or when it has approved theapplication for the establishment of a securities company, an organ for securitiesregistration and account settlement, or an organ providing securities trading services, andthe establishment is not in conformity with this law, the direct persons in charge and otherpersonnel in charge shall be disciplined with administrative measures if the case is serious.They shall be held accountable for their criminal conduct if it constitutes a crime.

Article 205. When workers of a securities regulatory body or members of the committeethat reviews the issuance of securities fail to discharge their duties prescribed in this law,practice favoritism, commit graft, neglect their duties, or deliberately make things difficultfor relevant parties, they shall be disciplined by administrative measures. If their conductconstitute a crime, they shall be held accountable for their criminal conduct.

Article 206. Whoever issues and sells corporate securities in violation of this law, adepartment with the State Council's authorization shall mete out punishment to it inaccordance with Articles 175, 176, and 202 of this law.

Article 207. When one who violates this law and must be held liable for civilcompensation and paying a fine, but his property is insufficient for the two payments, heshall undertake the civil compensation first.

Article 208. Whoever uses force or coercion to obstruct a securities regulatory body fromexercising its lawful regulatory responsibilities, he shall be held accountable for hiscriminal conduct by the law. Whoever rejects and obstructs a securities regulatory bodyfrom exercising its lawful regulatory responsibilities but has not resorted to force orcoercion, he shall be punished according to the regulations for punishing public offenses.

Article 209. All the illegitimate incomes and fines lawfully confiscated and collected fromissuing and trading securities against the law shall be delivered to the national treasury.

Article 210. If a party concerned disagrees with the punishment meted out by a securitiesregulatory body, or by any department authorized by the State Council, it may follow thelegal procedures and request a review of the case. He may also directly file a suit at thepeople's court according to the law.

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Article 211. The trading of securities approved by administrative regulations to be listedand traded at securities exchanges before this law goes into effect may proceed accordingto those regulations. For those securities organs approved for establishment in accordancewith administrative regulations, or regulations promulgated by financial administrativedepartments under the State Council, before this law goes into effect, but whoseestablishment is not fully in conformity with this law, shall meet the requirements set inthis law within a prescribed period. Specific measures will be prescribed separately by theState Council.

Article 212. The State Council will prescribe separate procedures for implementing theregulations governing clients' funds for securities trading and account settlement.

Article 213. The State Council will prescribe specific measures separately for the purchaseand trading of stocks of companies within China by people and organizations outsideChina with foreign currencies.

Article 214. This law goes into effect on 1 July 1999.