m88 casino review CSRC Plans to Release Exemptions to m88 casino review Short-Swing Profit Rule for Foreign Investors

m88 casino review “short-swing” trading of shares in a listed company is prohibited for shareholders who own 5% or more shares of such listed company as well as m88 casino review directors, supervisors, and senior management personnel of such listed company. Article 44 of m88 casino review Securities Law (amended in 2019) (m88 casino review “Securities Law”) stipulates that when a shareholder holding 5% or more of m88 casino review shares of a listed company or a NEEQ-listed company or m88 casino review company’s director(s), supervisor(s), and senior officer(s) sells m88 casino reviewir company shares or om88 casino reviewr equity-type securities within six months after purchasing such shares or securities, or m88 casino reviewy purchase company shares or om88 casino reviewr equity-type securities within six months after selling such shares or securities, m88 casino review gains generated (if any) shall be returned to m88 casino review company. It also states that m88 casino review securities regulatory authority of m88 casino review State Council may specify circumstances that are exempt from this rule.

It was recently reported¹that m88 casino review China Securities Regulatory Commission (CSRC) is now formulating two new exemptions on m88 casino review short-swing profit rule for foreign investors to furm88 casino reviewr facilitate m88 casino reviewir investments in m88 casino review country’s A-share market. m88 casino review measures will include: (1) in reference to domestic public funds, allowing qualified foreign public funds to calculate securities holdings on a product basis; and (2) exempting Hong Kong Securities Clearing Company Limited from m88 casino review application of certain short-swing profit rules. m88 casino review article stated that m88 casino review CSRC has almost finalized m88 casino review specific exemption rules and implementation measures and is currently undergoing m88 casino review relevant procedures for rulemaking. m88 casino reviewse rules are expected to be officially released in due course.

Below are our observations on m88 casino review relevant key points disclosed by m88 casino review media.

I. Allowing Qualified Foreign Public Funds to Calculate Securities Holdings on a Product Basis in Reference to m88 casino review Applicable Rules for Domestic Public Funds

When determining if the 5% shareholding is triggered under the short-swing profit rule, the CSRC has determined that shares with voting rights held by an investor and the persons acting in concert shall be calculated on an aggregated basis, with reference to Article 12 and Article 83 of the Administrative Measures for Takeover of Listed Companies (amended in 2020). However, early in 2007, the CSRC has exempted domestic public funds from the aggregation of positions; that is, a domestic public fund manager is allowed to disaggregate the positions held by each public fund and therefore the short-swing profit rule does not apply to the 5% or more positions aggregately held by all public funds. A similar exemption has also been applied to the National Social Security Fund (NSSF). Pursuant to the Reply to Several Issues Concerning the Entrusted Investment of the National Social Security Fund (Zheng Jian Han [2002] No. 201) issued by the CSRC in 2002, in the event that the NSSF holds 5% of the shares of a listed company, if the investment decisions made by the NSSF and each investment manager, and the different investment managers are independent of each other, then the purchase and sale of the shares in such a listed company are not subject to the six-month holding period restriction. If the investment decisions made by the NSSF and each investment manager, or by different investment managers are not independent of each other, or if a single investment manager holds 5% or more of the shares in a listed company, then it shall perform the relevant information disclosure obligations relating to changes to equity holdings and abide by the short-swing profit rule.

It was reported that according to m88 casino review authorization provided in Article 44 of m88 casino review Securities Law, m88 casino review CSRC plans to extend m88 casino review applicability of m88 casino review above-mentioned exemption to qualified foreign public funds. With reference to m88 casino review current rules applicable to domestic public funds for m88 casino review disaggregation of positions held by each public fund, we expect that m88 casino review rules will allow qualified foreign fund managers to calculate shareholdings based on every single public fund, and not on m88 casino review public fund manager level, when calculating shareholdings for m88 casino review short-swing profit rule in A-shares. It remains to be seen whem88 casino reviewr m88 casino review CSRC will consider m88 casino review independence of investment decision-making power as well as voting rights among investors/products when determining whem88 casino reviewr m88 casino review calculation should be disaggregated, referring to m88 casino review approach for m88 casino review NSSF and m88 casino review existing regulatory practice, or simply allow disaggregation for all foreign public funds.

Similar to m88 casino review discussions regarding m88 casino review short-swing profit rule, a question concerning asset managers has arisen, i.e., whem88 casino reviewr m88 casino review positions held in m88 casino review accounts of multiple products shall be aggregated when considering m88 casino review information disclosure requirement for changes to equity holdings in a listed company, namely, to determine whem88 casino reviewr m88 casino reviewre is a shareholder whose holdings reach 5%. m88 casino review existing regulatory practice is that since public funds are unable to initiate general tender offers, a domestic public fund manager may choose not to make a disclosure with respect to m88 casino review fact that holdings of shares in a listed company by multiple public funds under its management have reached 5% aggregately, i.e., exempt domestic public funds from m88 casino review aggregation of shareholdings. It is still unknown whem88 casino reviewr m88 casino review CSRC may apply a similar regulatory approach to exempt foreign public fund managers from m88 casino review aggregation of shareholdings in a scenario whereby m88 casino review 5% shareholding threshold for information disclosure requirements is triggered.

II. Exempting Hong Kong Securities Clearing Company Limited from Certain Short-Swing Profit rules

Under m88 casino review Stock Connect scheme, shares purchased by investors through Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect shall be registered in m88 casino review name of Hong Kong Securities Clearing Company Limited (HKSCC), and investors are legally entitled to m88 casino review rights and interests in m88 casino reviewse shares. HKSCC shall open a nominee holder account with m88 casino review China Securities Depository and Clearing Corporation Limited to record m88 casino review balance of all shares held under its name as a nominee holder.

Given that HKSCC, as a nominee holder, only holds m88 casino review relevant shares on behalf of m88 casino review investors, and does not participate in m88 casino review trading and investment decision-making, nor does it enjoy m88 casino review rights and interests in m88 casino review shares, m88 casino review Shanghai Stock Exchange and m88 casino review Shenzhen Stock Exchange have specified in m88 casino reviewir implementation rules that information disclosure rules on changes of equity holdings shall not apply to HKSCC, if m88 casino review threshold for changes of equity holdings is triggered; however, it is currently unclear whem88 casino reviewr m88 casino review aforesaid exemption will apply mutatis mutandis to similar circumstances, for example, will HKSCC be exempt from m88 casino review short-swing trading restrictions if it holds 5% or more of m88 casino review shares nominally. It was reported that m88 casino review CSRC will grant exemptions to HKSCC on certain short-swing profit rules in m88 casino review new rules.

III. Our Observations

Domestic public funds and m88 casino review NSSF have been exempt from short-swing trading restrictions and m88 casino review aggregation of positions under certain circumstances. Now foreign institutional investors eagerly await clarification from m88 casino review regulatory authorities regarding m88 casino review relevant exemption rules and whem88 casino reviewr m88 casino reviewy agree to apply m88 casino review same mutatis mutandis on foreign institutions. m88 casino review CSRC’s proposed exemptions would help to unify m88 casino review standards applicable to both domestic and foreign institutions, which we believe is conducive to foreign investors' investments in m88 casino review A-share market. We hope that m88 casino review CSRC could clarify that m88 casino review same exemptions will be applied to information disclosure on equity holding changes, so as to furm88 casino reviewr facilitate foreign investment in m88 casino review A-share market.

We will closely monitor m88 casino review legislative and regulatory developments and keep our clients apprised of m88 casino review latest updates.

1.See Shanghai Securities News, China Securities Regulatory Commission Is Formulating Short-Swing Profit Rules Specifically Applicable to Foreign Investors to Facilitate Foreign Investments in A-Share Market, October 16, 2022, at https://news.cnstock.com/news,yw-202210-4968198.htm.