Laws and Regulations
Chinese Law
Source: Ministry of Commerce Website, PRC
PROVISIONAL REGULATIONS ON LICENSE CONTROL OF SECURITIES AND FUTURES- RELATED BUSINESS CARRIED OUT BY CERTIFIED PUBLIC ACCOUNTANTS
Wednesday, December 31, 1997 Posted: 10:53 BJT(0253 GMT)
(Valid From:1997.12.31)
(Issued by the Ministry of Finance on December 31, 1997)
CONTENT
- CHAPTER ONE GENERAL PROVISIONS
- CHAPTER TWO REQUIREMENTS FOR LICENSE APPLICATION
- CHAPTER THREE EXAMINATION AND APPROVAL OF LICENSE APPLICATIONS
- CHAPTER FOUR ADMINISTRATION OF LICENSES
- CHAPTER FIVE PENALTY PROVISIONS
- CHAPTER SIX SUPPLEMENTARY PROVISIONS
CHAPTER ONE GENERAL PROVISIONS
Article 1 This set of regulations has been formulated in accordance with the Law of the People’s Republic of China on Certified Public Accountants and provisions of laws and regulations on securities and futures, with a view to giving a better use of certified public accountants as an intermediary in securities and futures market so as to give a better protection to the public interests and the lawful rights and interests of investors, and prompt the standardization of the securities and futures markets.
Article 2 The Ministry of Finance and China Securities Regulatory Commission (hereinafter referred to as the CSRC) shall institute a license control system on certified public accountants, public accounting firms and public auditing firms (hereinafter referred to as the firms) in their control of securities and futures-related business.
To be engaged in securities and futures-related services, certified public accountants and firms should acquire licenses for such kind of services (hereinafter referred to as licenses).
Article 3 The securities and futures-related business cited in this set of regulations refer to such operations as auditing of accounting statements, verification of net assets, attestation of paid-in capital (capital stock), and checking of profit forecasts for institutions related to securities and futures.
Institutions related to securities and futures cited in this set of regulations refer to companies that publicly issue shares for transaction on the stock markets, institutions dedicated to or concurrently engaged in securities and futures transactions, and venues for such transactions and etc.
Securities cited in this set of regulations include shares and transferable bonds, investment fund and other securities with properties and functions of stocks.
Futures cited in this set of regulations include commodity futures and financial futures.
Article 4 No restrictions shall be placed on administrative regions or trades for legal securities and futures-related business of certified public accountants and firms. No units or individuals are allowed to interfere in such a respect.
Securities and futures-related institutions have the right to independently choose among licenses firms for their business.
CHAPTER TWO REQUIREMENTS FOR LICENSE APPLICATION
Article 5 A certified public accountant should meet the following requirements when applying for a license concerned:
1. The firm with which the accountant works should have already acquired a license, or met the requirements as set under Article 6 of this set of regulations;
2. The accountant concerned has acquired qualification certificates for securities and futures-related business;
3. The accountant concerned has more than three years of experience in performing auditing works independently;
4. The accountant concerned should not be over 60 years of age;
5. The accountant concerned has not been acting in violation of any laws, regulations or the professional code or rules and has passed annual inspections.
Procedures for qualification tests of certified public accountants in securities and futures-related business shall be formulated separately by the Ministry of Finance.
Article 6 A firm applying for licenses should meet the following requirements:
1. The firm has been separated from its affiliated units;
2. The firm has been legally established for more than three years with a sound control on its own affairs and has not been acting in violation of laws, regulations or professional codes or rules within the past three years;
3. The firm has more than eight certified public accountants who have acquired qualification certificates for securities and futures-related business, or who have already acquired licenses (not including the certified public accountants in affiliated institutions);
4. The firm has at least 40 full-time employees (not including those in affiliated institutions) and among them, at least 30 are under the age of 60;
5. The sum of the registered capital, venture capital and business development fund of the firm should be more than RMB3 million.
The above paragraph may not be applied to the accountant firms which are initiated and set up by certified public accountants, among which six have acquired licenses for securities and futures-related business and have been engaged in such business for more than three years.
CHAPTER THREE EXAMINATION AND APPROVAL OF LICENSE APPLICATIONS
Article 7 Whereas the requirements as set in Articles 5 and 6 have been met, certified public accountants and firms may file applications with the Ministry of Finance and the CSRC to apply for engagement in securities and futures-related business within the specified time for such applications.
Article 8 Certified public accountants who apply for engaging in securities and futures-related business should fill out Application Form for Securities and Futures-Related Business License for Certified Public Accountants as stipulated.
Article 9 A firm applying for engagement in securities and futures- related business should submit the following documents:
1. A written report on engagement in securities and futures-related business by the firm and Application Form for Securities and Futures- Related Business License for Firms;
2. Application Form for Securities and Futures-Related Business License for Certified Public Accountants filled out by certified public accountants, or duplicates of licenses;
3. List of Certified Public Accountants of the Firm, List of Business Assistants, and List of Experts and Other Technical Personnel Engaged by the Firm filled out by the firm;
4. Annual accounting statements of the past three years, and a statement on calculation, appropriation and use of business development fund and venture capital;
5. Other documents that should be presented as required by the Ministry of Finance and the CSRC.
A firm that conforms to provisions as set in Section 2, Article 6 of this set of regulations should also submit duplicates of reports, furnished by certified public accountants with licenses, on the auditing of fiscal statements of listed companies during the three years before the first public issue, and on annual audits of the listed companies, as well as business summaries.
Article 10 Application documents of certified public accountants and firms should first of all be sent to certified public accountants at the provincial level for examination and then together with opinions conveyed therefrom to be sent to the relevant department of the Chinese Institute of Certified Public Accountants and the CSRC.
The relevant departments of the Chinese Institute of Certified Public Accountants and the CSRC shall examine and verify the application documents of certified public accountants and firms, and conduct random inspection on the business of these certified public accountants and firms.
Article 11 Certified public accountants and firms which are deemed qualified after the examination and verification shall be approved jointly by the Ministry of Finance and the CSRC with the approvals to be announced publicly. Procedures for the issuance of licenses shall be handled by the Chinese Institute of Certified Public Accountants.
CHAPTER FOUR ADMINISTRATION OF LICENSES
Article 12 Change of license should be made whenever a transfer of a certified public accountant who has already got a license to another firms that has got a license.
For the change, the certified public accountant concerned should file a written application to the association of certified public accountants at the provincial level through the firm that the accountant concerned assumingly transfers to. The provincial association of certified public accountants shall examine application for the change and report to the Chinese Association of Certified Public Accountants and related departments of the CSRC for examination and verification. A new license is issued after the approval of the Ministry of Finance and the CSRC.
Article 13 Upon leaving a firm to turn to other jobs or to join another firm that has not acquired a license a certified public accountant who has already got a license from the original firm should hand back the original license to the association of certified public accountants at the provincial level, and then the license concerned should be sent to the Chinese Association of Certified Public Accountants. The Chinese Association of Certified Public Accountants shall promptly report to the Ministry of Finance and the CSRC for the change.
After going through the procedures as stated in the previous paragraph, a certified public accountant may apply for a reinstatement of license within three years since the turning in of the license over to the higher authorities upon joining a firm which has acquired a license. When the time lapsed is more than three years, he/she shall re-apply for a new license in accordance with this set of regulations.
Article 14 A name change of a firm that has got a license should be promptly reported through the association of certified public accountants at the provincial level to the Ministry of Finance and the CSRC. Whereas the change is in conformance with Article 6 of this set of regulations, the Ministry of Finance and the CSRC shall promptly complete the procedures for the change.
A merge or separation of a firm that have got a license should be promptly reported to the Ministry of Finance and the CSRC through the association of certified public accountants at the provincial level. The Ministry of Finance and the CSRC shall, in accordance with actual circumstances, retain, recall or make alterations to the original license.
Article 15 A firm that has got a license should submit annual report on its securities and futures-related business activities to the related departments of the Chinese Association of Certified Public Accountants and the CSRC. An annual report should include the following items:
1. The names and types of business of securities and futures-related institutions that the firm served during the past year and the signatory certified public accountants;
2. Information on the training of certified public accountants with licenses in securities and futures-related businesses;
3. Changes in the roster of the certified public accountants with licenses and the firm’s other employees;
4. Changes in the firm’s registered capital, business development fund and venture capital;
5. Other items that need to be reported as required by the Ministry of Finance and the CSRC.
Article 16 The firm’s license shall remain valid unless suspended or rescinded.
Article 17 Licenses for certified public accountants should undergo annual registrations.
Associations of certified public accountants at the provincial level shall send in annual registration requests en masse to the Chinese Association of Certified Public Accountants in July of every year.
Anyone who is more than 65 years of age, or fails to pass the annual inspection of certified public accountants, or has left a licensed firm, must not apply for annual registration.
Article 18 The Chinese Association of Certified Public Accountants shall be responsible for the annual registration of the certified public accountants’ licenses and for alterations and issuance of licenses to qualified persons.
Article 19 Whereas the number of certified public accountants with licenses in a firm is less than adequate, the firm should stop its securities and futures-related business and its certified public accountants’ licenses shall be suspended from renewal in annual registration. The term of suspension shall not exceed one year at most. If the required number of certified public accountants with licenses is not reached at the end of the suspension term, the firm’s license shall be revoked.
Article 20 The Chinese Institute of Certified Public Accountants shall, within one month of its completion of the annual registration process, report related information to the Ministry of Finance and the CSRC.
The Ministry of Finance and the CSRC shall conduct regular or irregular inspections on securities and futures-related business activities performed by certified public accountants and firms with licenses.
Article 21 In carrying out securities and futures-related business, the certified public accountants and firms should not lower its service standard or offer improperly low prices to solicit business.
CHAPTER FIVE PENALTY PROVISIONS
Article 22 Whereas committing any of the following circumstances, a certified Public accountant shall, in accordance with the seriousness of the offense, be meted out one or several of the following punishments: a warning, imposition of a fine, suspending him/her from securities and futures-related business, or permanent banishment from carrying out securities and futures-related business:
1. Violation of Law of the People’s Republic of China on Certified Public Accountants, Company Law of the People’s Republic of China, securities and futures-related laws and regulations, and the professional code or rules;
2. Unauthorized engagement in securities and futures-related business without a license or during the period when he/she is suspended from carrying out securities and futures-related services.
Article 23 Whereas committing any of the following circumstances, a firm should in accordance with the seriousness of the offense, be meted out one or several of the following punishments: a warning, confiscation of illegal earnings, imposition of a fine, suspension from securities and futures-related business, or revocation of licenses:
1. Violation of Law of the People’s Republic of China on Certified Public Accountants, Company Law of the People’s Republic of China, securities and futures-related laws and regulations, and the professional code or rules;
2. Acquisition of a license through fraudulence or other illicit means;
3. Unauthorized engagement in securities and futures-related business without a license or during the period when the firm is suspended from carrying out securities and futures-related services;
4. Lowering service standard and offering improperly low prices to solicit business in violation of related provisions;
5. Failure to submit annual summaries as required in Article 15 of this set of regulations.
CHAPTER SIX SUPPLEMENTARY PROVISIONS
Article 24 The terms “more than” in this set of regulations should be understood as “more than (and including)”.
Article 25 Overseas-based accounting companies (accounting firms), when practicing within Chinese territory should abide by related provisions as set in Ministry of Finance Document MOF-AC 119 [1993], CSRC Document CSRC-AC 12 [1994] and Ministry of Finance Document MOF-AC 81 [1994].
Article 26 This set of regulations shall be interpreted jointly by the Ministry of Finance and the CSRC.
Article 27 This set of regulations enters into force as of the date of its promulgation. The Provisional Procedures on License Control of Securities, Futures-Related Business Carried Out by Public Accounting Firms and Certified Public Accountants promulgated by the Ministry of Finance and the CSRC on February 15, 1996 (MOF-AC 11 [1996]) shall accordingly be annulled.