For the purpose of regulating the establishment of the foreign stock exchange’s representative office (the “Rep Office”) and its business operation in China, China Securities Regulatory Commission (“CSRC”) promulgated the Measures for the Administration of Foreign Stock Exchange’s Representative Office (the “Measures”) on May 20, 2007 and the Measures came into force as of July 1, 2007.  The main contents of the Measures are as follows:

1.   Conditions and Approvals of Application for the Establishment of the Rep Office
A foreign stock exchange applying for the establishment of a Rep Office (the “Applicant”) shall meet the following requirements:
(1) The country or region where the applicant is located has perfect laws and regulations on financial supervision;
(2) The financial supervision authority in the country or region where the applicant is located has concluded a memorandum of understanding on supervisory cooperation with the CSRC, and keeps a good cooperation with the CSRC;
(3) The applicant is duly established upon approval or ratification of the financial supervision authority of the country or region where it is located;
(4) The applicant has been established for no less than 20 years, its operation is stable and standardized, and its financial situation is good; and
(5) Other prudential conditions put forward by the CSRC.
According to the Measures, an applicant can only apply for the establishment of one Rep Office and the CSRC shall be responsible for the examination and approval of the establishment of the Rep Office as well as issuing the approval certificate.
A Rep Office shall, within 90 days upon the approval by the CSRC, go through the formalities for industrial and commercial registration as well as taxation registration upon the receipt of the approval certificate, move into a fixed office, and report the following matters to the CSRC in written form: business registration from the industrial and commerce,  taxation registration, a certificate for the lawful right to use the office, the telephone number, fax number and  address of the Rep Office, and the mobile phone number and email address of the chief representative.

If the Rep Office fails to submit a written report to the CSRC within the time limit prescribed above, the original approval certificate shall be automatically invalidated.

2.   Business Scope of the Rep Office
The Rep Office is limited to conducting liaison, market promotions, investigations and other similar non-business activities inside the territory of China.  It shall not conclude any agreement or contract that may bring about incomes to the Rep Office or its foreign stock exchange and shall not seek for interests for any other institution in any form.

3.        Engagement of the Chief Representative and other Representatives
The qualification for the chief representative of a Rep Office to hold the position shall be subject to the examination and approval by the CSRC.  The chief representative shall satisfy the following requirements:
(1) Being familiar with the finance laws and regulations of China;
(2) Having a bachelor’s degree or above, 10 years or more of experiences in finance or economy, and 3 years or more of experiences in engaging in Chinese-related business during the latest 5 years; and
(3) Being of good character, having no record of criminal or administrative penalty.
No chief representative may concurrently assume a post in the head office or a regional head office, nor may he concurrently assume a post in any other commercial institution inside the territory of China; and a chief representative shall always stay in the Rep Office to take charge of the routine work.
To appoint a representative or deputy representative, a Rep Office shall, within 5 working days as of the date of appointment, report the name list, identity certificate and resume of that person to the CSRC for keeping on record.
In case certain changes to a Rep Office or a Rep Office changes its chief representative, adds or reduces other representatives or deputy representatives, the Rep Office shall also report to the CSRC for approval or for keeping on record.

4.        Supervision System
According to the Measures, in case a Rep Office changes its office address, conducts a large-scale market promotion activity or makes annual report, or in case a foreign stock exchange gives any major punishment to any Chinese company whose stocks are listed and traded in it or any Chinese-funded member thereof, or in case any important matters happen to the foreign stock exchange, or in case the chief representative goes abroad for more than 30 consecutive days, the Rep Office shall report to the CSRC in writing.
In addition, CSRC will carry out regular or irregular on-site or off-site inspections of a Rep Office.
In case a Rep Office violates the Measures, the CSRC may give the Rep Office such punishments as warning, fines, confiscation of the illegal gains and revoking the business registration of the Rep Office.  The CSRC may also take such regulatory measures as ordering the chief representative or any other person in-charge to make correction, arranging a supervisory interview, issuing a letter of warning and prohibiting them from entry into the securities market.
The establishment of a Rep Office inside the territory of China by a stock exchange of Hong Kong Special Administrative Region, Macao Special Administrative Region or Taiwan Area shall be carried out by reference to the Measures.