China Securities Regulatory Commission Official Bulletin

No.30 [2008]

Interim Provisions on Compliance Management of Securites Companies is hereby announced and shall take effect on August 1, 2008.

China Securities Regulatory Commission
July 14, 2008

Interim Provisions on Compliance Management of Securites Companies

Article 1  This provision is formulated to promote securites companies enhancing internal compliance management, strengthen self restraint capability and realize sustainable and standardized development, according to the Securities Law and Regulation on Supervision and the Administration of Securities Companies. 

Article 2  Securites companies that is set up in Chinese territory shall implement compliance management based on this provision.

Compliance management in this provision refers to such behaviors of securites companies as development and implementation of compliance management system, establishment of compliance management mechanism, cultivation of compliance culture and prevention of compliance risk.   

Compliance in this provision refers to compliance of business management of securites companies and occupational behavior of its working staff with law, regulation, rule and other normative document, behavior criteria, rule of self discipline, company rule and system, and occupational ethics and conduct code (hereinafter referred to as “law, regulation and rule”) that are widely known in the industry and universally observed.

Compliance risk in this provision refers to risk of legal sanction, being subject to supervisory measure, loss of property or reputation on securites companies, when the business management of securites companies or occupational behavior of its working staff violates law, regulation or rule.

Article 3  Compliance management of securites companies shall cover all businesses, each department and branch of the company, and go through various steps like decision making, implementation, supervision and feedback.

Article 4  Securites companies shall build philosophy of legal operation, compliance by all working staff starting from top to bottom, advocate and facilitate establishment of compliance culture, and raise compliance awareness of all staff.

Article 5  Securites companies shall formulate basic system for compliance management and implement it after approval from the BOD. Basic systems of compliance management include target, basic principle, organization structure, roles and responsibility of compliance management, report, handling and legal responsibility pursuing of violation.

Article 6  Board of directors, board of supervisors and senior management of securites companies shall perform roles and responsibilities related to compliance management based on law, regulation and company rule, and hold responsible for effectiveness of company compliance management.

Principals of each department and branch of the securities company shall enhance supervision and administration of the compliance of occupational conduct of working staff in the department and branch, and hold responsible for effectiveness of compliance management in the department and branch.

All staff in the securities company shall get familiar with law, regulation and rule related to specific occupational behavior, take initiative to identify, control compliance risk of the occupational behavior, and hold responsible for compliance of their occupational behavior.

Article 7  Securites companies shall organize related internal organization and department, or entrusting external professional institute to conduct evaluation of effectiveness of company compliance management upon requirement, resolve problems existed in compliance management, and conduct overall evaluation of compliance management effectiveness at least once each year.

Article 8  Securites companies shall set up director position of compliance management. Such compliance management director is the principal of company compliance, and hold responsible for inspecting, supervising and checking of compliance of business management and occupational behavior of the company as well as the working staff. The compliance management director shall neither shaller other position that has conflict with the role and responsibility of compliance management nor administrate department that in conflict with role and responsibility of compliance management.

Rule of Securites companies shall prescribe on position, role and responsibility, appointment and removal condition, procedure and so on.

Article 9  Compliance director shall meet the following condition for the position:

（1）Acquired senior management qualification of securites companies;

（2）Got familiar with securities business, understood securities law, regulation and rule, and had related know-how and expertise of compliance management; 

（3）Engaged in securities work for over five years and passed concerning professional exam or had at least 8 years' experience; or had took the position of professional supervision for more than 8 years in securities supervision and administration institute.

The professional exam mentioned in (3) above refers to exam on compliance management capability of securites companies, national judicial examination, or lawyer qualification exam.

Article 10  Securites companies shall submit resume and related certificate material of the appointee to local securities regulatory bureau while employing a compliance director. After being approved by local securities regulatory bureau, the compliance director can take post.

Securites companies shall have appropriate reason for dismissing compliance director and submit written report of fact and reason of the dismission, within 3 working days from the dismissing day, to local securities regulatory bureau.

Article 11  When the compliance director can't perform responsibility or the position is vacancy, securites companies shall appoint a substitutive senior management and submit written report to local securities regulatory bureau within 3 working days of the appointed date.

The substitutive compliance director shalln't administrate department that's in conflict with role and responsibility of compliance management. The substitutive period shall not exceed 6 months.

If the position of compliance director is vacancy, the company shall, within 6 months, employ someone, who meets requirement prescribed in article 9 of this provision to assume compliance director position.

Article 12  Compliance director shall conduct compliance audit of company internal management system, major decision, new product and new business proposals and issue written compliance audit suggestion.

If securities supervision and administration institute requires securites companies to conduct compliance audit for submitted application document or report, the compliance director shall implement the audit and put clear suggestion in the application material or report. 

Article 13  Compliance director shall adopt effective measures to supervise compliance of business management and occupational conduct of the company as well as working staff, and implement regular or irregular inspection based on requirement of securities regulatory institute and company prescription.

Compliance director shall organize and implement company anti-money washing and information isolation wall system, provide compliance consultation to senior management, each department and branch, organize compliance training and handle claim and report on violation behavior of the company and working staff.

Article 14  If compliance director finds violation behavior of law or regulation or compliance risk in the company, he shall report to internal institute prescribed in company rule as well as local securities regulatory bureau in time; if such behavior violates industrial standard and self discipline rule, report shall also be sent to related self discipline organization.

 For violation behavior and compliance risk potential, compliance director shall put forward suggestions to related company institute or department on stopping and handling of such violation behavior and risk potential, and urge the rectification. Securites companies shall report the rectification result to local regulatory bureau; and send a copy to related self discipline organization if necessary.

Article 15  If law, regulation and rule are changed, compliance director shall suggest board of director or senior management to supervise related company department in a timely manner, evaluate impact to company compliance management, and modify and complete related management system and business procedure. 

Article 16  Compliance director shall keep contact with securities supervision and administration institute and self discipline organization, and take initiative to cooperate with work of securities supervision and administration institute and self discipline organization.

Compliance director shall handle investigation required by securities supervision and administration institute and self discipline organization in a timely manner, cooperate with them on company inspection and investigation, follow up and evaluate implementing result of supervision suggestion and requirement.

If compliance director finds ambiguity of prescription in law, regulation and rule, and feels hard to make judgment on compliance of business management and occupational behavior of the company as well as working staff, he can consult to securities supervision and administration institute or self discipline organization, who shall reply in a timely manner.

Article 17  Compliance director shall archive the issued compliance audit suggestion, provided compliance consultation suggestion, signed company document，working paper of compliance inspection, and other documents or materials that are related to performance of role and responsibility, and keep record of such performance. 

Article 18  Securites companies shall ensure independence of compliance director and guarantee compliance director can sufficiently exercise the right of knowing and investigation of necessity in order to perform role and responsibility.

Compliance director enjoys the right to participate or attend meetings related to his performance of role and responsibility, get and read related document, material, and ask persons concerned to explain issues.

Shareholders, board of directors and senior managements shalln’t directly order or interfere the work of compliance director by violating prescribed role and responsibility and procedure; board of directors, supervisory directors, senior managements, each department and branch of the securities company shall support and cooperate with compliance director, rather than restricting or interfering his performance of role and responsibility with any excuse.

Article 19  Securites companies shall provide man power, property, fund and technical support to compliance director in order to perform his role and responsibility.

Securites companies shall set up compliance department or appointed relevant department (hereinafter referred to as “compliance department”) to assist work of the compliance director based on business scope, business scale, organization structure and other conditions, and arrange sufficient number of compliance managing staff, who have professional knowledge and expertise to perform role and responsibility of compliance management, in the compliance department. 

If compliance director finds its necessary, he can hire external professional institute or expert in the name of the company to assist his work.

Article 20  Compliance department is responsible for compliance director and perform compliance management role and responsibility according to company prescription and arrangement of the compliance director. Other responsibility that the compliance department has shalln’t be in conflict with role and responsibility of compliance management.

Securites companies shall clarify different roles and responsibilities between compliance department and other internal control department, and establish coordination and interaction working mechanism among all internal control departments.

Article 21  Securites companies shall establish report system for violation and ensure every employee enjoys normal right of reporting law and regulation violation behavior.

When each department, branch and working staff of the company find violation behavior or compliance risk potential, they shall actively and timely report to compliance director.

Article 22  Securites companies shall include effectiveness of compliance management and legality of occupational behavior into performance review of senior management, each department, branch as well as personnel wherein.

Securites companies shall assess performance of role and responsibility of compliance director and compliance management personnel, and decide their salary and benefit. If compliance director and management performed their roles and responsibilities well, their salary and benefit shalln’t be lower than average level of company management at the same level.

Article 23  Securites companies shall report interim compliance report to local securities regulatory bureau before August 31 each year; submit annual compliance report of the previous year before April 30 of each year. The compliance report shall be passed in BOD meeting and includes the following content:

（1）Basic profile of company compliance management; 

（2）Performance of  role and responsibility of compliance director;

（3）Discovery and rectification of company violation behavior and compliance risk;

（4）Evaluation of effectiveness of company compliance management as well as the rectification status;

（5）Other content required by securities regulatory institute or believed to be reported by the company. 

Board of director, senior management of the securities company shall sign confirmation suggestion of the foregoing prescribed compliance report to ensure the report is true, accurate and complete; suggestion and reason shall be input if there’s any different point of view on report content. 

Article 24  China Securities Regulatory Commission shall evaluate effectiveness of compliance management of securites companies. The evaluation result will serve as an important evidence for securites companies to implement classified supervision.

Article 25  Through effective compliance management, if the securities company actively finds violation behavior, handles properly, pursues legal responsibility, complete internal control system and business flow, and report to local securities regulatory bureau on a timely basis, it can be either free from legal responsibility pursuit or punished at the lower level.

For violation of law and regulation by securites companies, if the compliance director has stopped and reported based on the prescription, legal responsibility will be exempted.

Article 26  If securites companies hasn’t performed effective compliance management, internal control is incomplete or there’s any violation behavior, the board of director, senior management and other personnel that hold responsible for the company shall be subject to supervising measure or pursuit of legal responsibility.

If compliance director supports or allows company violation of law and regulation, or not stops or reports as regulation without any reasonable reason, he will be subject to supervising measure or pursuit of legal responsibility.

Article 27  This regulation takes effect as of  August 1, 2008.

  China Securities Regulatory Commission 2008-07-14