The Provisions on the Compliance Management of Securities Companies went into effect on August 1, 2008. The China Securities Regulatory Commission (CSRC) issued the Provisions to require securities companies to implement internal policies to ensure their compliance with relevant laws and regulations. The Provisions focus on the securities companies’ appointment and responsibilities of compliance officers.
The Provisions emphasize that the compliance management of a securities company must cover all businesses, departments, branch institutions, and personnel of the company. The board of directors, board of supervisors and senior managers of a securities company must perform their duties in accordance with internal compliance management policies. Securities companies must conduct annual inspections on the compliance management systems and resolve any problems. The Provisions provide that when evaluating the performance of executives, departments, and personnel, the securities companies must include compliance performance evaluations.
The Provisions require that each securities company has a compliance officer who oversees the compliance of the company and its employees. The compliance officer will make compliance examinations on the internal management system, material decisions, new financial products, and new business plans of the company. He or she will also ensure the implementation of the anti-money laundering system and the Chinese-wall system of the company. Upon discovery of noncompliant activities or risks, the compliance officer must make internal reports, as well as reports to the securities regulatory bureau. When the activities violate professional responsibility rules, the compliance officer will also report the violation to organizations that enforce internal discipline. The compliance officer will also offer opinions on how to correct or eliminate the noncompliant activities or risks, and oversee the corrective actions. The company must report the results of its corrective actions to the relevant securities bureau.
To qualify for a compliance officer position, a candidate must be qualified to take an executive position with a securities company. In addition, he or she must have worked in the securities field for over five years, and passed relevant bar or aptitude test for compliance management, or have over eight years of legal work experience. A securities company may not appoint a compliance officer without the review and approval of competent securities regulatory bureau’s of the candidate.
Under the Provisions, a securities company must file a mid-term compliance report with the local securities regulatory bureau before August 31 each year, and file an annual compliance report of the last year before April 30 each year. The compliance report must include:
- basic information about the company’s compliance management;
- the performance of the compliance officer;
- the discovery and rectification of any misconduct, compliance violation or compliance risk; and
- information about the effectiveness evaluation of the company’s compliance management and rectification activities. The CSRC will evaluate the effectiveness of the securities company’s compliance management and conduct categorized supervision over them based on the evaluation results.