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Article NO. Content

Title:

Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers  CH

Amended Date: 2017.11.22 
Categories: Market Supervision > Regulation of Securities Firms
Article 5     A securities firm concurrently operating securities proprietary trading or securities underwriting business shall maintain the independence of its recommendation business, to avoid impairing fair price formation of the securities it recommends, and to avoid damaging the rights and interests of customers to whom it makes recommendations.
    A securities firm shall establish an internal control system to prevent conflicts of interest and, upon its confirmation by the compliance officer or responsible officer and audit officer, present the same to the board of directors for adoption. After the release of a research report by the brokerage department recommending trades in securities to customers, neither the securities firm nor its personnel may conduct any trade in the objects recommended in the report within two hours of the commencement of the trading hours of the market; if said report is released within the trading hours of the market, no such trade may be conducted until two hours after the commencement of the trading hours of the market on the following business day.
    The securities firm's proprietary trading division may trade securities to meet the following needs without being subject to the restrictions in the preceding paragraph:
  1. in order to meet the hedging needs for the issuance of call (put) warrants or trading of financial derivative products;
  2. in order to subscribe or redeem the exchange-traded fund (ETF) beneficial certificates;
  3. in order to trade the ETF beneficiary certificates and call (put) warrants if it acts as liquidity provider of the ETF beneficiary certificates and call (put) warrants; or
  4. in order to meet the hedging needs for objects of securities and futures contracts if it, also a futures proprietary merchant, acts as market maker.
    A securities firm shall not recommend that a customer trade in any security in which the securities firm conducts stabilization operation trading.
    When the underwriting department [of a securities firm] underwrites securities, the brokerage department shall not recommend trading in such securities during the period from the signing of the underwriting agreement with the listed company to the deadline for payment.
    When the underwriting department [of a securities firm] acquires securities on a firm commitment basis, the brokerage department shall not recommend purchase of such securities before the [firm commitment underwriting obligations] have been completed in accordance with regulations.

Interpretation: