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	NOTICE OF CHINA SECURITIES REGULATORY COMMISSION CONCERNING THE REGISTRATION AND SETTLEMENT SERVICES OF DOMESTIC SECURITIES OF THE QUALIFIED FOREIGN INSTITUTIONAL INVESTORS

	(No.3 [2003] of China Securities Regulatory Commission promulgated on July 4, 2003)


SUBJECT : REGISTRATION AND SETTLEMENT SERVICES; FOREIGN INSTITUTIONAL INVESTORS
ISSUING DEPARTMENT : CHINA SECURITIES REGULATORY COMMISSION
ISSUE DATE : 07/04/2003
IMPLEMENT DATE : 07/04/2003
LENGTH : 1,012 words
TEXT :

In order to improve the administration of the securities investment, registration and settlement of the qualified foreign institutional investor (hereinafter referred to the QFII), clarify the respective responsibilities and duties of the QFII, the representing trustee and securities firm in the investment, registration and settlement, the relevant issues concerning the securities investment, registration and settlement involving the QFII are hereby notified as follows according to the Interim Measures for the Administration of Domestic Securities Investments of QFII.

I. The QFII and the representing trustee and securities firm shall assume the relevant legal liabilities in securities investment, registration and settlement, in accordance with the relevant laws and regulations, the rules of the Securities Exchange, the rules of China Securities Depository and Clearing Corporation Limited (hereinafter referred to the Clearing Corporation), and the rules of this notice.

II. The trustee shall ensure the independence and security of the securities assets and investment assets of the QFII represented by them in the process of securities investment and settlement. And the security of the QFII assets shall not be affected by the behaviors (including overbought and short sale) of other QFIIs.

If the trustee finds that the QFII overbuys securities (the balance in the RMB special account of the QFII is not adequate to pay for the securities bought on the same day), it may, according to the relevant agreements, apply to the Clearing Corporation for non-trade transfer of the overbought securities from the securities account of the QFII to that of the appointed party, and transfer the equivalent capitals from the capital account of the appointed party to that of the trustee.

III. The QFII, the representing trustee and securities firm shall reach an agreement to define the respective liabilities and duties in preventing erroneous trading and in case of erroneous trading. The agreement shall be filed to China Securities Regulatory Commission, the Securities Exchange and the Clearing Corporation for record.

The following items shall, at least, be included in the agreement:

(1) The names, addresses, special contacts and the addresses and contacting methods of all parties involved in the agreement;

(2) The control procedure to prevent erroneous trading and the liabilities and duties of all parties in the procedure;

(3) The settlement procedure of erroneous trading and the liabilities and duties of all parties in the procedure;

(4) The applicant to go through the non-trade transfer procedure in correcting the erroneous trading;

(5) The appointed party (the party assuming the responsibility to pay to the Clearing Corporation in case of overbought caused by whatever reasons);

(6) The term of the agreement; and

(7) Other content agreed upon by the parties.

IV. According to the Securities Law of the People's Republic of China, the Interim Measures for the Administration of Domestic Securities Investments of QFII, and other relevant regulations, the QFII shall not overbuy securities. The QFII, the representing domestic securities firm and trustee shall make joint effort to take the following measures to prevent the QFII from overbuying securities:

(1) Prior to the securities investment, the QFII shall insure that the balance of securities and capitals it has deposited in the trustee is adequate for the investment;

(2) With the authorization of the QFII, the trustee shall provide the securities firm with the balance payable in the capitals and securities account of the QFII on the same day, in order to prevent the overbought;

(3) The securities firm representing the QFII shall, prior to the opening of the market, verify the capital balance toward the trustee for fear that the planned securities investment leads to the overbought.

V. In order to maintain the order and security of settlement in the securities market, the illegal overbought of securities caused by whatever reasons shall be treated in accordance with the following principles.

(1) The trustee shall immediately report to the Securities Regulatory Commission and the Clearing Corporation;

(2) Any party discovering the overbought shall immediately inform the other two parties, so as to ascertain the guilty party;

(3) In case of an overbought caused by the mistakes of the trustee, it shall bear the responsibility to pay to the Clearing Corporation for the securities overbought, and therefore it is entitled to dispose of and benefit from the overbought securities. And the trustee may authorize the securities firm to dispose of the securities, the Clearing Corporation shall provide necessary assistance;

(4) In case of an overbought caused by the mistakes of the securities firm, the trustee and the securities firm shall directly go through the procedure of non-trade transfer in the Clearing Corporation, transferring the securities overbought to the securities firm. Meanwhile, the Clearing Corporation shall transfer the amount of capital equivalent to the overbought securities in the settlement reserve account of the securities firm to that of the trustee;

(5) In case that the QFII, the trustee and the securities firm fail to check out the reasons for the overbought or to ascertain the guilty party by 12:00 a.m. on day T+1, the party appointed in the agreement shall deal with the issue according to the agreement; and

(6) In case that the trustee or the securities firm fails to bear the responsibility to pay for the overbought securities stated in Items 3, 4 and 5, the Clearing Corporation is empowered to temporarily detain the securities whose value is equivalent to 120% of the overbought securities in the account of the represented QFII appointed by the trustee. If the value of the securities in the account is not adequate, all the securities shall be detained. If the trustee fails to specify the securities for the Clearing Corporation to detain in the specific period, the Clearing Corporation shall detain in inverted sequence of securities investment the securities in the account of all the represented QFIIs of the trustee on day T, until the total market value of the detained securities amounts to 120% of the overbought securities. If the trustee fails to compensate for the overbought securities on the second day, the Clearing Corporation shall sell all the detained securities as the compensation for the overbought securities. In case of a margin between the compensation and the overbought securities including the capital and interests, the trustee shall demand payment of the margin from the guilty party, and return it to the Clearing Corporation immediately.