Guide for Securities Self-support Business of Securities Companies

Chapter Ⅰ General Principle

Article 1 In order to standardize self-support business of securities companies and to effectively control risk, this
Guide is hereby formulated in accordance with provisions of related laws and rules and the requirement of standardization
of self-control.

Article 2 Securities companies shall, in accordance with the requirement of this Guide and the management characteristic
and business operation of the companies herein, establish perfect self-control management system, investment
decision-making mechanism, operation flow and risk monitoring mechanism to undertake self-support business on the premise
that risk can be estimated, controlled and endured.

Article 3 Securities companies shall establish and perfect responsibility-affix-to person mechanism. Where violation of
law occurs in self-support business, responsibilities shall be affixed to person.

Chapter Ⅱ Decision-making and authorization

Article 4 Securities companies shall establish relatively concentrated investment mechanism and authorization mechanism
with the integration between rights and responsibilities.
Decision-making mechanism of self-support business shall in principle be established in accordance with such a system:
board of directors--investment decision-making institution--self-support sectors.

Article 5 Board of director, the supreme decision-making institution of the self-support business, on the basis of
severe abidance of the risk control indicator criterion in monitoring provisions, shall, in accordance with such
situation as asset, debt, profit and loss, and abundance of capital in the companies herein, work out the scale of
self-support, endurable risk and etc., and put them into practice by means of board of directors’ decision-making, with
the specific investment operation management of self-support business decided by the decision-making institutions of the
authorized company by the board of directors herein.
Investment decision-making institutions, the supreme decision-making institution, shall be responsible for the
settlement of specific asset arrangement strategy, investment proceedings and investment types and etc.
Self-support business sector, the executive institution of self-control, shall, within the scope of decision-making set
by investment decision-making institution and in accordance with its authorized rights, be answerable for the
decision-making and execution of investment particulars.

Article 6 Securities companies shall establish the
authorization system of self-support business, confirm the
range of authorized rights, its time limit and
responsibilities, make written record in the process of
authorization to ensure the effective execution of authorized
system.
Securities companies shall establish business management
system with clear administrative levels and definite
responsibilities, work out standardized business flow, and
make clear the responsibilities of related sectors and
positions of self-support business.

Article 7 Management and operation of self-support business
shall be exclusively responsible by the self-support business
of securities companies, and non-self-support business sectors
and its branches shall not carry out self-support business in
any form.
Article 8 Important decisions mentioned in self-support
business in the process of scale of self-support, at risk
limitation, asset arrangement, business authorization and
etc., shall be made collectively and in written form and kept
in the archives after the signature by related personnel.

Chapter Ⅲ Operation of Self-support Business
Article 9 Self-support business must, in the name of
securities company of itself, be undertaken through special
self-support post, with non-self-support business sector
responsible for the management of self-support account,
including opening account, cancelling account, using
registration and etc.
Self-support business shall establish and perfect the
examination and auditing system of self-support system, and is
forbidden to lend self-support account, use non-self-support
post to undertake disguised self-support business and
extra-account self-support business.
Article 10 Self-support business shall strengthen fund
allocation and accounting of self-support business, with
non-self-support business responsible for allocation of
self-support business fund.
Debit and credit of self-support fund must be operated in the
name of the company, and is forbidden in the individual name;
cash withdrawal from self-support business is also forbidden.
Article 11 Self-support business shall perfect the investment
justification mechanism, establish investment pool system,
with self-support sectors operating within the range of
limited self-support scale and endurable risk, and choosing
investment from investment pool.
Article 12 Self-support business shall establish and perfect
the mechanism and decision-making of profit stop and loss stop
mechanism, with the implementation and actual assessment in
conformity with the written procedure and written record.
Article 13 Establishment of rigorous operational flow,
research on investment variety, formulation of portfolio and
implementation of transaction directive shall be separated
from each other and charged by different persons; auditing and
compulsory record shall be made, backup system of self-support
business shall be established, perfected and be charged by
special personnel for its administration. .
Article 14 Liquidation and statistics of self-support
business shall be implemented by special personnel, and
reconciled duly with fund liquidators of financial sector, and
subsequently recorded by relating personnel.
Independent liquidation system on self-support fund shall be
undertaken, with the separation of self-support business post
with the liquidation post of brokerage, asset management
business and of otherwise business.

Chapter Ⅳ Risk Monitoring
Article 15 Firewall shall be established to ensure the strict
separation of self-support business with such businesses as
brokerage, asset management, and investment bank in personnel,
information, account, fund and accounting.
Article 16 Organs and functions of investment
decision-making, investment operation and risk control shall
be independent from each other; background functions such as
account management, fund liquidation and accounting shall be
charged by independent sector or post so as to form effective
balanced supervision mechanism in the whole process of
self-support business.
Article 17 Risk monitoring sector shall be capable to
normally implement functions and acquire information an data
in self-support business operation, and thoroughly monitor
risk in risk monitoring through establishing real-time
monitoring system, establish effective risk monitoring report
mechanism, submit risk monitoring system to the board of
directors and decision-making institutions, and inform
relating information to self-support business sectors and
up-to-standard sectors. In case of discovering potential risk
or irregular performance in business operation or risk control
indicators, risk monitoring sector herein shall report it to
the board of directors and raise proposal for its solution.
The board of directors and investment decision-making
institution as well as the relating sectors of self-support
business shall render feedback promptly to the proposal
hereof, with written record being made in the process of
report and feedback.
Article 18 Risk monitoring sector shall, in accordance with
its real situation, enthusiastically borrow internationally
advanced management experience, introduce and develop
effective risk control management tools, gradually establish
and perfect such processes as risk identity, survey and
monitoring to make risk monitoring more scientific.
Article 19 Risk monitoring sector shall establish
mark-to-market system of self-support business, perfect
integrated analysis and monitoring system of risk exposure of
self-support business and total profit and gain, perfect
quantizing indicator system of risk control, and undertake
regular sensitivity analysis and pressure test upon market
value variation of self-support business and of the potential
influence of risk control indicator centered on the company’s
net capital.
Article 20 Risk monitoring sector shall establish and perfect
functions of risk monitoring system of self-support business,
and set the corresponding risk monitoring value to improve
dynamic monitoring efficiency through dynamic variation
automatically indicated by early warming trigger equipment.
Article 21 Risk monitoring sector shall improve the
transparency of self-support business. Securities self-support
operation dealing system and the monitoring system shall set
necessary opening function or data interface so as to notice
and check the self-support business of securities companies.
Article 22 Risk monitoring sector shall establish and perfect
the correcting and handling mechanism for defects in
self-support operation risk monitoring, with the risk
monitoring sector, in accordance with the result of
investigation and of assessment, be responsible for raising
rectifying and correcting measures and undertaking follow-up
examination.
Article 23 Risk monitoring sector shall establish perfect
file management system for investment decision-making and
investment operation to ensure its availability for checking
after investment.
Article 24 Risk monitoring sector shall establish perfect
achievement assessment and incentive system, perfect
performance of evaluation mechanism, follow the principle of
objectivity, fairness and quantization to evaluate the
investment capability and achievement performance on
self-support personnel.
Article 25 The auditing sector shall regularly undertake
comprehensive audit upon the according-to-law operation,
profit and loss, risk monitoring and etc., and issue auditing
report hereon.
Article 26 The auditing sector shall strengthen professional
ethics and good faith education upon self-support personnel,
intensify the awareness of the confidentiality,
according-to-law operation, risk control upon self-support
personnel. Key self-support operation personnel shall, before
leaving office, be audited by auditing sectors.

Chapter Ⅴ Information Report
Article 27 Report mechanism shall be established in
self-support business. The content of report includes but not
limits to: implementation of decision-making, self-support
asset quality, self-support profit and loss, risk monitoring
and otherwise important particulars.
The board of directors shall review, sign signature and
feedback the interior report of self-support business.
Article 28 Securities companies shall establish and perfect
their self-support business report system, be consciously
subject to exterior supervision. Securities companies shall,
in accordance with the requirement of supervisory sector and
securities exchange, subject their self-support business
operation.
Content of the report includes:
1) account and post of self-support business;
2) Important decision-making engaged in scale of self-support
business, limit of risk, asset allocation, business
authorization and etc.;
3) Risk monitoring report of self-support business;
4) Other particulars needed reporting.
Article 29 Securities companies shall clarify the responsible
sector, report process and person responsible, and, render
corresponding punishment to the persons with direct
responsibility and leading reasonability for false record,
misleading statement, or gross negligence, and promptly report
it to the supervisory sector.

Chapter Ⅵ Appendix
Article 30 The Guide shall be interpreted by China Securities
Association.
Article 31 The relating terms of the Guide is given as
follows:
1) Risk exposure refers to the securities exposure (net
position) formed as a result of difference between long
position and short position of certain securities type held by
a securities company for certain period.
2) Risk monitoring valve refers to certain indicator to
control risk set in risk monitoring system. Risk monitoring
valve generally includes trading limit, risk limit and
profit-stop and -loss-stop limit and etc.
3) Sensitivity analysis refers to the potential influence of
single or several market risk factors (interest rate, exchange
rate and stock price and etc.), with the invariability of
other conditions, upon financial products and its integrated
market value.
4) Pressure test refers to the test of risk endurance in
non-normative market, i.e. assessment on loss of financial
products and its integrated value under extreme market
conditions such as volatile variation of such market risk
factors as interest rate, exchange rate, stock price and etc.,
or unexpected political or economic event.

Article 32 The Guide shall come into effect as of the date of its promulgation.

Bright Jon    Attorney-at-law   Fax: +86-512-53516040  email@colaw.cn
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