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Upon approval by the China Securities Regulatory Commission (CSRC), the Shanghai Stock Exchange (SSE) hereby releases the following notice of issues about participation of shares with sales limit and stock shares with terminated sales limit in listed companies in margin trading and securities lending, in a bid to further specify issues about margin trading and securities lending as well as regulate the relevant business management.
1. While providing services about margin trading and securities lending for investors, the SSE’s members should require the investors to submit information about shares with sales limit and stock shares with terminated sales limit held by them, and other information such as whether they hold positions of directors, supervisors, and senior executives in listed companies or not. Afterwards, members should verify the information submitted by investors and conduct front control on them.
2. Investors should not submit shares with sales limit in listed companies held by their ordinary securities accounts as collaterals.
3. Individual investors should not submit stock shares with terminated sales limit in listed companies held by them as collaterals. In terms of consolidated calculation of the number of the institutional investors’ stock shares with terminated sales limit in listed companies sold via the SSE auction trading system through credit securities accounts (only including sale of collaterals, sale of repayment by selling securities, and sale by forced liquidation) and ordinary securities accounts, as well as those used for direct repayment of securities, the institutional investors should abide by relevant rules of the CSRC and the SSE about lessening holding of stock shares with terminated sales limit for transfer.
The SSE’s members should take proper measures so that relevant shares transfers meet requirements. If institutional investors take stock shares with terminated sales limit in listed companies as margins, members should cement risks control and rationalize the business management concerned, in a bid to prevent the risks of the margin trading and securities lending business.
4. The SSE’s members should not submit shares with sales limit held by their ordinary securities accounts as resources for securities lending. In terms of consolidated calculation of the number of the members’ stock shares with terminated sales limit in listed companies lent to investors and sold through the SSE auction trading system, the members should abide by relevant rules of the CSRC and the SSE about lessening holding of stock shares with terminated sales limit for transfer.
5. Any investor who holds shares with sales limit in listed companies should not sell the shares for short selling.
6. Any director, supervisor, and senior executive in a listed company, as well as any shareholder who holds more than 5% shares in a listed company should not conduct margin trading and securities lending with the shares in their listed company as underlying securities.
7. The SSE’s member should remind their clients of conforming to the voting-avoiding rule for related issues, while soliciting voting opinions from their clients.
8. The stock shares mentioned in the notice refers to the following two kinds of shares as regulated in the "Guidance Opinion on Transfer of Stock Shares with Terminated Sales Limit in Listed Companies" (the CSRC Announcement [2008] No. 15).
(1). The SSE-listed shares, with certain sales limit periods, in the companies which have completed the equity division reform;
(2). The shares issued before the initial public offering of the companies listed on the SSE after the period of “complete separation of new shares from the old ones”.
9. The directors, supervisors, and senior executives in listed companies mentioned in the notice refer to those holding or leaving their positions in the companies who have been imposed on restrictive requirements for transfer of their shares in the companies, as regulated in the "Management Measures of Shares in Listed Company Held by Directors, Supervisors and Senior Management and Change of These Shares" (Zheng Jian Gong Si Zi [2007] No. 56).
