PART FOUR: TAKEOVER OF LISTED COMPANIES

　　Article 85: Investors² may acquire listed companies by means of takeover by offer, takeover by agreement or other lawful³ means.

　　Article 86: If, through securities trading at a stock exchange, an investor¹ holds or jointly⁴ holds with another person through an agreement or other arrangement 5% of the shares issued by a listed company, the investor shall, within three days of the date on which such shareholding⁵ becomes a fact, submit a written report to the State Council's securities regulatory authority and the stock exchange, notify the listed company and make an announcement. During the time period specified⁶ above, the investor may not continue to purchase or sell shares in the listed company.

　　Once an investor holds or jointly holds with another person through an agreement or other arrangement 5% of the shares issued by a listed company, he shall, pursuant to the provisions of the preceding paragraph, report and make an announcement of each 5% increase or decrease in the issued shares he holds in the listed company. During the reporting period, and for two days following the report and announcement, the investor may not continue to purchase or sell shares in the listed company.

　　Article 87: Written reports and announcements made in accordance with the provisions of the preceding article shall include the following:

　　the name and domicile of the shareholder⁷; the description and quantity of the shares held; and the date on which the shareholding or the increase or decrease in the shareholding reached the statutory percentage. Article 88: If, through securities trading on a stock exchange, an investor holds or jointly holds with another person through an agreement or other arrangement 30% of the issued shares of a listed company and continues to buy up such shares, the investor shall issue a offer of takeover of all or part of the equity⁹ in the listed company to all the shareholders¹⁰ of the listed company according to law.

　　An offer of takeover of part of the equity in a listed company shall stipulate¹² that where the number of shares that the shareholders of the target company undertake to sell exceeds the number of shares scheduled to be bought up, the purchaser shall carry out the takeover according to the ratio.

　　Article 89: When issuing a takeover offer pursuant to the preceding article, the purchaser must first submit a report on the takeover of the listed company to the State Council's securities regulatory authority. The report shall contain the following particulars:

　　the name and domicile of the purchaser; the decision of the purchaser concerning the takeover; the name of the listed company targeted; the purpose of the takeover; a detailed¹³ description of the shares bought up and the number of shares scheduled to be bought up; the term and price of the takeover; the amount and guaranteed availability of the funds required for the takeover; and the ratio between the total number of issued shares of the target company and the number of such shares held at the time of submission¹⁴ of the takeover report. The purchaser shall simultaneously¹⁵ submit a listed company takeover report to the stock exchange.

　　Article 90: The purchaser shall announce his takeover offer 15 days after the date on which he submits the listed company takeover report pursuant to the preceding article. During the time period specified above, where the State Council's securities regulatory authority discovers that the listed company takeover report does not comply with the provisions of laws and administrative¹⁶ regulations, it shall notify the purchaser in a timely manner, and the purchaser may not announce his takeover offer.

　　The term of takeover stipulated¹⁷ in a takeover offer shall be not less than 30 days and not more than 60 days.

　　Article 91: During the undertaking¹⁸ time limit determined¹⁹ in a takeover offer, the purchaser may not revoke²⁰ his takeover offer. If the purchaser needs to change the takeover offer, he must submit a report to the State Council's securities regulatory authority and the stock exchange in advance. If approved, the purchaser shall make an announcement.

　　Article 92: The conditions of takeover set forth²¹ in the takeover offer shall apply to all shareholders of the target company.

　　Article 93: In the case of takeover by offer, the purchaser may not, during the term of the takeover offer, sell shares in the target company or purchase shares in the target company by any method other than that prescribed in, or on any conditions other than those of, the offer.

　　Article 94: In the case of takeover by agreement, the purchaser may effect the equity transfer by entering into an agreement with the shareholders of the target company according to the provisions of laws and administrative regulations.

　　When a listed company is taken over by agreement, the purchaser must, within three days after the agreement is reached, submit a written report on the takeover agreement to the State Council's securities regulatory authority and the stock exchange, and make an announcement.

　　The takeover agreement may not be performed until the announcement has been made.

　　Article 95: In the case of takeover by agreement, the parties to the agreement may on an ad hoc basis entrust²² a securities registration²³ and clearing institution with custody²⁴ of the shares transferred pursuant to the agreement and with deposit of the funds into the designated bank.

　　Article 96: In the case of takeover by agreement, when a purchaser buys or jointly buys with another person through an agreement or other arrangement 30% of the issued shares of a listed company and continues to buy such shares, an offer of buying all or part of the shares in the listed company shall be issued to all shareholders of the said listed company, except where the issue of offer is exempted²⁵ by the State Council's securities regulatory authority.

　　Where the purchaser buys the shares in the listed company by way of takeover by offer according to the provisions of the preceding paragraph, he shall comply with Articles 89 to 93 hereof.

　　Article 97: Where the equity distribution of the target company does not comply with the listing conditions upon the expiration²⁶ of the term of takeover, the stock exchange shall terminate the listing and trading of the shares of the said listed company according to law. The remaining shareholders that still hold the shares of the target company shall have the right to sell their shares on the same conditions as those in the takeover offer, and the purchaser shall buy such shares.

　　If, after the completion of the takeover, the target company no longer fulfils the conditions of a company limited by shares, it shall change the corporate²⁷ form according to law.

　　Article 98: During the takeover of a listed company, the shares in such company which are held by the purchaser of the listed company may not be transferred in the 12 months following the completion of the takeover.

　　Article 99: After the completion of a takeover, where the purchaser merges²⁸ with and dissolves the target company, the existing shares in the dissolved company shall be replaced according to law by the purchaser.

　　Article 100: After the completion of a takeover, the purchaser shall, within 15 days, report the particulars of the takeover to the State Council's securities regulatory authority and the stock exchange, and make an announcement.

　　Article 101: The takeover of the shares held by a State-authorized investment organization in a listed company shall be approved by the relevant competent authority in accordance with the regulations of the State Council.

　　The State Council's securities regulatory authority shall formulate²⁹ the specific procedures for takeover of listed companies according to the principles of this Law.

　　PART FIVE: STOCK EXCHANGES

　　Article 102: Stock exchanges are legal persons that provide sites and facilities for the centralized trading of securities, organize and supervise securities trading and implement³⁰ self-disciplinary administration.

　　The establishment and dissolution of stock exchanges shall be decided³¹ on by the State Council.

　　Article 103: To establish a stock exchange, a constitution must be formulated³².

　　The formulation and amendment³³ of the constitution of a stock exchange must be approved by the State Council's securities regulatory authority.

　　Article 104: Stock exchanges must include the words "stock exchange" in their names. No other unit and no individual may use the name "stock exchange" or a similar name.

　　Article 105: The fee revenue which stock exchanges may allocate³⁴ by themselves shall first be used to ensure the normal operation and gradual improvement of the stock exchange and its facilities.

　　The property accumulated by a stock exchange that implements³⁵ membership system shall belong to its members. The rights and interests in the stock exchange shall be enjoyed jointly by its members. Accumulated property may not be distributed to members while the stock exchange is in existence.

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

　　Article 107: A stock exchange shall have a general manager, who shall be appointed and removed by the State Council's securities regulatory authority.

　　Article 108: The persons described in Article 147 of the PRC, Company Law and the following persons may not serve as responsible persons of stock exchanges:

　　responsible persons of stock exchanges or securities registration and clearing institutions, and directors, supervisors³⁶ and senior management personnel of securities companies, who were removed from office due to a violation³⁷ of the law or a breach³⁸ of discipline, where not more than five years has elapsed since the date of their removal from office; and lawyers, certified³⁹ public accountants, and professional personnel of investment consultancy organizations, financial consultancy organizations, credit rating organizations, asset valuation organizations or verification organizations, whose qualifications were cancelled due to a violation of the law or a breach of discipline, where not more than five years has elapsed since the date of cancellation⁴⁰. Article 109: Working personnel of stock exchanges, securities registration and clearing institutions, securities service organizations or securities companies that were dismissed for violating the law or breaching⁴¹ discipline, and working personnel of State authorities that were dismissed, may not be employed as working personnel of stock exchanges.

　　Article 110: Only members of a stock exchange may enter that stock exchange to participate in centralized trading.

　　Article 111: Investors shall conclude a securities trading entrustment⁴² agreement with a securities company, and shall open a securities trading account with the securities company, and instruct, in writing, by telephone or otherwise, the said securities company to purchase and sell securities on their behalf.

　　Article 112: Securities companies shall, as instructed by investors, declare transactions in accordance with the securities trading rules and participate in centralized trading in the stock exchange, and shall bear the corresponding clearing and delivery responsibilities based on the transactions concluded. Securities registration and clearing institutions shall effect the clearing and delivery of securities and funds with the securities company based on the transactions concluded and in accordance with the rules for clearing and delivery, and carry out procedures for registration of the change in ownership of the securities for the clients of the securities company.

　　Article 113: Stock exchanges shall safeguard the fair organization of centralized trading and shall announce real-time quotations⁴⁴ concerning the securities trading. They shall compile securities market quotation⁴³ tables for each day of trading, and announce the same.

　　Without the permission of the stock exchange, no work unit or individual may announce real-time quotations concerning the securities trading.

　　Article 114: If a sudden event affecting the normal conduct of securities trading occurs, stock exchanges may effect a technical suspension of trading. Stock exchanges may decide to suspend the market if a sudden event of force majeure occurs or in order to protect the normal order of securities trading.

　　When stock exchanges effect a technical suspension of trading or decide to suspend the market, they must timely report the same to the State Council's securities regulatory authority.

　　Article 115: Stock exchanges shall implement real-time monitoring of securities tradings, and shall report any unusual trading as required by the State Council's securities regulatory authority.

　　Stock exchanges shall supervise the disclosure of information by listed companies and the relevant persons with information disclosure obligations to ensure their timely and accurate disclosure of information according to law.

　　Stock exchanges may, according to needs, restrict the trading of securities accounts with major unusual transactions, and shall report the matter to the State Council's securities regulatory authority for record filing.

　　Article 116: Stock exchanges shall allocate a certain percentage of their transaction costs, membership fees and seat fees to establish a risk fund. The risk fund shall be managed by the board of governors of the stock exchange.

　　The specific percentages of allocations to, and measures for the use of, the risk fund shall be specified by the State Council's securities regulatory authority in conjunction with the State Council's finance department.

　　Article 117: Stock exchanges shall deposit the risk fund collected by them in dedicated⁴⁵ accounts with their banks, and may not use the same without authorization⁴⁶.

　　Article 118: Stock exchanges shall, pursuant to securities laws and administrative regulations, formulate listing rules, trading rules, membership administration rules and other relevant rules, and submit the same to the State Council's securities regulatory authority for approval.

　　Article 119: If, in carrying out duties related to securities trading, the responsible persons and other working personnel of stock exchanges discover that a material relationship with themselves or any of their relatives is involved, they shall withdraw.

　　Article 120: The transaction results of trading that has been conducted in accordance with trading rules formulated according to law may not be changed. Traders may not be released from the civil liability incurred⁴⁷ as a result of their violation of rules during trading. Gains obtained from trading against the rules shall be dealt with pursuant to the relevant provisions.

　　Article 121: If persons engaged in securities trading inside a stock exchange violate the trading rules of the stock exchange, the stock exchange shall take disciplinary actions. If the circumstances are serious, the offenders⁴⁸' qualifications shall be revoked⁴⁹ and they shall be barred from entering the exchange to carry out securities trading.

　　PART SIX: SECURITIES COMPANIES

　　Article 122: Establishment of securities companies must be examined and approved by the State Council's securities regulatory authority. No work unit or individual may engage in securities business without the approval of the State Council's securities regulatory authority.

　　Article 123: For the purposes of this Law, the term "securities companies" shall mean limited liability companies or companies limited by shares that have been established pursuant to the provisions of the PRC, Company Law and this Law and that engage in securities business.

　　Article 124: To establish a securities company, the following conditions shall be fulfilled:

　　the articles of association of the company shall comply with the provisions of laws and administrative regulations; the major shareholders shall have the ability to maintain continuous profitability, a good reputation, no record of major violation of laws or regulations within the most recent three years, and net assets of not less than Rmb 200 million; have a registered capital that complies with the provisions hereof; the directors, supervisors and senior management personnel shall have employment qualifications, and the employees shall have securities business qualifications; have a sound risk management and internal control system; have up-to-standard business premises⁵⁰ and business facilities; and other conditions stipulated in the provisions of laws and administrative regulations and by the State Council's securities regulatory authority that have been approved by the State Council. Article 125: Securities companies may engage in all or some of the following securities businesses upon approval of the State Council's securities regulatory authority:

　　securities brokerage; securities investment consultancy; financial consultancy related to securities trading and securities investment activities; securities distribution and sponsoring; securities business on own account; securities asset management; and other securities businesses. Article 126: Securities companies must include the words "securities limited liability company" or "securities company limited by shares" in their names.

　　Article 127: Where a securities company engages in businesses specified in Items （1） to （3） of Article 125 hereof, its minimum registered capital shall be Rmb 50 million; where it engages in any of the businesses specified in Items （4） to （7）, its minimum registered capital shall be Rmb 100 million; where it engages in two or more businesses specified in Items （4） to （7）, its minimum registered capital shall be Rmb 500 million. The registered capital of securities companies shall be paid-up capital.

　　The State Council's securities regulatory authority may, according to the principles of prudential regulation and the risk levels of the various types of businesses, adjust the minimum registered capital provided that it is not less than the amount stipulated in the preceding paragraph.

　　Article 128: The State Council's securities regulatory authority shall, within six months of the date of acceptance of an application for establishment of a securities company, carry out examination according to the statutory conditions and the statutory procedures, and the principles of prudential regulation, make a decision on whether or not to grant approval, and notify the applicant⁵¹ thereof. Where approval is not granted, the reasons therefor shall be stated.

　　Where an application for establishment of a securities company is approved, the applicant shall apply to the company registry for establishment registration within the stipulated time limit and obtain a business licence.

　　The securities company shall, within 15 days of obtaining a business licence, apply to the State Council's securities regulatory authority for a permit for operating securities business. Where it has not obtained such permit, the securities company may not engage in securities business.

　　Article 129: The establishment, take over or closure of branches, change in the scope of business or registered capital, change in a shareholder that holds 5% or more of the equity or the de facto controlling person, change in the major clauses in the articles of association of the company, and the merger⁵², division, change in corporate form, termination of operation, dissolution or bankruptcy⁵³ of securities companies must be approved by the State Council's securities regulatory authority.

　　The establishment of, take over of or equity participation⁵⁴ in securities business organizations overseas of securities companies must be approved by the State Council's securities regulatory authority.

　　Article 130: Risk control indices of securities companies such as net assets, ratio of net capital to liability, ratio of net capital to net assets, ratios of business scale such as the respective ratios of net capital to business on own account, distribution and asset management, ratio of liability and net assets, as well as ratio of liquid assets to liquid liability, etc., shall be stipulated by the State Council's securities regulatory authority. Securities companies may not provide financing or security to their shareholders or the related parties of their shareholders.

　　Article 131: Directors, supervisors and senior management personnel of securities companies shall be honest, be of good conduct, familiar with securities laws and administrative regulations, have the operation and management capability⁵⁵ required for performance of duties, and have obtained the employment qualifications verified and approved by the State Council's securities regulatory authority prior to employment.

　　The persons described in Article 147 of the PRC, Company Law and the following persons may not serve as the directors, supervisors or senior management personnel of securities companies:

　　responsible persons of stock exchanges or securities registration and clearing institutions, and directors, supervisors and senior management personnel of securities companies, who were removed from office due to a violation of the law or a breach of discipline, where not more than five years has elapsed since the date of their removal from office; and lawyers, certified public accountants, and professional personnel of investment consultancy organizations, financial consultancy organizations, credit rating organizations, asset valuation organizations or verification organizations, whose qualifications were cancelled due to a violation of the law or a breach of discipline, where not more than five years has elapsed since the date of cancellation. Article 132: Working personnel of stock exchanges, securities registration and clearing institutions, securities service organizations or securities companies that were dismissed for violating the law or breaching discipline, and working personnel of State authorities who were dismissed, may not be employed as working personnel of securities companies.

　　Article 133: Working personnel of State authorities, and other persons prohibited by laws and administrative regulations from concurrently⁵⁶ holding positions in companies, may not concurrently hold positions in securities companies.

　　Article 134: The State establishes securities investor protection fund. The securities investor protection fund shall comprise funds paid by securities companies and funds collected by other means according to law. The specific procedures on its collection, administration and use shall be stipulated by the State Council.

　　Article 135: Securities companies shall make allocations to a trading risk reserve from their annual after-tax profits. The reserve shall be used to make up losses from securities trading. The specific allocation percentage shall be specified by the State Council's securities regulatory authority.

　　Article 136: Securities companies shall establish a sound internal control system, adopt valid⁵⁷ segregation⁵⁸ measures, and safeguard against the conflict of interest between the company and the clients and between clients.

　　Securities companies must handle their securities brokerage business, securities distribution business, securities business operated on their own account and securities asset management business separately.

　　Article 137: Business on the own account of securities companies must be conducted in their own names. Such business may not be conducted in the name of another or in the name of an individual.

　　When carrying out business on own account, securities companies must use their own funds and/or funds that they have raised according to law.

　　No securities company may lend its account for business carried out on own account to another for use.

　　Article 138: Securities companies shall have the lawful right to operate independently, and their lawful operations shall not be interfered⁵⁹ with.

　　Article 139: The clients' transaction clearing funds of a securities company shall be deposited with a commercial bank, and shall be managed as individual accounts in the name of each client. The specific procedures and implementing⁶⁰ steps shall be stipulated by the State Council.

　　Securities companies may not include their clients' transaction clearing funds and securities as their own property. All work units and individuals are forbidden to misappropriate a client's transaction clearing funds and securities in any form. When a securities company is bankrupt or undergoes liquidation⁶¹, the clients' transaction clearing funds and securities shall not fall under its bankrupt or liquidation property. Unless for the debts of the clients or in other circumstances stipulated by law, the clients' transaction clearing funds and securities may not be sealed up, frozen, deducted⁶² or subject to enforcement.

　　Article 140: When handling brokerage business, securities companies shall make available uniform printed securities sale and purchase instruction forms for use by instructing parties. If instructions are given in other ways, a record must be kept thereof.

　　The records of clients' instructions to purchase or sell securities shall be kept by the securities company for the prescribed period, irrespective of whether or not any transactions are concluded.

　　Article 141: When a securities company accepts an instruction to purchase or sell securities, it shall purchase or sell securities as an agent in accordance with the trading rules and on the basis of the description of the securities, the purchase or sales quantity, the method of bidding, the price range, etc. set forth in the instruction form, and make a transaction record truthfully. After the transaction has been concluded, a transaction report shall be drawn⁶⁴ up according to regulations and delivered to the client.

　　Account statements confirming trading acts and their transaction results which are drawn up in the course of securities trading must be truthful⁶³. Such statements shall be verified on a transaction by transaction basis by an examiner other than the person handling the transaction, in order to ensure that the book securities balance is the same as the number of securities actually held.

　　Article 142: Engagement in trading on the margin⁶⁵ and short sale of securities for clients by securities companies shall be handled according to the regulations of the State Council and approved by the State Council's securities regulatory authority.

　　Article 143: When handling brokerage business, securities companies may not accept a discretionary order of clients to decide on the purchase or sale of securities, choose the types of securities or decide on the quantities to be purchased or sold or the purchase or sales price.

　　Article 144: Securities companies may not give any form of commitment to clients concerning earnings⁶⁶ from the purchase or sale of securities or compensation for losses from the purchase or sale of securities.

　　Article 145: Securities companies and their working personnel may not privately⁶⁷ accept instructions from a client to purchase or sell securities that has not gone through the company's place of business established according to law.

　　Article 146: If, in the course of securities trading activities, a member of the working personnel of a securities company violates the trading rules on the instructions of his securities company or by manipulating his position, the securities company to which such person belongs shall bear full liability therefor.

　　Article 147: Securities companies shall properly keep the account details, entrustment records, transaction records of their clients, and various information related to internal management and business operation. No one may conceal⁶⁸, forge, alter or destroy such information. The aforementioned information shall be kept for a period of not less than 20 years.

　　Article 148: Securities companies shall submit business management information and materials such as business and financial information to the State Council's securities regulatory authority according to regulations. The State Council's securities regulatory authority shall have the right to request securities companies and their shareholders, de facto controlling persons to provide the relevant information and materials within the stipulated time limit.

　　The information and materials submitted or provided by securities companies and their shareholders, de facto controlling persons to the State Council's securities regulatory authority must be truthful, accurate and complete.

　　Article 149: Where the State Council's securities regulatory authority deems necessary, it may appoint accounting⁶⁹ firms or asset valuation organizations to audit⁷⁰ or evaluate the financial status, internal control status and asset value of the securities companies. The specific procedures shall be formulated by the State Council's securities regulatory authority in conjunction with the relevant competent departments.

　　Article 150: Where the net capital or other risk control indices of a securities company do（es） not fulfil regulations, the State Council's securities regulatory authority shall order rectification⁷¹ within a stipulated time limit. Where the securities company fails to carry out rectification within the time limit or its act seriously endangers the stable operation of the company or harms the lawful rights and interests of its clients, the State Council's securities regulatory authority may adopt the following measures depending on the circumstance:

　　restrict business activities, order suspension of certain businesses and cease approving new businesses; cease approving the establishment and takeover of branches of business nature; restrict the distribution of dividends⁷², and restrict the payment of remuneration and provision of welfare benefits to the directors, supervisors and senior management personnel; restrict the transfer of property or creation of other rights on property; order the replacement⁷³ of directors, supervisors and senior management personnel or restrict their rights; order the transfer of equity of controlling shareholders or restrict the exercise of shareholders' rights by the relevant shareholders; and revocation⁷⁴ of the relevant business permit. After the securities company has carried out rectification, it shall submit a report to the State Council's securities regulatory authority. Where the State Council's securities regulatory authority confirms that the relevant risk control indices are fulfilled upon inspection⁷⁵ check, it shall remove the relevant measures specified in the preceding paragraph imposed on the company within three days of the completion of the inspection check.

　　Article 151: Where the shareholders of a securities company makes false capital contributions or surreptitiously withdraw their capital contributions, the State Council's securities regulatory authority shall order rectification within a stipulated time limit, and may order them to transfer the equity of the securities company they hold.

　　Before the shareholders specified in the preceding paragraph correct their illegal act and transfer the equity of the securities company they hold, the State Council's securities regulatory authority may restrict their shareholder's rights.

　　Article 152: Where the directors, supervisors and senior management personnel of a securities company fail to act with due diligence, thereby⁷⁶ causing major act in violation of laws or regulations or major risks of the company, the State Council's securities regulatory authority may revoke their employment qualifications and order the company to replace them.

　　Article 153: Where a securities company engages in illegal operation or has a major risk, which seriously endangers the order of the securities market and harms the interests of investors, the State Council's securities regulatory authority may impose regulatory measures on the said company such as ordering the termination of operation for rectification, appointing other organization to take custody or take over the company, or shut down the company.

　　Article 154: During the period in which the securities company has been ordered to terminate operation for rectification, taken custody or over according to law or undergoes liquidation or it encounters a major risk, the following measures may be imposed on the directly responsible directors, supervisors, senior management personnel and other directly responsible persons of the securities company upon the approval of the State Council's securities regulatory authority:

　　notify the customs authority to, according to law, restrict his departure from China; and apply to the judicial⁷⁷ authorities to prohibit his transfer, assignment or disposal of property in other manner, or creation of other rights on property. PART SEVEN: SECURITIES REGISTRATION AND CLEARING INSTITUTIONS

　　Article 155: Securities registration and clearing institutions are non-profit legal persons that provide centralized registration, custody and clearing services for securities trading.

　　The establishment of securities registration and clearing institutions shall be subject to approval by the State Council's securities regulatory authority.

　　Article 156: To establish a securities registration and clearing institution, the following conditions shall be met:

　　it has its own funds of not less than Rmb 200 million; it has the necessary site and facilities for securities registration, custody and clearing services; its main management personnel and working personnel must have securities business qualifications; and other conditions specified by the State Council's securities regulatory authority. The names of securities registration and clearing institutions shall include the words "securities registration and clearing".

　　Article 157: Securities registration and clearing institutions shall perform the following functions:

　　the establishment of securities accounts and clearing accounts; the custody and transfer of ownership of securities; the registration of the names of the holders¹¹ of securities; the clearing and delivery of listed securities traded on the stock exchange; the allotment of securities rights and interests upon entrustment by the issuer; the handling of inquiries⁷⁸ concerning the aforementioned businesses; and other businesses approved by the State Council's securities regulatory authority. Article 158: A nationwide, centralized, unified⁷⁹ method of operation shall be adopted for the registration and clearing of securities.

　　The articles of association and business rules of securities registration and clearing institutions shall be formulated according to law and be subject to approval by the State Council's securities regulatory authority.

　　Article 159: A holder⁸ of listed securities shall place all such securities in the custody of a securities registration and clearing institution before trading the same.

　　Securities registration and clearing institutions may not misappropriate their clients' securities.

　　Article 160: Securities registration and clearing institutions shall furnish the issuers of securities with the name lists and relevant information of the holders of their securities.

　　On the basis of the results of securities registration and clearing, securities registration and clearing institutions shall confirm the fact that particular securities are held by particular holders and provide registered information on the holders of the securities. Securities registration and clearing institutions shall ensure the truthfulness⁸⁰, accuracy and completeness of the name lists of the holders of securities and the records of registration of change in ownership. Such name lists and records may not be concealed⁸¹, forged, altered or destroyed.

　　Article 161: Securities registration and clearing institutions shall adopt the following measures to ensure the normal operation of business:

　　to have the necessary service equipment and comprehensive data security and protection measures; to have established sound management systems for business, financial affairs and security; and to have established comprehensive risk management systems. Article 162: Securities registration and clearing institutions shall properly preserve their records, the original evidence relating to custody and clearing and the relevant document and materials. They shall be kept for a period of not less than 20 years.

　　Article 163: Securities registration and clearing institutions shall establish securities clearing risk funds to be paid for or make up the losses of securities registration and clearing institutions caused by default on delivery, technical failures, operational errors or events of force majeure.

　　Securities clearing risk funds shall be allocated⁸² from the business revenue and earnings of securities registration and clearing institutions, and may be collected from clearing participants at a fixed⁸³ percentage of the volume of their securities trading business.

　　The methods of raising and managing securities clearing risk funds shall be specified by the State Council's securities regulatory authority in conjunction with the State Council's finance department.

　　Article 164: The money in securities clearing risk funds shall be deposited in a dedicated account at a designated bank and managed as allocated money.

　　After a securities registration and clearing institution has paid compensation from the risk fund, it shall seek recourse against the responsible person（s）.

　　Article 165: Applications by securities registration and clearing institutions for their dissolution shall be subject to approval by the State Council's securities regulatory authority.

　　Article 166: Investors that entrust securities companies with securities transactions shall apply to open a securities account. Securities registration and clearing institutions shall open a securities account for the investors in the name of the investor according to regulations.

　　Investors that apply to open an account must hold a legal document that proves the identity of a Chinese national or status of a Chinese legal person, except stipulated otherwise by the State.

　　Article 167: When a securities registration and clearing institution provides net balance clearing services for securities trading, it shall request the clearing participants to pay securities and funds in full and provide guarantee for delivery according to the payment for delivery principle. Before the completion of the delivery, no one may use the securities, funds or collateral⁸⁴ used for delivery.

　　Where a clearing participant fails to fulfil its delivery obligation according to schedule, the securities registration and clearing institution has the rights to handle the property mentioned in the preceding paragraph according to business rules.

　　Article 168: Various types of clearing funds and securities collected by securities registration and clearing institutions according to business rules must be deposited in the account dedicated to clearing and delivery. They may only be used for the clearing and delivery of securities transactions already concluded according to business rules and may not be subject to enforcement

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