On 24 June 2008, the China Securities Regulatory Commission (CSRC) released the Decision on Revising Procedures for the Administration of Risk Control Indices of Securities Companies (the “Decision”), which is scheduled to take effect on 1 December 2008.

The Decision amends the Measures for the Risk Control Indexes of Securities Companies (as amended, the “Measures”), which were adopted on 5 July 2006. According to the Measures, the CSRC may adjust the net capital calculation basis, the risk capital reserve calculation basis and the calculation basis of the scale of each securities business according to the development of the market and on the basis of the principle of prudent supervision. The Measures now stipulate that for securities firms which operate their own securities business, they must satisfy the following requirements: (i) the total amount of self-operated equity securities and securities derivatives shall not exceed 100% of the firm’s net capital; (ii) the total amount of the self-operated securities with a fixed earnings ratio shall not exceed 500% of the firm’s net capital; (iii) the cost of holding one type of equity securities shall not exceed 30% of the firm’s net capital; and (iv) the proportion of the market value of one type of equity securities held by the firm against the total market value of this type of equity securities shall not exceed 5%, unless it is caused by exclusive sale or it is so stipulated by the CSRC.

For more information, please refer to CSRS Order No. 55 of 2008 at http://www.csrc.gov.cn/n575458/n575667/n4231514/n4231533/n8928778/10638388.html