Chapter III Trading of Securities

Section 1 General Regulations

Article 37 Securities purchased and sold pursuant to law by the parties to a securities transaction must be securities issued and delivered pursuant to law.

Securities not issued pursuant to law shall not be purchased and sold.

Article 38 No shares, corporate bonds or other securities issued pursuant to law, restrictive provisions on the periods of transfer of which have been stipulated by law, shall be purchased or sold within such periods.

Article 39 Shares, corporate bonds and other securities publicly issued pursuant to law shall be listed for trading on lawfully established stock exchanges, or transferred at other securities trading sites approved by the State Council.

Article 40 The trading of securities listed on the stock exchanges shall be carried out in an open and centralized manner or in such other manners as may be so approved by the securities regulatory authority under the State Council.

Article 41 Securities purchased and sold by the parties to a securities transaction may take the form of scrip or such other forms as may be so prescribed by the securities regulatory authority under the State Council.

Article 42 Securities shall be traded in spot transaction or such other ways as may be so prescribed by the State Council.

Article 43 The business persons of the stock exchanges, securities companies and securities registrar and clearance institutions, the staff members of the securities regulatory authorities, and other persons prohibited by laws or administrative regulations from participating in share trading shall not, while in office or within the statutory periods of time, hold, purchase or sell any shares directly or under assumed names or names of other persons, nor shall they receive or accept any shares given by others.

At the time of becoming a person as described in the preceding paragraph, one must have his previously held shares transferred pursuant to law.

Article 44 The stock exchanges, securities companies and securities registrar and clearance institutions shall keep their clients’ accounts confidential pursuant to law.

Article 45 Securities service institutions and their staff members that produce such documents as auditing reports, asset valuation reports and legal opinions for share issuance shall not purchase or sell such shares during the period of underwriting and within six months thereafter.

In addition to the provisions in the preceding paragraph, securities service institutions and their staff members that produce such documents as auditing reports, asset valuation reports and legal opinions for listed companies shall not purchase or sell the shares concerned from the date of accepting the entrustment of the listed companies until five days after such documents are made known to the public.

Article 46 The fees charged for securities transactions must be reasonable and the items for which fees are charged, the rates of the fees and methods of fee collection must be made known to the public.

The uniformed charging items, standards and measures for securities trading shall be prescribed by the relevant departments in charge under the State Council. Article 47 Where a director, supervisor or senior manager of a listed company, or a shareholder who holds 5% or more of the shares of a listed company sells the shares of the company within six months of purchasing such shares, or repurchases the shares within six months of selling such shares, the gains therefrom, if any, shall belong to the company, and the board of directors of the company shall recover such gains. However, if a securities company comes to hold 5% or more of the shares as a result of absorbing the unsold shares under the terms of an underwriting on a principal basis, it shall not be subject to the restriction of the six-month period when selling such shares.

Where the board of directors of the company fails to take action in accordance with the provisions of the preceding paragraph, the shareholders of the company shall have the right to demand it to act within 30 days. Where the board of directors of the company fails to take action within the said time limit, the shareholders shall have the right to initiate, in their own name, a lawsuit directly in a people’s court for the benefit of the company.

Where the board of directors of the company fails to take action in accordance with the provision of the first paragraph, the directors who are accountable thereto shall be held jointly and severally liable pursuant to law.