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China Securities Regulatory Commission
Notice of China Securities Regulatory Commission on Transmission of Guide for Securities Self-support Business of Securities Companies
and on Strengthening its Operation
To securities companies:
In recent years, self-support business of securities companies have been accompanied with operation with non-normative account, unproportional
position, concentrated shareholding or suspected manipulation of the market, which might trigger the breakout of corporation risks.
This Commission, on the basis of comprehensive control of securities companies, carried out survey on the operation of securities
companies and raises more detailed requirements on its supervision in such documents as Notice on Promoting Self-regulation, Legitimate
Operation and Innovation of Securities Companies ( Zheng Jian Ji Gou Zi[2005]No.37). Nowadays, most securities companies are, on
the basis of self -survey and in accordance with the requirements of the Commission herein, rectifying their operation, and some
are vigorously exploring how to ameliorate and perfect its self-support business mechanism, some of the remaining, however, have
failed to report and record account in accordance with the requirements herein, carried out inefficient rectification and violated
the relating rules to increase the position scale and etc. In order to promote reform of the self-support business mechanism of securities
companies, to prevent the risk in self-support business, China Securities Regulatory Commission formulated Guide for Securities Self-support
Business of Securities Company and transmitted it, on the basis of having solicited opinions in the circle of securities. The related
particulars are hereby notified as follows for the abidance and implementation hereof by securities companies:
China Securities Regulatory Commission
November 11, 2005
Guide for Securities Self-support Business of Securities Companies
Chapter neral Principle
Article 1
In order to standardize self-support business of securities companies and to effectively control risk, this Guide is hereby formulated
in accordance with provisions of related laws and rules and the requirement of standardization of self-control.
Article 2
Securities companies shall, in accordance with the requirement of this Guide and the management characteristic and business operation
of the companies herein, establish perfect self-control management system, investment decision-making mechanism, operation flow and
risk monitoring mechanism to undertake self-support business on the premise that risk can be estimated, controlled and endured.
Article 3
Securities companies shall establish and perfect responsibility-affix-to person mechanism. Where violation of law occurs in self-support
business, responsibilities shall be affixed to person.
Chapter cision-making and authorization
Article 4
Securities companies shall establish relatively concentrated investment mechanism and authorization mechanism with the integration
between rights and responsibilities. Decision-making mechanism of self-support business shall in principle be established in accordance
with such a system: board of directors–investment decision-making institution–self-support sectors.
Article 5
Board of director, the supreme decision-making institution of the self-support business, on the basis of severe abidance of the risk
control indicator criterion in monitoring provisions, shall, in accordance with such situation as asset, debt, profit and loss, and
abundance of capital in the companies herein, work out the scale of self-support, endurable risk and etc., and put them into practice
by means of board of directors’ decision-making, with the specific investment operation management of self-support business decided
by the decision-making institutions of the authorized company by the board of directors herein.
Investment decision-making institutions, the supreme decision-making institution, shall be responsible for the settlement of specific
asset arrangement strategy, investment proceedings and investment types and etc.
Self-support business sector, the executive institution of self-control, shall, within the scope of decision-making set by investment
decision-making institution and in accordance with its authorized rights, be answerable for the decision-making and execution of
investment particulars.
Article 6
Securities companies shall establish the authorization system of self-support business, confirm the range of authorized rights, its
time limit and responsibilities, make written record in the process of authorization to ensure the effective execution of authorized
system.
Securities companies shall establish business management system with clear administrative levels and definite responsibilities, work
out standardized business flow, and make clear the responsibilities of related sectors and positions of self-support business.
Article 7
Management and operation of self-support business shall be exclusively responsible by the self-support business of securities companies,
and non-self-support business sectors and its branches shall not carry out self-support business in any form.
Article 8
Important decisions mentioned in self-support business in the process of scale of self-support, at risk limitation, asset arrangement,
business authorization and etc., shall be made collectively and in written form and kept in the archives after the signature by related
personnel.
Chapter eration of Self-support Business
Article 9
Self-support business must, in the name of securities company of itself, be undertaken through special self-support post, with non-self-support
business sector responsible for the management of self-support account, including opening account, cancelling account, using registration
and etc.
Self-support business shall establish and perfect the examination and auditing system of self-support system, and is forbidden to
lend self-support account, use non-self-support post to undertake disguised self-support business and extra-account self-support
business.
Article 10
Self-support business shall strengthen fund allocation and accounting of self-support business, with non-self-support business responsible
for allocation of self-support business fund.
Debit and credit of self-support fund must be operated in the name of the company, and is forbidden in the individual name; cash withdrawal
from self-support business is also forbidden.
Article 11
Self-support business shall perfect the investment justification mechanism, establish investment pool system, with self-support sectors
operating within the range of limited self-support scale and endurable risk, and choosing investment from investment pool.
Article 12
Self-support business shall establish and perfect the mechanism and decision-making of profit stop and loss stop mechanism, with the
implementation and actual assessment in conformity with the written procedure and written record.
Article 13
Establishment of rigorous operational flow, research on investment variety, formulation of portfolio and implementation of transaction
directive shall be separated from each other and charged by different persons; auditing and compulsory record shall be made, backup
system of self-support business shall be established, perfected and be charged by special personnel for its administration. .
Article 14
Liquidation and statistics of self-support business shall be implemented by special personnel, and reconciled duly with fund liquidators
of financial sector, and subsequently recorded by relating personnel.
Independent liquidation system on self-support fund shall be undertaken, with the separation of self-support business post with the
liquidation post of brokerage, asset management business and of otherwise business.
Chapter sk Monitoring
Article 15
Firewall shall be established to ensure the strict separation of self-support business with such businesses as brokerage, asset management,
and investment bank in personnel, information, account, fund and accounting.
Article 16
Organs and functions of investment decision-making, investment operation and risk control shall be independent from each other; background
functions such as account management, fund liquidation and accounting shall be charged by independent sector or post so as to form
effective balanced supervision mechanism in the whole process of self-support business.
Article 17
Risk monitoring sector shall be capable to normally implement functions and acquire information an data in self-support business operation,
and thoroughly monitor risk in risk monitoring through establishing real-time monitoring system, establish effective risk monitoring
report mechanism, submit risk monitoring system to the board of directors and decision-making institutions, and inform relating information
to self-support business sectors and up-to-standard sectors. In case of discovering potential risk or irregular performance in business
operation or risk control indicators, risk monitoring sector herein shall report it to the board of directors and raise proposal
for its solution. The board of directors and investment decision-making institution as well as the relating sectors of self-support
business shall render feedback promptly to the proposal hereof, with written record being made in the process of report and feedback.
Article 18
Risk monitoring sector shall, in accordance with its real situation, enthusiastically borrow internationally advanced management experience,
introduce and develop effective risk control management tools, gradually establish and perfect such processes as risk identity, survey
and monitoring to make risk monitoring more scientific.
Article 19
Risk monitoring sector shall establish mark-to-market system of self-support business, perfect integrated analysis and monitoring
system of risk exposure of self-support business and total profit and gain, perfect quantizing indicator system of risk control,
and undertake regular sensitivity analysis and pressure test upon market value variation of self-support business and of the potential
influence of risk control indicator centered on the company’s net capital.
Article 20
Risk monitoring sector shall establish and perfect functions of risk monitoring system of self-support business, and set the corresponding
risk monitoring value to improve dynamic monitoring efficiency through dynamic variation automatically indicated by early warming
trigger equipment.
Article 21
Risk monitoring sector shall improve the transparency of self-support business. Securities self-support operation dealing system and
the monitoring system shall set necessary opening function or data interface so as to notice and check the self-support business
of securities companies.
Article 22
Risk monitoring sector shall establish and perfect the correcting and handling mechanism for defects in self-support operation risk
monitoring, with the risk monitoring sector, in accordance with the result of investigation and of assessment, be responsible for
raising rectifying and correcting measures and undertaking follow-up examination.
Article 23
Risk monitoring sector shall establish perfect file management system for investment decision-making and investment operation to ensure
its availability for checking after investment.
Article 24
Risk monitoring sector shall establish perfect achievement assessment and incentive system, perfect performance of evaluation mechanism,
follow the principle of objectivity, fairness and quantization to evaluate the investment capability and achievement performance
on self-support personnel.
Article 25
The auditing sector shall regularly undertake comprehensive audit upon the according-to-law operation, profit and loss, risk monitoring
and etc., and issue auditing report hereon.
Article 26
The auditing sector shall strengthen professional ethics and good faith education upon self-support personnel, intensify the awareness
of the confidentiality, according-to-law operation, risk control upon self-support personnel. Key self-support operation personnel
shall, before leaving office, be audited by auditing sectors.
Chapter formation Report
Article 27
Report mechanism shall be established in self-support business. The content of report includes but not limits to: implementation of
decision-making, self-support asset quality, self-support profit and loss, risk monitoring and otherwise important particulars.
The board of directors shall review, sign signature and feedback the interior report of self-support business.
Article 28
Securities companies shall establish and perfect their self-support business report system, be consciously subject to exterior supervision.
Securities companies shall, in accordance with the requirement of supervisory sector and securities exchange, subject their self-support
business operation.
Content of the report includes:
1)
account and post of self-support business;
2)
Important decision-making engaged in scale of self-support business, limit of risk, asset allocation, business authorization and etc.;
3)
Risk monitoring report of self-support business;
4)
Other particulars needed reporting.
Article 29
Securities companies shall clarify the responsible sector, report process and person responsible, and, render corresponding punishment
to the persons with direct responsibility and leading reasonability for false record, misleading statement, or gross negligence,
and promptly report it to the supervisory sector.
Chapter pendix
Article 30
The Guide shall be interpreted by China Securities Association.
Article 31
The relating terms of the Guide is given as follows:
1)
Risk exposure refers to the securities exposure (net position) formed as a result of difference between long position and short position
of certain securities type held by a securities company for certain period.
2)
Risk monitoring valve refers to certain indicator to control risk set in risk monitoring system. Risk monitoring valve generally includes
trading limit, risk limit and profit-stop and -loss-stop limit and etc.
3)
Sensitivity analysis refers to the potential influence of single or several market risk factors (interest rate, exchange rate and
stock price and etc.), with the invariability of other conditions, upon financial products and its integrated market value.
4)
Pressure test refers to the test of risk endurance in non-normative market, i.e. assessment on loss of financial products and its
integrated value under extreme market conditions such as volatile variation of such market risk factors as interest rate, exchange
rate, stock price and etc., or unexpected political or economic event.
Article 32
The Guide shall come into effect as of the date of its promulgation.
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