On November 16, 2010, the General Office of China's State Council promulgated a circular aimed at better detection, prevention and control of insider trading in capital markets by requiring listed companies in China to establish a registration system for people in possession of insider information (the "2010 Circular")1. To further implement the 2010 Circular, the China Securities Regulatory Commission (the "CSRC") released the Provisions for Establishing a Registration and Administration System for Persons with Insider Information in Listed Companies, which will become effective on November, 25 2011 (the "Provisions").
If an entity that exercises control over a listed company (whether as a controlling shareholder or otherwise) and its connected party learns of or initiates any major event related to the listed company or any other event which has a major impact on the share price of the listed company, the listed company must identify all persons in possession of such insider information. The Provisions also require securities companies, securities advisory institutions and law firms that become engaged in a matter that has a major impact on the share price of a listed company to disclose that they are in possession of insider information. Acquirers, counterparties to major asset reorganizations and any other initiators of matters that have a major impact on the share price of a listed company must also indentify persons that are in possession of such insider information. Furthermore, the Provisions clarify that acquirers, counterparties in significant asset restructuring transactions as well as other initiators related to listed companies should submit profiles of all persons with knowledge of insider information. The Provisions also provide certain time frames within which the above information must be submitted. In cases of non-compliance, the CSRC will resort to administrative measures such as ordering corrections, conducting supervisory interviews and issuing warning letters; under more serious circumstances, the CSRC may deem certain individuals to be ineligible to enter the market.
1 Circular on Forwarding the Opinions of Some Departments Including the China Securities Regulatory Commission on Cracking Down on, Preventing and Controlling Insider Trading on the Capital Market in Line with the Law (Guofaban No. 55 , "Decree 55")
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