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
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
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.
1Circular 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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