Chinese Securities Law

Statutory Framework and the 2019 Revision

The Securities Law of the People’s Republic of China (the “PRC Securities Law”) was originally adopted in December 1998 and took effect on 1 July 1999. The law underwent a comprehensive revision in December 2019 (effective 1 March 2020) , representing the most significant overhaul in the statute’s history. The 2019 revision introduced a registration-based IPO system, substantially increased penalties for securities violations, strengthened investor protection mechanisms, and expanded the regulatory powers of the China Securities Regulatory Commission (CSRC) . The Securities Law is supplemented by the Company Law of the PRC (governing corporate governance, share issuance, and capital maintenance) and the Administrative Measures for Securities Issuance and Underwriting promulgated by the CSRC.

The CSRC

The China Securities Regulatory Commission (CSRC) is the principal securities regulator, exercising authority over the public offering, listing, and trading of securities; the supervision of stock exchanges, futures exchanges, securities companies, funds, and rating agencies; and the investigation and enforcement of securities law violations. The CSRC operates through a headquarters in Beijing and regional/local offices. In 2023, the CSRC was elevated in administrative rank to a directly affiliated State Council institution, reflecting the central government’s prioritisation of capital market development.

Registration-Based IPO System

The hallmark of the 2019 revision was the codification of a registration-based IPO system (zhuce zhi), replacing the prior approval-based system (hezhun zhi). Under the registration system, the CSRC or the exchange (to which the CSRC has delegated review) examines the completeness, consistency, and comprehensibility of disclosure documents rather than making substantive merit determinations about the issuer’s quality. The reform was initially piloted on the STAR Market (SSE Sci-Tech Innovation Board) in 2019 and extended to the ChiNext board (Shenzhen) in 2020, to the Beijing Stock Exchange in 2021, and to the main boards of the Shanghai and Shenzhen stock exchanges in 2023. The issuer must submit a prospectus and supporting materials to the relevant stock exchange, which conducts an inquiry-based review. The exchange issues a review opinion, following which the CSRC registers the offering.

Stock Exchanges

China operates three principal securities exchanges. The Shanghai Stock Exchange (SSE) , established in 1990, lists large-cap state-owned enterprises and financial institutions on its Main Board and innovative technology companies on the STAR Market (Sci-Tech Innovation Board). The Shenzhen Stock Exchange (SZSE) , also established in 1990, lists mid-cap and SME issuers on its Main Board and high-growth innovative enterprises on the ChiNext board (similar to NASDAQ’s growth segment). The Beijing Stock Exchange (BSE) , inaugurated in September 2021, focuses on “specialised, sophisticated, distinctive, and innovative” (zhuan jing te xin) SMEs, serving as a listing destination for companies previously traded on the National Equities Exchange and Quotations (NEEQ, or the “New Third Board”).

Information Disclosure

The PRC Securities Law imposes a comprehensive information disclosure regime (xinxi pilu). Article 78 requires issuers to disclose information in a true, accurate, complete, timely, and fair manner, with no false records, misleading statements, or material omissions. Issuers must publish annual reports (within four months of year-end), semi-annual reports (within two months of the mid-year end), and quarterly reports (within one month of quarter-end), as well as ad-hoc announcements of material events likely to affect the securities trading price. The CSRC’s Administrative Measures on Information Disclosure by Listed Companies (revised 2021) provide detailed content requirements and liability standards.

Prohibited Conduct

The Securities Law prohibits insider trading (Article 19 of the law, read with relevant CSRC provisions), defining insiders as directors, supervisors, senior management, and any person who obtains inside information by virtue of their position or relationship. Market manipulation (Article 55) is defined to include continuous trading (matched orders), wash sales, pooling arrangements, and dissemination of false information. The 2019 revision raised the maximum administrative fine for insider trading and market manipulation to RMB 10 million (approximately USD 1.4 million) for individuals and RMB 20 million for legal persons, and introduced criminal liability under Article 180 of the Criminal Law (amended 2021), with maximum penalties of ten years’ imprisonment.

Securities Class Actions

The 2019 revision introduced a groundbreaking securities class action mechanism (Article 95, paragraphs 2 and 3) with an opt-out design (tui chu zhi) for representative actions. Where a securities violation causes damages to multiple investors, an investor protection agency (zhongtoufu, the China Securities Investor Services Center or CSISC) may file a representative action on behalf of all affected investors; investors are automatically included unless they expressly opt out. This mechanism borrows from the US Rule 23(b)(3) opt-out model but reserves standing exclusively to state-designated agencies. The first such case, Kangmei Pharmaceutical (2021), resulted in a settlement of RMB 2.459 billion (approximately USD 380 million), now regarded as a landmark in Chinese securities enforcement.

Corporate Governance and Stock Connect

The CSRC’s Guidelines for the Governance of Listed Companies impose requirements for independent directors (at least one-third of the board), audit committees, and related-party transaction approval. The Stock Connect programmes (Shanghai-Hong Kong Stock Connect, 2014; Shenzhen-Hong Kong Stock Connect, 2016; Bond Connect, 2017) permit cross-border investment between Mainland China and Hong Kong under mutual market access arrangements. These programmes operate within daily quota limits and settlement through the Central Clearing and Settlement System (CCASS) and China Securities Depository and Clearing Corporation (SD&C).

Enforcement and Sanctions

The CSRC may impose administrative sanctions including warnings, fines, disgorgement of illegal gains, market bans (prohibiting persons from serving as directors or senior management for up to ten years or permanently), and revocation of business licences. In 2024, the CSRC intensified enforcement, targeting financial fraud, illegal share reductions by controlling shareholders, and unauthorised securities advisory activities. The CSRC may also refer criminal cases to the Ministry of Public Security or the Supreme People’s Procuratorate.

Key Legislation Table