How to p rotect investor’s transaction right

1. How to protect investor’s transaction right Suyi Liu 2008.7.31

2. Provisions on protection of investor’s transaction right and relevant paraphrase • The definition of protection of investor’s transaction right • The relevant provisions in <the regulation on the disposition of risky securities companies > • Understanding dialectic protection of investor’s transaction right

3. The main policies and practice during the time of disposition of risky securities companies. • Subrogation of the shortfall of investor’s settlement funds. • Offset of the shortfall of investor’s settlement funds. • The result of disposition of risky securities companies.

4. The four instances of protection of investor’s transaction right • The securities companies can not bear the settlement obligation after opening of insolvency proceedings against securities companies • The investor’s settlement funds and securities can not fulfill their settlement obligation because the funds and securities were appropriated or frozen by the securities companies.

5. The investor protection fund only remedy investor’s loss partly,not 100% percent. • The securities transactions are settled in DVP method,the settlement system not allow short selling, investor’s transaction would be stopped if he has not enough fund or securities.

6. Reality and Pressure of Ensuring Clients’ Trading Rights • China Securities Investor Protection Fund Company is drafting, amending and arguing Regulations on Securities Investor Protection Fund. • Shanghai Stock Exchange, Shenzhen Stock Exchange and China Securities Depository and Clearing Corporation is drafting, amending and arguing Business Rules on Securities Clearing and Settlement and Scheme for the Implementation ofDVP. • Question: How to handle transactions conducted by insolvent brokers’ clients in case of brokers’ liquidation in terms of relevant regulations and operating procedures?

7. Communications and Coordination for Discussions on New System Coordination between Ensuring Clients’ Trading Rights and Reimbursing Protection Fund • Is it full reimbursement or limited reimbursement of property loss of brokers’ clients? • What is the timing of protection fund reimbursement? • What is the procedure of protection fund reimbursement?

8. Coordination between Ensuring Clients’ Trading Rights and DVP • DVP system • Coordination between Ensuring Clients’ Trading Rights and Measures for the Administration of Securities Registration and Settlement • Special Measures for Trading and Settlement should be made in accordance with the reimbursement system of Protection fund.Protection of Clients’ Trading Rights Protection of Clients’ Property Rights Clearing and settlement institutions adopt DVP Establish special supplement fund Regarding operating procedures, closely combining risk disposal and insolvency liquidation, reimbursement of protection fund, ensuring clients’ trading rights and clearing andsettlement requirements, we should guarantee precise linkages and efficient operation.

9. Summary • To establish special securities trading and settlement rules, clearly regulating the system and procedure of trading, clearing, settlement and depository etc. in case of disposing brokers’ risks. • To earnestly research full reimbursement and limited reimbursement system of protection fund, clarify advancement measures for insufficient clients’ settlement property and compensation measures for final loss.

10. Wish this seminar a great success! Thanks!