Legislative Guide on Rules Enhancing Trading --- An Introduction China Securities Depository & Clearing Corp., Ltd. HUANG Xiangsheng CSDC Shanghai Branch Tehran, Iran May 20, 2014 The 16 th ACG Cross -Training Seminar

Committee on Emerging Markets Issues China Securities Depository and Clearing Corporation Limited Principles and rules capable of enhancing trading in securities in emerging markets Unidroit Study LXXVIII B Meeting Agenda Item No. 6 Committee on Emerging Markets Issues, Follow-Up and Implementation Third Meeting Istanbul, Turkey November 11-13, 2013 Consideration of the preparation of a Legislative Guide on Principles and Rules Capable of Enhancing Trading in Securities in Emerging Markets

DRAFT OUTLINE China Securities Depository and Clearing Corporation Limited Legislative Guide on Principles and Rules Capable of Enhancing Trading in Securities in Emerging Markets DRAFT OUTLINE I. CREATION II. OVERSIGHT III. SECURITIES IV. OPERATIONS V. RIGHTS AND OBLIGATIONS OF THE PARTIES VI. INSOLVENCY VII. CONFLICT OF LAWS

I. CREATION China Securities Depository and Clearing Corporation Limited First step in securities trading ( general framework of an efficient, modern securities market ) Creation of securities exchange: establishment of an exchange and rights of its members, charter, rules, requirements, organization of trading Nature/Types of securities Role of intermediaries Issuance of securities: stages of issuance of securities, registration of a securities issue, requirements to a securities prospectus

II. OVERSIGHT China Securities Depository and Clearing Corporation Limited Regulated markets vs. unregulated markets Governmental agencies that control market oversight Framework for disclosure, prevention of insider trading, and conduct of market participants Supervision of intermediaries Investor associations Self-regulatory organizations Independent auditing Issuance process Information disclosure Prohibition of insider information Parameters of advertising information in the stock market Framework Intermediaries /Investors Issuers

III. SECURITIES China Securities Depository and Clearing Corporation Limited a. Nature of securities b. Nature of account holder rights in intermediated securities c. Types of securities I. Equity Shares Collective Investment Schemes Mutual funds Trusts Special Purpose Vehicles II. Debt Corporate bonds Municipal bonds Government bonds Treasury bills III. Derivatives Swaps Options Futures Other derivatives IV. Others Investment certificates Savings (deposit) certificates Promissory notes Asset-backed securities Commodities

IV. OPERATIONS China Securities Depository and Clearing Corporation Limited Equal access of market participants Holding Infrastructure Custody of securities Transfer of securities Non-convention law Role and significance of collateral Securities settlement systems and securities clearing systems Voting rights / dividends, interest, and other distributions Fungibility and Segregation of securities Operations concerns the circulatory system of the market

V. RIGHTS & OBLIGATIONS OF THE PARTIES- 1 China Securities Depository and Clearing Corporation Limited I.Investors (account holder/shareholder) Attached rights Right to dispose of securities Right to use as collateral for a loan Right to hold other than with intermediary II.Transfer and creation of interests in favor of third parties Intermediated securities Non-intermediated securities III.Intermediaries Possible indemnification situations Rights ① I.Intermediaries Holding of sufficient securities Segregation of securities Allocation of securities Information disclosure Pass through of dividends, interest, and other distributions II.Issuer actions Information disclosure requirements Identification of relevant parties Financial reporting Material event reporting Obligations ②

V. RIGHTS & OBLIGATIONS OF THE PARTIES- 2 China Securities Depository and Clearing Corporation Limited I.Account Holders Fraud Insider trading Prohibited trading practices II.Issuers Attached rights Right to dispose of securities Right to use as collateral for a loan Right to hold other than with intermediary III.Intermediaries Fraud Prohibited trading practices False, misleading or deceptive statements, promises and forecasts Failure to disclose information No-look-through IV.Companies Fraud Prohibited trading practices Insider trading False, misleading or deceptive statements, promises and forecasts Failure to disclose information Liability I.Administrative sanctions II.Criminal sanctions III.Administrative/penal liability Sanctions ④ ③

VI. INSOLVENCY China Securities Depository and Clearing Corporation Limited Administration Parties Timing of process Types of proceedings Insolvency administration Substantive issues Effectiveness of interests in insolvency Account holder v. other account holders Loss-sharing in insolvency Set-off Enforcement, top-up and substitution, avoidance Account holder claims in insolvency of intermediary Cross border insolvency A key vital complement to a healthy securities market

VII. CONFLICT OF LAWS China Securities Depository and Clearing Corporation Limited Issue in cross-border transactions Hague Securities Convention Choice of law rule Fall-back rules Third-party rights Change of the applicable law Insolvency proceeding When the transaction involves cross-border movements and foreign law

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