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TABLE OF CONTENTS CHAPTER I GENERAL PROVISIONS CHAPTER II QUALIFICATIONS AND CONDITIONS CHAPTER III INVESTMENT SCOPE AND PROPORTIONS CHAPTER IV CUSTODY OF ASSETS CHAPTER V ACTS OF INSURANCE INSTITUTIONAL INVESTORS PROHIBITED CHAPTER VI RISK CONTROL CHAPTER VII SUPERVISION AND ADMINISTRATION CHAPTER VIII SUPPLEMENTARY PROVISIONS CHAPTER I GENERAL PROVISIONS Article 1. These Measures are formulated in accordance with the "Insurance Law of the People's Republic of China", the "Securities Law of the People's Republic of China" and other laws and administrative regulations in order to strengthen the administration of stock investment business by insurance institutional investors, regulate investment activities, prevent investment risks, and safeguard the interests of the insured. Article 2. Insurance institutional investor mentioned in these Measures shall mean an insurance company or insurance asset management company that meets the conditions prescribed by China Insurance Regulatory Commission (hereinafter referred to CIRC) and engages in stock investments. Insurance group companies and insurance holding companies engaging in stock investments shall be governed by these Measures. Stock investment mentioned in these Measures shall mean the activity that an insurance institutional investor engages in or entrusts a qualified institution to engage in the trading of stocks, convertible company bonds, and other stock market products. Stock asset custody mentioned in these Measures shall mean the activity that an insurance company concludes, according to the relevant provisions of CIRC, a custody agreement with a commercial bank or other professional financial institution, who is entrusted by the insurance company to keep in custody the stocks and the funds for investing in stocks, to be responsible for settlement, valuation of assets, and investment supervision, etc. Article 3. An insurance institutional investor shall, when investing in stocks, set up an independent custody mechanism, follow the principles of prudence, safety and value increase, as well as independently operate the business, bear the risks, profits and losses by itself. Article 4. CIRC and China Securities Regulatory Commission (hereinafter referred to CSRC) shall, according to their respective duties, conduct supervision and administration over the stock investment activities carried out by insurance institutional investors. CHAPTER II QUALIFICATIONS AND CONDITIONS Article 5. An insurance asset management company shall, if it is entrusted to engage in stock investments, meet the following conditions: (1) Its internal management system and risk control system conform to the "Guide to Risk Control on Utilization of Insurance Funds"; (2) It has an independent trading department; (3) Its relevant senior management staff and major professionals meet the conditions prescribed in these Measures; (4) It has professional investment analysis system and risk control system; and (5) Other conditions prescribed by CIRC. Article 6. An insurance company meeting the following conditions may, upon approval of CIRC, entrust a relevant insurance asset management company which meets the conditions prescribed in Article 5 of these Measures to engage in stock investments: (1) Its solvency conforms to the relevant provisions of CIRC; (2) Its internal management system and risk control system conform to the "Guide to Risk Control on Utilization of Insurance Funds"; (3) It has a department specially responsible for entrustment in respect of insurance funds; (4) The relevant senior management staff and major professionals meet the conditions prescribed in these Measures; (5) It has set up a mechanism for stock asset custody; (6) It has no records on investment in severe violation of laws or rules during the latest three years; and (7) Other conditions prescribed by CIRC. Article 7. An insurance company meeting the following conditions may, upon approval of CIRC, directly engage in stock investments: (1) Its solvency conforms to the relevant provisions of CIRC; (2) Its internal management system and risk control system conform to the "Guide to Risk Control on Utilization of Insurance Funds"; (3) It has a professional fund utilization department; (4) It has an independent trading department; (5) It has built up a mechanism for stock asset custody; (6) The relevant senior management staff and major professionals meet the conditions prescribed in these Measures; (7) It has professional investment analysis system and risk control system; (8) It has no records on investment in severe violation of laws or rules during the latest three years; and (9) Other conditions prescribed by CIRC. Article 8. An insurance company that applies for directly engaging in or entrusting an insurance asset management company to engage in stock investments shall submit the following documents and materials to CIRC in triplicate: (1) the application letter; (2) the board resolution on stock investments; (3) its internal management system, risk control system, and information on the setup of its internal offices; (4) relevant materials on stock asset custodians, and the draft of the custody agreement; (5) name list and resumes of the relevant senior management staff and major professionals; (6) the company's financial statements of the latest three years which have been audited by an accounting firm; (7) the existing trading seats, securities accounts and fund accounts; (8) its stock investments plans, which shall at least state the ideology of stock investments, investment targets, and direction of investment portfolio; and (9) other documents and materials required by CIRC to be provided. If an insurance company applies for directly engaging in stock investments, it shall submit a statement on the investment analysis system and risk control system in addition. Article 9. CIRC shall, when examining the application of an insurance company for directly engaging in or entrusting an insurance asset management company to engage in stock investments, make a decision on whether to approve the application or not within 20 days as of receipt of the complete application documents and materials. If CIRC decides not to approve the application, it shall notify the applicant in writing and state the reason thereof. CIRC may, when considering it necessary, conduct expert appraisal on the particulars in the application filed by the insurance company, and shall notify the insurance company in writing of the time needed for expert appraisal. Article 10. Where an insurance company directly engages in stock investments, it shall, within 10 days after completing the relevant procedures for stock investments, submit to CIRC the formal custody agreement, the basis for evaluating investment performance, as well as the relevant materials on trading seats, securities account and fund account. Where an insurance company entrusts an insurance asset management company to engage in stock investments, it shall, within 10 days after completing the relevant procedures for stock investments, submit to CIRC the entrustment agreement, the formal custody agreement, the investment guidance, the basis for evaluating investment performance, as well as the relevant materials on trading seats, securities account and fund account. In the event that the contents in the preceding two paragraphs are modified, the insurance company shall report to CIRC within 5 days after completing the modification procedures. The insurance company shall submit copies of the relevant materials on trading seats, securities account and fund account to CSRC simultaneously. CHAPTER III INVESTMENT SCOPE AND PROPORTIONS Article 11. The stock investments of an insurance institutional investor shall be limited to the following varieties: (1) ordinary RMB stocks; (2) convertible company bonds; (3) other investment varieties prescribed by CIRC. Ordinary RMB stocks mentioned in Item (1) of the preceding paragraph shall mean the stocks which are issued and listed for circulation inside China, and subscribed and traded in RMB. Article 12. The stock investments of an insurance institutional investor may be traded in the following methods: (1) To be subscribed on primary market, including distribution based on market value, subscription either on or off the network, participation in distribution in the identity of strategic investor, and so on; (2) To be traded on secondary market. Article 13. The stocks of one listed company which are held by an insurance institutional investor shall be less than 30% of the ordinary RMB stocks of this listed company. The specific proportion of the investment stocks of an insurance institutional investor shall be separately prescribed by CIRC. An insurance asset management company may not use its own funds to invest in stocks. Article 14. An insurance institutional investor may not invest in ordinary RMB stocks of the following types: (1) Those which are under "special penalty" or "warning on special penalty due to there being risk on termination of the listing" imposed by the stock exchange, or which have been terminated by the stock exchange to be on listing; (2) The rise of price of the stocks during the past 12 months exceeds 100%; (3) The said stocks are suspected of being manipulated by others; (4) An accounting firm has issued its opinions on refusal to comment or its reservation opinions on the financial statements of the listed company for the latest year; (5) The listed company has disclosed that its performance has gone down by a big margin, and it is in heavy loss or will be in heavy loss in the future; (6) The listed company has disclosed that it is investigated by the regulatory authority or was severely punished by the regulatory authority within the latest year; or (7) Other types of stocks prescribed by CIRC. Article 15. The balance of the investment of an insurance institutional investor in convertible company bonds shall be calculated into the investment balance of the enterprise bonds, and shall conform to the relevant provisions of the "Interim Measures for the Administration for Insurance Companies to Invest in Enterprise Bonds". Where an insurance company converts the convertible company bonds it holds into stocks, such bonds shall be calculated into the investment balance of the ordinary RMB stocks at cost price, and shall conform to the relevant provisions of CIRC on the proportion of stock investments. Article 16. In an investment account set up by an insurance institutional investor for investment-linked insurance, the proportion of stock investments may be 100%. In an investment account set up by an insurance institutional investor for universal life insurance, the proportion of stock investments may not exceed 80%. In an independent account set up by an insurance institutional investor for other insurance products, the proportion of stock investments may not exceed the relevant rate prescribed by CIRC. In an independent account set up by an insurance institutional investor for the above mentioned insurance products, the proportion of stock investments may not exceed the proportion specifically agreed upon in the insurance clauses. CHAPTER IV CUSTODY OF ASSETS Article 17. For the purpose of selecting a stock asset custodian, an insurance company shall select a commercial bank or other professional financial institution which meets the conditions prescribed in the "Guide to Stock Asset Custody for Insurance Companies". Article 18. The stock asset custodian of an insurance company shall perform the following obligations: (1) Safely keeping custody the insurance company's funds and stock assets; (2) Handling settlement matters in time pursuant to the orders of the insurance company or of the insurance asset management company; (3) Supervising the investment operation of the insurance company or the insurance asset management company; (4) Valuating the stock assets entrusted by the insurance company; (5) Regularly providing reports on stock asset custody to the insurance company or the insurance asset management company; (6) Upon the regulatory requirements of CIRC, submitting to CIRC the relevant data on the stock assets, and providing by regular and irregular intervals reports on risk evaluation and performance evaluation of the stock assets, etc.; (7) Keeping completely the records, account books, statements on stock asset custody, as well as other relevant documents. The relevant important documents such as vouchers, trading records, contracts, etc. on custody of the stock assets shall be kept for no less than 15 years; and (8) Other obligations prescribed by CIRC. Article 19. The stock asset custodian of an insurance company must strictly separate its own assets from the stock assets under its management upon entrustment, and must set up relevant accounts for different insurance companies for the sake of separate management. Article 20. The stock asset custodian of an insurance company may not have the following acts: (1) Mixing its own assets with the stock assets in its custody to manage; (2) Mixing other assets in its custody with the stock assets in its custody to manage; (3) Mixing different insurance companies' stock assets in its custody to manage; (4) Misappropriating the insurance company's stock assets in its custody; (5) Taking advantage of the insurance company's stock assets in its custody and other relevant information to seek benefits for itself or for a third person; (6) Violating the laws, administrative regulations, relevant provisions of the state or the custody agreement; (7) Other acts prohibited by CIRC. Article 21. An insurance company shall conclude a custody agreement with the stock asset custodian. The custody agreement must set forth the following contents: (1) The stock asset custodian's obligations prescribed in Article 18, Article 19 and Article 20 of these Measures; and (2) In the event that the stock asset custodian violates the obligations in Item (1) of this Article, and CIRC requires the insurance company to replace the stock asset custodian, the insurance company shall have the right to terminate the custody agreement in advance. Article 22. Where a stock asset custodian is lawfully dissolved, revoked, or runs into bankruptcy, the stock assets of the insurance company which serves as the entrusting party shall not be listed as assets for liquidation. CHAPTER V ACTS OF INSURANCE INSTITUTIONAL INVESTORS PROHIBITED Article 23. The scope and proportion of stock investments of insurance institutional investors may not exceed the relevant provisions of CIRC. Article 24. None of the management staff of an insurance institutional investor in the respects of decision making, research, trading and settlement concerning stock investments, and other relevant persons may engage in insider trading. Insider trading mentioned in the preceding paragraph shall be ascertained in accordance with "Securities Law of the People's Republic of China" and "Interim Measures for Prohibiting Securities Frauds". Article 25. An insurance institutional investor who engages in stock investments may not commit any of the following acts: (1) Transferring profits between securities accounts for insurance funds of different natures; (2) Buying stocks through financing by illegal means; or (3) Other acts prescribed by CIRC. Article 26. An insurance institutional investor may not obtain inappropriate benefits or transfer risks by the following means: (1) Centralizing advantages in respect of funds or share holding either alone or by conspiracy, or utilizing information advantage to trade unitedly or continuously, so as to manipulate securities trading prices; (2) Colluding with others to trade in securities pursuant to the time, price and method agreed upon in advance, or to trade in securities held by neither of them, thus affecting the securities trading price or securities trading amount; (3) Trading with itself without transferring ownership, thus affecting the securities trading price or securities trading amount; or (4) Manipulating securities trading prices in other methods. Article 27. Where a listed company holds either directly or indirectly no less than 10% of shares of an insurance institutional investor, the insurance institutional investor may not invest in the stocks of this listed company or any of its associated companies. Article 28. None of the insurance institutional investors, stock asset custodians, securities operation institutions or other securities intermediary institutions may fabricate false trading records, financial information or other information. Article 29. An insurance company investing in stocks may not entrust any institution other than insurance asset management companies unless otherwise prescribed by CIRC. CHAPTER VI RISK CONTROL Article 30. An insurance institutional investor shall have the ideologies of long-term investment and value investment, optimize allocation of assets, and disperse investment risks. Article 31. Insurance institutional investors shall, in accordance with the "Guide to Risk Control on Utilization of Insurance Funds", build up a well developed stock investment risk control system. Article 32. The stock investment risk control system of an insurance institutional investor shall at least include the following contents: (1) investment decision making process; (2) investment authorization system; (3) study report system; (4) stock scope selection system; (5) risk assessment and performance appraisal index system; (6) criteria on vocational ethics; and (7) mechanism for dealing with major incidents. Where an insurance company entrusts an insurance asset management company to engage in stock investments, its stock investment risk control system shall at least include the stock custody system in addition. Where an insurance company directly engages in stock investments, its stock investment risk control system shall at least include the stock custody system, the stock trading management system, and the information management system in addition. An insurance asset management company's stock investment risk control system shall at least include the stock trading management system and the information management system in addition. Article 33. An insurance institutional investor that invests in stocks must work out a written study report before making the following important decisions: (1) A single item of investment fund is to exceed the amount determined by the insurance institutional investor; (2) No less than 5% of investable stock assets are to be involved; (3) The investment portfolio or investment direction needs to be adjusted greatly; (4) The standard for selecting the scope of stocks needs to be adjusted greatly; or (5) The stock investment risk tolerance needs to be adjusted greatly. Article 34. An insurance institutional investor shall, when determining the investable scope of stocks, consider various indexes of the listed company such as governance structure, earning capacity, information transparency, stock liquidity, etc. An insurance institutional investor must invest in stocks within the scope of investable stocks. Article 35. An insurance institutional investor shall, prior to investment, determine the basis for evaluating stock investment performance by taking the indexes of quality growth stocks, blue chips and shares of high liquidity into account for reference. The basis for evaluating stock investment performance of the insurance industry shall be separately prescribed by CIRC. Article 36. An insurance institutional investor shall, when making use of the following funds, separately open a securities account and a fund account for separate accounting: (1) funds for traditional insurance products; (2) funds for participating insurance products; (3) funds for universal insurance products; (4) funds for investment-linked insurance products; or (5) funds for insurance products required by CIRC to be subject to independent accounting. Article 37. The insurance asset management companies and the insurance companies directly engaging in stock investments shall trade in stocks through independent seats. The administrative measures for independent seats for stock trading shall be separately formulated. Article 38. To place the stock investment trading orders of either an insurance asset management company or an insurance company directly engaging in stock investments shall be the responsibility of the independent trading department and full-time trading staff. Article 39. The insurance asset management companies and the insurance companies directly engaging in stock investments shall make information management systems in respect of firewall, on-post duties, access, security and prevention, etc. Article 40. The insurance asset management companies and the insurance companies directly engaging in stock investments shall regulate the operating program of stock trading systems such as computer room facilities, communication equipment, computer equipment, operating system software, database software, etc. Article 41. Where an insurance institutional investor selects the seat of an securities operation institution to trade in stocks, this securities operation institution shall meet the following conditions: (1) It is in good financial conditions, in stable business operation, and its net capital is no less than RMB 1 billion Yuan; (2) It has well developed internal control system; (3) Its client trading settlement funds are fully deposited in a commercial bank with the qualification for engaging in absorbing deposits of and keeping custody of securities trading settlement funds; (4) It has set up two separate accounts in China Securities Depository Clearing Co., Ltd., one for excessive self-operation reserves, the other for excessive client settlement reserves; (5) It sets up seats separately for self-operated business and non-self-operated business in the stock exchanges in Shanghai and Shenzhen; (6) It has high-efficiency and secure communication conditions and trading facilities, which meet the stock trading requirements, and provides considerate information services; (7) It has the capability for securities market research, and is able to provide consulting services in time; (8) In the latest 3 years, it has no records on major violation of laws or rules, nor was it punished by CSRC or in the process of investigation under a case filed; (9) It has no ill records in respect of honesty and credibility, and committed no act of occupying or misappropriating the client margin or securities in the latest year; (10) It has promised in writing to accept CIRC's inspections on the insurance institutional investor's stock trading, and truthfully provides CIRC with various stock trading information of the insurance institutional investor; (11) Its local business department is in regular management, good operation and has complete service functions; and (12) Other conditions prescribed by CIRC. Article 42. Where an insurance institutional investor selects the seats of a securities operation institution's business department to trade in stock investments, it shall conclude a relevant agreement with the head office. The agreement shall set forth the obligations of the securities operation institution prescribed in Item (10) of Article 41 of these Measures. If the securities operation institution violates the said obligations, and CIRC requires the insurance institutional investor to replace the securities operation institution, the insurance institutional investor shall have right to terminate the agreement in advance. The insurance institutional investor shall, within 5 days as of concluding the agreement prescribed in the preceding paragraph, submit a copy of the agreement to CIRC. Article 43. The insurance asset management companies and the insurance companies directly engaging in stock investments shall, prior to the opening of each day, check with the stock asset custodians the balance of securities and that of funds, so as to guarantee the said balances to be enough for settlement. Article 44. Where the stocks held by an insurance institutional investor are under any of the circumstances prescribed in Article 14 of these Measures, the insurance institutional investor shall formulate specific solutions. Article 45. Where the operational situation of an insurance company is changed, and no longer meets the conditions prescribed in these Measures, the insurance company shall not add stocks, and shall lower the stock investment proportion pursuant to the time limit, method and other requirements prescribed by CIRC. Article 46. An insurance institutional investor shall reveal the stock investment risk situation by risk value and other risk measurement indexes. Article 47. The allotment of funds between an insurance company and an insurance asset management company, a stock asset custodian or a securities operation institution must be in a method of transfer between accounts. Article 48. The senior management staff member of an insurance institutional investor who is in charge of stock investments shall meet the following conditions: (1) He has the academic qualification of university graduate or above; (2) He has no less than 5 years of work experience in the field of securities or finance; (3) He knows well the operation of securities investment, and has necessary financial and legal knowledge; and (4) Other conditions prescribed by CIRC. Article 49. The senior management staff of an insurance institutional investor must, when making decisions on stock investments, strictly comply with the scope of power prescribed in the company's internal management system and risk control system. It is strictly prohibited to make investment or make decisions in excess of the scope of power. Article 50. A major professional in an insurance institutional investor who engages in stock investments shall meet the following conditions: (1) He has the academic qualification of university graduate or above; (2) He has no less than 3 years of work experience in the field of securities or finance; (3) He knows well the securities business rules and operational procedures; and (4) Other conditions prescribed by CIRC. Major professionals mentioned in the preceding paragraph shall mean the persons who are either in charge of or operate the stock investment business. Article 51. In an insurance asset management company or in an insurance company directly engaging in stock investments, the number of major professionals engaging in stock investments shall fit in with the scale of stock investments, and the company concerned shall have a suitable number of researchers in the areas of macro-economics, industrial analysis and financial engineering, etc. If the stock assets in use amount to RMB 100 million Yuan or more in an insurance asset management company or in an insurance company directly engaging in stock investments, there shall not be less than 5 major professionals engaging in stock investments. Article 52. A person under any of the following circumstances may not act as a senior management staff member in charge of stock investments business or a major professional in an insurance institutional investor: (1) He was sentenced to criminal punishments due to the crime of embezzlement, bribery, malicious occupation of properties, misappropriation of properties, or destruction of socialist economic order, etc.; (2) He was imposed upon administrative penalties or sentenced to criminal punishments due to such illegal acts as gambling, taking drugs, visiting prostitutes, frauds, etc.; (3) He was a senior management staff member of a company or enterprise running into bankruptcy and liquidation due to inappropriate management, and bears individual liabilities or directly leadership liabilities for the bankruptcy, and it has not been 5 years since the liquidation of the company or enterprise was finalized; (4) He is presently investigated by a judicial organ, disciplinary supervision department, or CIRC; (5) He himself bears large amount of debts which have been due but unpaid; or (6) It was decided by the financial regulatory authority that he may not hold any post in a financial institution within a time limit, and this time limit has not expired. CHAPTER VII SUPERVISION AND ADMINISTRATION Article 53. CIRC and CSRC shall, pursuant to their respective duties, conduct inspections on the stock investment business of insurance institutional investors. CIRC may retain intermediary institutions such as accounting firms to inspect stock investments of insurance institutional investors. Article 54. An insurance institutional investor shall submit the following statements, reports or other documents to CIRC according to the provisions: (1) the basis for evaluating investment performance; (2) the method of calculating the risk index, and the statement on the use thereof; and (3) the relevant statements on stock investments. The contents of the statements and reports prescribed in the preceding paragraph and the methods of submission shall be separately prescribed by CIRC. Article 55. An insurance institutional investor shall disclose the relevant information on stock investments in the method prescribed by CIRC. Article 56. An insurance institutional investor shall, when investing in stocks, abide by the laws, administrative regulations and the relevant provisions of the state, and accept CSRC's supervision over its market trading acts. Article 57. Where an insurance institutional investor violates the laws, administrative regulations or the relevant provisions of CIRC, CIRC may have a supervisory talk or interrogation with the relevant senior management staff and major professionals. If the case is serious, CIRC may impose warnings or fines in accordance with the law or order to dismiss and replace such staff or professionals. Article 58. Where an insurance institutional investor violates the laws, administrative regulations and relevant provisions, CIRC and CSRC may impose administrative penalties in accordance with the law. Article 59. Where any stock asset custodian or securities operation institution prescribed in these Measures violates the laws, administrative regulations or the relevant provisions of the state, the relevant regulatory authorities shall impose administrative penalties pursuant to their respective scope of power or regulatory duties. Where a stock asset custodian or securities operation institution mentioned in the preceding paragraph violates these Measures and the case is serious, CIRC may order the insurance institutional investor to replace the insurance assets custodian or the securities operation institution. CHAPTER VIII SUPPLEMENTARY PROVISIONS Article 60. "Days" mentioned in these Measures shall only refer to working days, excluding legal holidays. Article 61. These Measures shall come into force on the date of their promulgation. |
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