Regulations of Shanghai Municipality on Regional Financial Supervision and Administration

(April 10, 2020)

Chapter I  General Provisions

Article 1

With a view to regulating regional financial organizations and their activities, maintaining financial consumers' and investors' legitimate rights and interests, preventing and dissolving financial risks, pushing ahead a safe and sound financial development in this Municipality, and building Shanghai into an international financial center, these Regulations are formulated in accordance with relevant laws, administrative rules, and relevant state provisions, and in the light of the actual circumstances in this Municipality.

Article 2

These Regulations apply to the supervision and administration, and risk prevention and treatment of regional financial organizations and their activities within the administrative area of this Municipality.

Where the State has otherwise provisions on regional financial supervision and administration, such provisions shall prevail. Where the Municipal People's Government has otherwise provisions on various local trading places, such provisions shall prevail.

The "regional financial organizations" mentioned in these Regulations include micro-loan companies, financing guarantee companies, regional equity market, pawnbrokers, finance lease companies, commercial factoring companies and regional asset management companies, as well as other organizations with financial attributes under the supervision and administration of local people's governments authorized by laws, administrative rules and the State Council.

Article 3

The regional financial supervision and administration in this Municipality shall follow the principles of safety and prudence, being orderly and standardized, as well as innovative development, pursue the objectives of serving the real economy, preventing and controlling financial risks, and deepening financial reform, and push ahead a high-quality development of the finance serving the economy.

Article 4

The Municipal People's Government shall, under the guidance and supervision of the Financial Stability and Development Committee of the State Council, establish a deliberation and coordination mechanism for financial work, so as to perfect the system for regional financial supervision and administration, consolidate the duties of supervision and administration of regional finance, and coordinate in major issues such as the promotion of financial reform and development and the prevention of financial risks.

Shanghai Municipality's deliberation and coordination mechanism for financial work shall strengthen its coordination with the regional coordination mechanism of the General Office of the Financial Stability and Development Committee under the State Council in such aspects as the financial supervision and administration, risk treatment, information sharing, and protection of consumer's rights and interests.

District people's governments shall strengthen the organization and leadership in the work relevant to regional finance within their respective administrative areas, establish and perfect the mechanism for regional financial supervision and administration, as well as prevent and treat financial risks.

Article 5

The municipal regional financial regulatory department shall be responsible for the supervision and administration of regional financial organizations and their activities in this Municipality, and be responsible for such duties as formulating detailed supervision and administration rules, conducting surveys, collecting statistics, and organizing the monitoring, early warning, prevention, and treatment. relevant to risks

According to the requirements of the municipal regional financial regulatory department, the district financial supervision and administration department shall bear the responsibility for the preliminary examination and information collecting on the regional financial organizations registered in its administration area, and organize such work as the monitoring, early warning, prevention, and treatment relevant to risks, and take corresponding regulatory measures.

The departments of development & reform, economy and informatization, commerce, public security, market regulation, finance, state-owned assets, publicity, culture and tourism, transportation, agriculture and rural affairs, science and technology, education, civil affairs, housing and urban-rural construction administration, cyberspace affairs and communication administration shall perform the duty of regional financial supervision and administration in accordance with their respective responsibilities.

Article 6

This Municipality shall set up a regional financial supervision and administration information platform (hereinafter referred to as the regulatory platform), participate in the building of the national basic financial database, and promote the standardization of regional financial supervision and administration in accordance with the unified national planning. The municipal regional financial regulatory department shall be responsible for the building and operation of the regulatory platform.

The municipal regional financial regulatory department shall urge the application of modern information technology on the regulatory platform, and, by means of collecting regulatory information, performing statistical work on industries, and conducting risk monitoring and early warning through the regulatory platform, realize the interconnection and sharing of regulatory information with relevant departments so as to study and analyze the actual status of financial risks on a regular basis, and to issue early warning of risks and to offer treatment suggestions.

Article 7

The Municipal People's Government shall perfect the planning for Shanghai's development into an international financial center, support the construction of the financial market system and the concentration of financial elements and resources, push the financial opening-up to the outside world, stimulate the vitality for financial innovation, optimize the finance development environment, further strengthen the function of allocating global financial resources, and enhance the radioactive influence of Shanghai as an international financial center.

This Municipality shall urge the pilot projects on the innovation of financial products, business operations and administrative supervision in areas such as China (Shanghai) Pilot Free Trade Zone and the Lin-gang Special Area.

This Municipality shall, in coordination with the central financial supervision and administration department, extend the pilot projects on the application of financial science and technology, comprehensively raise the level of its application, push the integrated development of technological innovation and financial innovation, and strengthen the in-step development of building Shanghai into both an international financial center and a scientific and technological innovation center.

Article 8

This Municipality shall perfect the cooperation mechanism of regional financial supervision and administration in the Yangtze River Delta, establish and perfect the coordination mechanism for risk monitoring and early warning and for supervision and law enforcement, strengthen the information sharing and collaborative treatment, and urge the finance to serve a high-quality and integrated development of the Yangtze River Delta.

Chapter Ⅱ  Code of Conduct for Regional Financial Organizations

Article 9

Where a financial organization is to be established in this Municipality, it shall apply for a license or qualification to participate in pilot projects in accordance with the state provisions.

The municipal regional financial regulatory department shall publish the conditions, procedures, list of application materials and written application samples for the establishment of regional financial organizations prescribed by the State on the official website, the integrated online platform and other government affairs platforms.

Article 10

The following items of regional financial organizations shall be submitted to the municipal regional financial regulatory department or the district financial work departments (hereinafter referred to as regional financial administrative departments) for filing:

1. establishment of branches in this Municipality or other provinces and cities;

2. alteration of organization's names, domiciles or principal places of business, registered capital, any controlling shareholders, or principal shareholders;

3. alteration of any legal representatives, directors, supervisors, or senior managers; and

4. other items provided by the municipal regional financial regulatory department that shall be submitted for filing.

For those items mentioned in the preceding paragraph, when the State requires an examination or approval, or makes other provisions on filing, such provisions shall prevail.

Article 11

Regional financial organizations shall improve their organizational management structure, establish, perfect and strictly abide by business rules and a management system such as risk management, internal control, asset quality, risk reserve, information disclosure, connected transaction, marketing and publicity, according to relevant regulations of the State and this Municipality.

Article 12

Regional financial organizations shall truthfully and fully disclose the risks of their financial products or services to their financial consumers and investors, educate people to make appropriate investment, and protect the legitimate rights and interests of their financial consumers and investors, such as the property rights, the right to know and the right to choose independently in accordance with the law. They must not set any trading conditions that violate the principle of fairness.

Regional financial organizations shall establish a convenient and efficient dispute settlement mechanism, improve the complaint handling procedures, and handle disputes with financial consumers and investors in a timely manner.

Article 13

The directors, supervisors and senior managers of regional financial organizations shall abide by the regulatory requirements of the State and this Municipality, fulfill their duties of exercising due diligence, and effectively prevent and control risks.

Article 14

Regional financial organizations shall periodically submit the following materials through the regulatory platform to the regional financial regulatory department：

1. reports of business operation and statistics, and relevant materials;

2. financial accounting reports audited by accounting firms; and

3. other materials prescribed by the State and this Municipality.

Article 15

Where a regional financial organization encounters material risk events such as liquidity crisis, major pending litigations or arbitrations, major negative public opinions, the chief responsible person gone missing or subject to criminal investigation, or civil disturbance, it shall report to the regional financial regulatory department within 24 hours of the occurrence of such events.

If the controlling shareholder or actual controller of a regional financial organization is involved in any material risk event as specified in the preceding paragraph, the regional financial organization shall report to the regional financial regulatory department within 24 hours from the time when it knows or should know the event.

The municipal regional financial regulatory department shall formulate the criteria, procedures, and specific requirements for reporting material risk events, and make them known to the public.

Article 16

Where a regional financial organization is to be dissolved, it shall set up a liquidation organization and go into liquidation in accordance with the law, and make arrangements for the undue debts and the bearing of related responsibilities.

Where a regional financial organization no longer operates relevant financial business, it shall, in accordance with the provisions, file a written application or deliver a report, and submit such materials as a certificate of asset status and a plan for the disposition of creditor's rights and debts.

Where a regional financial organization is dissolved or no longer operates relevant financial business, the Municipal People's Government or the municipal regional financial regulatory department shall, in accordance with the law, cancel its license or its qualification to participate in pilot projects, report the relevant information to the market regulation department and make a public announcement.

Article 17

The shareholders of a regional financial organization shall be liable to the regional financial organization within the limit of their subscribed capital contribution or subscribed shares in accordance with the law.

A regional financial organization may establish a system in which its controlling shareholder or actual controller bears the residual risk liability, and the controlling shareholder or the actual controller may issue a written commitment to bear the outstanding debts of the regional financial organization after it is dissolved or no longer operates the relevant financial business. A regional financial organization may release to the public whether its controlling shareholder or actual controller undertakes to bear the residual risk responsibility.

Article 18

A regional financial organization shall standardize its operation according to law and strictly abide by the bottom line of risk, and shall not engage in the following activities:

1. acceptance of deposits in actual or disguised form;

2. lending or leasing of its license or documents for the pilot project;

3. illegal entrusted investment and granting of self-operated or entrusted loans; and

4. other activities prohibited by the State and this Municipality.

Chapter Ⅲ  Supervisory and Administrative Measures

Article 19

The municipal regional financial regulatory department shall, on the basis of controllable risks, adopt the supervisory and administrative measures suitable for the innovation and development of regional financial organizations, and formulate and implement corresponding detailed regulatory rules and standards according to the nature and characteristics of various business types.

Article 20

The regional financial administrative department shall formulate supervision and inspection plans for regional financial organizations every year, and supervise and inspect the business activities of such organizations. Both on-site inspection and off-site supervision can be adopted.

The municipal regional financial regulatory department shall formulate the supervision and inspection procedures and regulate the supervision and inspection acts.

Through the regulatory platform, the regional financial administrative department shall analyze, assess, supervise, and administrate the business operation and its risk status of the regional financial organization.

Article 21

When conducting an on-site inspection, the regional financial administrative department may take the following measures:

1. access to the business sites of regional financial organizations and relevant units for inspection;

2. question the staff of regional financial organizations and relevant units and demand a description on the inspection items;

3. inspect the data management system for relevant business operations;

4. fetch, consult, copy and inspect documents and materials related to the inspection; and

5. other measures prescribed by laws and regulations.

With the approval of the person in charge of the municipal regional financial regulatory department, the evidentiary materials such as documents, materials and electronic equipment that are likely to be removed, concealed, or destroyed, relevant business sites and facilities can be sealed up or seized.

Where the regional financial administrative department conducts an on-site inspection, the number of law enforcement personnel shall be no less than two, and they shall show the administrative law enforcement certificate and the inspection notice. The regional financial administrative department may, according to the needs of supervision and administration, employ a third party institution such as a law firm and an accounting firm to participate in the supervision and inspection.

The relevant units and individuals shall cooperate in the inspection, truthfully describe the relevant information, and provide documents and materials, and shall not obstruct, refuse, or set obstacles to the inspection.

Article 22

In the process of performing its duties in accordance with the law, the regional financial administrative department may take such measures as supervisory consultations, ordering of public explanation and periodic reporting, publication of risk warning letters, public notice of criticism, and ordering of correction, if it finds that a regional financial organization is suspected of violating the regulatory requirements of the State and this Municipality or has other potential risks.

The regional financial administrative department may require the controlling shareholders or the actual controllers, and the legal representatives, directors, supervisors, or senior managers of the regional financial organizations to make statement on the events like the business operation, and risk status.

Article 23

Relevant government departments, agent institutions delegated to participate in the supervision and inspection, and self-disciplinary organizations of the financial industry and their employees shall keep the commercial secrets and personal privacy that are known while performing their duties confidential.

Article 24

The municipal regional financial regulatory department shall conduct a supervision and administration rating on the regional financial organizations based on the on-site inspection and off-site supervision.

The municipal regional financial regulatory department may have a classified supervision and administration based on the results of the supervision and administration rating, and determine the frequency, scope, and regulatory measures to be taken for the supervision and inspection.

Article 25

The municipal regional financial regulatory department shall release the information such as the establishment, alteration, termination and business scope of the regional financial organizations, and the operational monitoring of the financial industry on government service platforms such as its official website and the integrated online platform.

Article 26

The municipal regional financial regulatory department shall establish the credit archives for regional financial organizations, collect and incorporate the credit information of regional financial organizations and their employees into the municipal public credit information service platform, and at the same time submit such credit information to the basic database of the financial credit information in accordance with the law.

Where a regional financial organization violates these Regulations and causes serious consequences or serious adverse social influences, or is prohibited from entering the market, it shall be included in the list of subjects of serious discredit. The municipal regional financial regulatory department shall publish the list of subjects of serious discredit, as well as the conditions for their names to enter or be removed from the list and ways for the subjects to receive relief.

Where a regional financial organization is included in the list of subjects of serious discredit, the relevant departments may, in accordance with the law, impose a joint sanction on its legal representatives, directors, supervisors, senior managers or actual controllers.

Article 27

Regional financial organizations shall be encouraged to establish a self-disciplinary organization of the financial industry. And the organization shall carry out the following work according to the articles of association:

1. formulating self-discipline rules of the financial industry, urging and inspecting the acts of its members and their employees, and implementing self- discipline management;

2. safeguarding the legitimate rights and interests of its members, reflecting suggestions and demands of the financial industry, and cooperating with the regional financial administrative department to carry out the industrial supervision;

3. urging its members to educate financial consumers and investors to make appropriate investment, mediating disputes, and safeguarding the legitimate rights and interests of financial consumers and investors;

4. investigating and handling complaints against its members' illegal acts;

5. organizing and carrying out members' training and interaction; and

6. other work provided by laws and rules.

Article 28

Units and individuals without corresponding financial business qualifications shall not conduct marketing publicity activities related to the financial business.

Advertising agents and advertisement publishers shall, according to law, examine and verify the certificates of relevant financial business qualifications provided by the units and individuals, and shall not publish any financial marketing publicity inconsistent with the scope of business qualification.

The departments of regional financial administration, market regulation, public security, cyberspace affairs, and communication administration and the agency of the central financial supervision and administration department in Shanghai shall strengthen the cooperation in the monitoring, investigation, and punishment on the illegal financial marketing publicity.

Article 29

Any unit or individual shall have the right to report any illegal acts of regional financial organizations to the regional financial administrative departments and other relevant departments.

The regional financial administrative departments and other relevant departments shall make public the contact information for accepting reports, handle the reports received in a timely manner according to law, and keep the information of the reporter and contents of the report strictly confidential.

Where a real-name reporting is made and relevant evidence is provided, the regional financial administrative departments and other relevant departments shall inform the reporter of the result of the handling.

Chapter Ⅳ  Prevention and Treatment of Risks

Article 30

The municipal and district people's governments shall bear the responsibility of the first person responsible for the prevention and handling of illegal fund-raising activities in their respective administrative areas. They shall formulate emergency response pre-plans for risk emergencies, organize, coordinate with, and urge relevant departments to do a good job in monitoring and early warning, nature identification and case handling of illegal fund-raising activities, and shall maintain social stability.

The regional financial administrative departments shall, together with the relevant departments and the agency of the central financial supervision and administration department in Shanghai, carry out risk prevention and treatment of the unauthorized establishment of regional financial organizations or the illegal business activities of regional financial organizations.

Enterprises other than the financial institutions and regional financial organizations (hereinafter referred to as general registered enterprises) shall abide by the relevant provisions of the State, and shall not engage in legal financial business operations in actual or disguised form.

Article 31

In case of material risk events in the administrative area of this Municipality, which affect the regional financial stability or social order, the regional coordination mechanism of the General Office of the Financial Stability and Development Committee under the State Council and the municipal deliberation and coordination mechanism for financial work in Shanghai shall be brought into play, so as to urge relevant departments to prevent and treat the risks.

1. The agency of the central financial supervision and administration department in Shanghai, and the regional financial administrative departments shall, according to their respective duties, carry out risk assessment and early warning of illegal financial institutions, illegal regional financial organizations, and illegal financial business operations, and shall do a good job in the identification of the nature of the case, and the transfer, prevention and handling of the case;

2. The public security organ shall be responsible for investigating and handling the activities suspected of financial crimes, and taking measures such as freezing the funds involved, and restricting the exit of relevant personnel involved in the case from the People's Republic of China according to law.

3. Where a general registered enterprise is suspected of operating illegal financial business, the market regulation departments shall strengthen the registration administration of its name, business scope and shareholders, and shall impose joint sanctions on the discredit acts according to law.

4. Where an enterprise is suspected of operating illegal financial business, the departments of cyberspace affairs, and communication administration shall take measures such as suspending relevant business and shutting down its websites according to law.

5. The people's courts, the people's procuratorates, and the competent administrative departments of other relevant industries shall, according to their respective duties, do a good job in the prevention and treatment of risks.

Article 32

Regional financial organizations shall assume the primary responsibility for risk events occurred in their business operations, and shall, upon the occurrence of risk events, immediately take corresponding measures and report such events to the regional financial administrative department, which shall immediately assess and study the risks upon receiving the report.

Where there are potential material risks in a regional financial organization, the municipal regional financial regulatory department may, in accordance with the law, take measures to control the spreading of the risks, such as ordering to suspend relevant businesses, ordering to stop the establishment of additional branches, etc.

Where the measures mentioned in the preceding paragraph are still unable to control the spreading of the risks, which may seriously affect the regional financial stability, with the approval of the people's government at the same level, the regional financial administrative department may take such measures as taking over the regional financial organization according to law, and arranging for other similar regional financial organizations to have custody, and cooperate with the relevant departments for the risk treatment.

Article 33

Where a regional financial organization has eliminated its material risks and restored its capability normal business operation, it may be allowed to continue its financial business.

Where a local financial organization cannot eliminate its material risks or restore its capability of normal business operation, the Municipal People's Government or the municipal regional financial regulatory department shall cancel its license or qualification to participate in the pilot projects in accordance with the law.

Chapter V  Legal Liabilities

Article 34

Where there are provisions on the acts in violation of these Regulations in the existing laws and rules, such provisions shall prevail. Where any crime is constituted, the violator shall be subject to criminal liability according to law.

Article 35

Where any regional financial organization is established without authorization or any organization illegally engages in business operations of a regional financial organization, the municipal regional financial regulatory department shall order a suspension of its business and confiscate its illegal gains. If the amount of its illegal gains exceeds 500,000 yuan, a fine ranging from three to five times the amount of the illegal gains shall be imposed. If no illegal gains are involved or the amount of the illegal gains is less than 500,000 yuan, a fine of not less than 500,000 yuan but not more than 2,500,000 yuan shall be imposed. A fine of not less than 200,000 yuan but not more than1, 000,000 yuan shall be imposed on the relevant responsible persons.

Article 36

If a regional financial organization, in violation of the provisions of the first paragraph of Article 10 of these Regulations, fails to submit relevant items for filing as required, or in violation of the provisions of Article 14 of these Regulations, fails to report business information as required, the municipal regional financial regulatory department shall order the said organization to make corrections within a prescribed time limit, and impose a fine of not less than 10,000 yuan but not more than 50,000 yuan.

If a regional financial organization, in violation of the provisions of Article 15 of these Regulations, fails to report material risk events within a prescribed time limit as required, or in violation of the provisions of the first paragraph of Article 32 of these Regulations, fails to take corresponding measures immediately as required upon the occurrence of a risk event, the municipal regional financial regulatory department shall order the said local financial organization to make corrections within a prescribed time limit, and impose a fine of not less than 10,000 yuan but not more than 50,000 yuan. In case of gross violation, the municipal financial regulatory department shall impose a fine of not less than 50,000 yuan but not more than 200,000 yuan.

Article 37

If a regional financial organization violates the provisions of Article 18 of these Regulations, the municipal regional financial regulatory department shall order the said organization to make corrections within a prescribed time limit, confiscate the illegal gains, and impose a fine of not less than 500,000 yuan but not more than 2,500,000 yuan on it. In case of gross violation, it shall be ordered to suspend its business, or its business license shall be revoked, or its qualification to participate in the pilot projects shall be cancelled.

Article 38

Where a regional financial organization hampers the regional financial administrative department in performing its duties by rejecting or impeding the supervision and inspection, or destroying or removing relevant materials, the municipal regional financial regulatory department shall order the said organization to make corrections within a prescribed time limit, and impose a fine of not less than 10,000 yuan but not more than 50,000 yuan. In case of gross violation, the municipal regional financial regulatory department shall impose a fine of not less than 50,000 yuan but not more than 200,000 yuan. Where a violation of public security administration is constituted, the violator shall be subject to the punishment in accordance with the Law of the People's Republic of China on Public Security Administration and Imposition of Punishment.

Article 39

Where the municipal regional financial regulatory department imposes an administrative punishment on a regional financial organization in accordance with these Regulations, it may, at the same time, impose a fine of not less than 50,000 yuan but not more than 500,000 yuan on the directly responsible directors, supervisors or senior managers.

Article 40

In violation of the provisions of these Regulations under any one of the following circumstances, the violator shall be given lighter or mitigated administrative penalties according to law:

1. voluntarily and promptly compensating financial consumers and investors for their losses;

2. voluntarily eliminating or abating harmful consequences caused by illegal acts;

3. assisting the investigation and punishment of other illegal acts with meritorious performance; or

4. any other circumstances under which a lighter or mitigated punishment shall be imposed according to law.

Article 41

Where an administrative organ and its staff abuse power, neglect duty, or engage in malpractice for personal gains in the supervision and administration of regional finance, the violator shall be punished according to law. If any crime is constituted, the violator shall be subject to criminal liability according to law.

Chapter Ⅵ  Supplementary Provisions

Article 42

The "controlling shareholder" mentioned in these Regulations means a shareholder or other investor who holds 50% or more of the total shares or voting rights of the regional financial organization, or a shareholder or other investor whose equity or voting rights account for less than 50%, but whose rights are sufficient to have a significant impact on the resolutions of the regional financial organization.

The "principal shareholder" mentioned in these Regulations means a shareholder or other investor who holds 5% or more of the total shares or voting rights of the regional financial organization, but does not hold the controlling share.

The "actual controller" mentioned in these Regulations means a person who is not a direct investor of a regional financial organization, but is able to hold actual control of the organization through investment relations, agreements, or other arrangements.

Article 43

These Regulations shall be effective as of July 1, 2020.