Shareholdings in this market may be required to be disclosed by the beneficial owner, particularly when such shareholdings reach or exceed prescribed disclosure limits. Investors must ensure that they comply in full by reporting such holdings to the appropriate organizations for this market, within the time-frame required. If you have any questions regarding this issue we encourage you to consult your legal counsel.
Failure to comply with the reporting requirements in this market may lead to penalties and / or other sanctions.
A shareholder owning more than 5% of the total listed shares of a company must submit a report within three working days to the issuer, the CSRC and the SHSE, and make a public announcement via at least one of the CSRC designated media channels – China Securities Journal, Securities Times and Shanghai Securities News. Any subsequent increase or decrease must also be reported.
Furthermore, in the event of the following situations, QFIIs, as the eligible convertible bonds investors, must file the report to CSRC and stock exchanges, inform the listed company, and make a public announcement within three working days:
* when an investor’s holding of convertible bonds (CB) reaches or exceeds 20% of the total CB issued by a listed company
* when an investor’s holding of CB reaches or exceeds 20% of the total CB issued by a listed company and the investor subsequently changes his holding by another 10% of the CB issued by the same listed company.
During the reporting period, and within two days of reporting and making the public announcement, the investor cannot buy CB or stock of the listed company.
A shares: There are no buy in or sell out rules for the A share market.
B shares: Transactions not settled on T+3 must be settled by T+5, or a forced buy-in or sell-out will take place on T+6.
Responsibility for ensuring settlement depends on which party is at fault:
* For trades unconfirmed by custodian banks, the buying/selling broker is responsible for settlement.
* For trades confirmed by custodian banks, the custodian banks and underlying clients are responsible for settlement.
A share: In the event that a custodian runs into an overdraft at its clearing reserve account with CSDCC on T+1, the CSDCC will impose overdraft interest equivalent to the inter-bank deposit rate, as well as penalty interest (0.1% per day) based on the amount of overdraft. Additionally, CSDCC will provisionally retain the securities held by the custodian, equal to 120% of the amount of the overdraft. If the custodian repays the overdraft and interest within two days, the CSDCC will return the provisionally retained securities. Otherwise, the CSDCC will dispose of the retained securities to cover the overdraft. If the proceeds from the disposal are not sufficient to cover the principal of the overdraft and the penalty interest, the difference will be claimed from the custodian.
B share: If a party is unable to fund a purchase, the CSDCC Shanghai branch uses the guarantee fund to effect payment for settlement. The defaulting party using the guarantee fund incurs a handling fee of 0.5% of the amount of guarantee fund used per day.
The Settlement Guarantee Fund: intended to ensure participants meet their settlement obligation and liabilities.
The Settlement Risk Fund: intended to deal with systemic failure.
The Minimum Clearing Reserve Fund: QFIIs are required to deposit 0.08% of total approved and remitted in quota to their custodians’ clearing reserve accounts with CSDCC Shanghai. The Minimum Clearing Reserve Fund is intended to mitigate the risk that CSDCC undertakes as the central counter-party for all trades executed in the exchanges.
The first People’s Republic of China (PRC) anti-money laundering legislation took effect from March 3, 2001. The Rules:
* Lay down responsibilities of the PBOC Steering Work Group on anti-money laundering
* Require reporting of large amount and suspicious transactions
* Require proper identification of customers
* Require dedicated department or personnel to be responsible for anti-money laundering
* Require proper record keeping
* Define various penalties on breaching anti-money laundering rules.