The China Securities Regulatory Commission ("CSRC") has recently issued the Guidelines for Regulation of Risk Funds of Stock Exchanges (the "Guidelines"), immediately effective from the date of issuance.
The Guidelines stipulate that the stock exchange shall formulate specific measures for management of risk funds, which should specify the body in charge of routine management of risk funds and its concrete responsibilities, inspections conducted by the supervision board to look at the use of risk funds, specific management approaches, etc. The Guidelines expressly state that the stock exchange shall submit, within 10 working days after the use of risk funds each time, a report on such use to the CSRC, adding that the report on use of risk funds should cover: 1. reasons why the risk funds is used, and the necessity of such use; 2. the amount of the used funds, and details about the use; and 3. the recovery scheme. Moreover, the Guidelines require that the stock exchange shall give relevant details about risk funds, specifically including the scale of risk funds, the withdrawal, the use, recovery status, and implementation of and improvement to relevant systems, in the annual report it submits to the CSRC.
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