Capital Markets

Not falling short: The rise of short selling in China
Earlier this year, some Chinese companies listed in the US found their stock prices plunging as a result of short sellers’ actions. Meanwhile, short selling has landed in China on its futures exchange and is being induced by the government to develop and improve its capital markets

China Securities Regulatory Commission, Trial Measures for the Regulation of the Securities and Loan Lending Business [Legislation Digest]
中国证券监督管理委员会转融通业务监督管理试行办法
Securities and loan lending to facilitate margin trading and short selling.

State Administration of Foreign Exchange, Circular on Issues Relevant to the Handling of the Renminbi-foreign Exchange Option Portfolio Business by Banks [Legislation Digest]
国家外汇管理局关于银行办理人民币对外汇期权组合业务有关问题的通知
Safe puts forward risk-reversal option portfolios.

China Securities Regulatory Commission, Provisions for the Establishment of Management Systems for the Registration of Persons Who Have Knowledge of Insider Information by Listed Companies [Legislation Digest]
中国证券监督管理委员会关于上市公司建立内幕信息知情人登记管理制度的规定
Listed companies required to set up files of persons with insider information.

VIE structures under closer examination
Mofcom’s new security review measures heightens scrutiny of variable interest entity (VIE) structures operating in areas of PRC national concern

China Securities Regulatory Commission, Measures on Trial Business of Asset Management for Specific Clients of Fund Management Companies [Legislation Digest]
中国证券监督管理委员会基金管理公司特定客户资产管理业务试点办法
Entry thresholds lowered for fund management companies engaging in dedicated asset management.

Trust companies take the next step
New guidelines from China’s banking authority open up stock index futures trading to trust companies. However, strict restrictions and stringent qualification criteria have drawn mixed reactions from trust players

Rules for the Practice of Securities Law by Law Firms (Trial Implementation) [Full Text Translation]
律师事务所证券法律业务执业规则 (试行)
These Rules govern practice activities such as review and verification, preparation and issuance of legal opinions, etc. when law firms and their assigned lawyers provide securities-related legal services.

China Securities Regulatory Commission, Rules for the Practice of Securities Law by Law Firms (Trial Implementation) [Legislation Digest]
中国证券监督管理委员会律师事务所证券法律业务执业规则（试行）
Original documents are required for lawyers’ verification of legal personality.

Rules for the Practice of Securities Investment Fund Law by Law Firms (Trial Implementation) [Full Text Translation]
律师事务所证券投资基金法律业务执业细则 (试行)
The Rules specify the details a lawyer is required to review and verify in cases such as when a securities investment fund management company is to be established, when a change in the shareholders of a securities investment fund management company occurs and when a securities investment fund is to be offered.

China Securities Regulatory Commission, Rules for the Practice of Securities Investment Fund Law by Law Firms (Trial Implementation) [Legislation Digest]
中国证券监督管理委员会律师事务所证券投资基金法律业务执业细则（试行）
Rules for lawyers to follow when verifying the offering of a securities investment fund.

China Securities Regulatory Commission, Working Guidelines for the Review in Connection with the Administrative Permission of Securities Companies No.10: Share Increase and Changes in Equity Interests of Securities Companies [Legislation Digest]
中国证券监督管理委员会证券公司行政许可审核工作指引第10号——证券公司增资扩股和股权变更
Overseas investors may indirectly own 5% of equity interest in securities companies.

QFIIs trading on stock index futures
A new law opens up participation in the stock derivative market to qualified foreign institutional investors. However, as landmark as this rule may be, it remains fairly restrictive as regulators cautiously develop the market and seek to manage risks

Legal risks of the VIE Structure
The Variable Equity Interest Structure has become a popular option for domestic companies wishing to list on overseas foreign exchanges. However, the structure is quite risky legally

Guidelines for the Participation in Stock Index Futures Trading by Qualified Foreign Institutional Investors [Full Text Translation]
合格境外机构投资者参与股指期货交易指引
Qualified foreign institutional investors allowed to trade stock index futures for hedging purposes.

Backdoor listings to face tighter scrutiny
Securities regulator raises performance thresholds

Rules could be relaxed if QFII index futures trading is successful
CSRC allows QFIIs to trade SIFs in China

China Securities Regulatory Commission, Guidelines for the Participation in Stock Index Futures Trading by Qualified Foreign Institutional Investors [Legislation Digest]
中国证券监督管理委员会合格境外机构投资者参与股指期货交易指引
QFIIs may trade stock index futures only for hedging purposes.

China Securities Regulatory Commission, Rules for Determining the Administrative Liability for Acts of Violation of Information Disclosure Laws [Legislation Digest]
中国证券监督管理委员会信息披露违法行为行政责任认定规则
Sponsors and investment consultants may be liable for disclosure violations.

China Securities Regulatory Commission, Trial Measures on the Futures Investment Consultancy Services of Futures Companies [Legislation Digest]
中国证券监督管理委员会期货公司期货投资咨询业务试行办法
Futures companies allowed to engage in futures investment consultancy services.

Shanghai Stock Exchange, Implementing Guidelines on Affiliated Transactions of Listed Companies [Legislation Digest]
上海证券交易所上市公司关联交易实施指引
Affiliated transactions at a premium price require stringent disclosure and decision-making procedure.

Companies must carefully consider how IPO proceeds will be used
Post-IPO share price drops may trigger new pricing rules