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New Regulations for Securities Market in China May 23, 2001
May 23, 2001

After allegations in the official Shanghai Securities News that domestic securities firms continued to illegally their clients' money, the China Securities Regulatory Commission known also as CSRC issued a circular requiring stock brokerages to open separate accounts for their clients' money Jan. 1, 2002. The new regulation is aimed at curbing incidents of fund embezzlement. Brokerages will be required to register both the clients' and the brokerage's accounts with the CSRC for monitoring and these firms will only be allowed to draw money from the clients' trading account to collect their fees. The clients' trading funds, which should be put in separate accounts, include capital deposits, securities proceeds, dividends and interest. The CSRC will fine with up to 30,000 Yuan ($3625) stock brokerages that fail to keep separate books.

The measure follows talk about the introduction of new guidelines that will allow domestic retail investors to subscribe to primary offerings of hard-currency Class B shares. Although Class B-share primary offerings can only be sold to foreign institutional investors through private placements, domestic retail investors dominate the secondary market for Class B shares. As a result, the measure will only level the playing field for retail and institutional investors by allowing retail investors to access the lucrative primary share offerings. The new rule, expected to be issued soon, is viewed as a prelude to the resumption of Class B-share initial public offerings, they added. CSRC officials declined to comment. From Wall Street Journal. May 23, 2001

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