Our company has organized a study session on documents related to investor protection.

　　Recently, the General Office of the State Council issued the “Opinions on Further Strengthening the Protection of the Legitimate Rights and Interests of Small and Medium-Sized Investors in the Capital Market” (Guobanfa [2013] No. 110, hereinafter referred to as the “Opinions”), which comprehensively establishes a policy framework for safeguarding the legitimate rights and interests of small and medium-sized investors. Subsequently, the China Securities Regulatory Commission published on its official website an article titled “The General Office of the State Council Issues Opinions on Protecting the Rights and Interests of Small and Medium-Sized Investors, Promoting Comprehensive Advancement of Capital Market Infrastructure,” emphasizing the significance and necessity of the issuance of the “Opinions” and providing an interpretation thereof.
　　Protecting the rights and interests of small and medium-sized investors is a vital cornerstone of capital market development. The company attaches great importance to this issue and has taken this opportunity to designate January 2014 as the “Investor Protection Awareness and Learning Month,” organizing relevant personnel to study pertinent documents carefully and thoroughly grasp their guiding principles. This ensures that, in future work, the legitimate rights and interests of investors—particularly small and medium-sized investors—will be better safeguarded, thereby upholding the capital market’s principles of openness, fairness, and impartiality.

Annex I
　　　　　　　　　　　　　Opinions of the General Office of the State Council on Further Strengthening the Protection of the Legitimate Rights and Interests of Small and Medium-Sized Investors in the Capital Market
　　　　　　　　　　　　　　　　　　　　　　　　　General Office Document No. 110 [2013]

To the People’s Governments of all provinces, autonomous regions, and municipalities directly under the central government; to all ministries and commissions of the State Council, and to all institutions directly affiliated with the State Council:
　　Small and medium-sized investors constitute the principal constituency in China’s capital market at this stage; however, they are at an informational disadvantage, possess limited risk‑resilience and self‑protection capabilities, and are thus vulnerable to infringements of their legitimate rights and interests. Safeguarding the lawful rights and interests of small and medium-sized investors is a top priority of securities and futures regulatory work, as it directly affects the vital interests of the broad public and underpins the sustained, sound development of the capital market. In recent years, China has achieved notable progress in protecting small and medium-sized investors; nevertheless, significant gaps remain when compared with the requirements for ensuring “openness, fairness, and impartiality” in the market and for fully safeguarding the legitimate rights and interests of all investors. To implement the spirit of the 18th National Congress of the Communist Party of China, the Third Plenary Session of the 18th CPC Central Committee, and relevant directives issued by the State Council, and to further strengthen the protection of the lawful rights and interests of small and medium-sized investors in the capital market, with the approval of the State Council, the following opinions are hereby put forward.

I. Improving the Investor Suitability System
　　Develop and refine classification standards for small and medium-sized investors. Based on the actual conditions of China’s capital market, formulate and publicly disclose these classification standards and their underlying criteria, while conducting ongoing assessments and adjustments. Further standardize investor suitability arrangements across different market tiers and trading products, clearly defining the scope and modalities appropriate for each category of investor.
　　Scientifically classify risk levels. Securities and futures operating institutions and intermediary agencies shall assess the risks of products or services and assign them to appropriate risk categories. They shall recommend products or services that are suitable for investors’ risk tolerance and risk‑identification capabilities, fully disclose information that may affect investors’ rights, and refrain from misleading or defrauding clients.
　　Further refine regulatory frameworks and market service rules. Securities and futures firms and intermediary institutions shall establish professional standards and internal accountability mechanisms; sales personnel are prohibited from accepting client mandates to execute trades in their personal capacity. Investors must be explicitly advised to provide accurate and truthful information, and any personal data collected must be strictly confidential and securely safeguarded, with no sale or unlawful disclosure to third parties. The investor suitability regime must be rigorously enforced and oversight strengthened; where violations of suitability‑management requirements result in losses for retail investors, liability shall be pursued in accordance with the law.

II. Optimizing the Investment Return Mechanism
　　Guide and support listed companies in enhancing their ability to deliver sustained returns. Listed companies should improve corporate governance, boost profitability, and proactively reward investors. When a company undertakes an initial public offering, raises capital through secondary offerings, or engages in mergers and acquisitions that dilute immediate earnings per share, it shall commit to and implement concrete measures to compensate for such dilution.
　　Improve the profit distribution system. Listed companies shall disclose specific arrangements and commitments related to their profit distribution policies, particularly cash dividend policies. Listed companies that fail to honor their dividend commitments shall have such failures recorded in their integrity files, and those that do not meet the required remediation standards shall be prohibited from raising capital through refinancing. Independent directors and relevant intermediary institutions shall provide clear opinions on whether the profit distribution policy infringes upon the legitimate rights and interests of small and medium-sized investors.
Establish a diversified investment‑return framework. Enhance the share‑repurchase regime and encourage listed companies to commit to repurchasing shares when their stock price falls below net asset value per share, among other scenarios. Study the introduction of a “share‑for‑dividend” mechanism to diversify dividend‑distribution methods. Provide regulatory support to listed companies that maintain consistent and stable cash dividends. Formulate differentiated policies to guide dividend practices. Refine the arrangements for ex‑dividend and ex‑rights adjustments.
　　Develop specialized intermediary institutions that serve small and medium-sized investors. Encourage the development of products tailored to the needs of these investors. Promote their participation in the market through institutional investors. Fund managers should faithfully honor their dividend‑payment commitments and strive to deliver strong investment returns. Diversify fund management fee structures and levels to establish fee models that align the interests of fund managers with those of unit holders.

III. Safeguarding the Right to Information of Small and Medium-Sized Investors
　　Enhance the targeted nature of information disclosure. Relevant entities shall disclose, in a truthful, accurate, complete, and timely manner, information that has a material impact on investment decisions; such disclosures should be concise and easy to understand, fully disclose risks, and be readily accessible to retail investors. Strengthen internal information disclosure systems and procedures, and reinforce the responsibilities of board secretaries and other relevant personnel. Develop voluntary and streamlined information disclosure rules.
　　Enhance market transparency. For information that materially affects securities and futures prices, trading venues and relevant entities shall promptly fulfill their obligations to report, disclose, and warn of risks. Establish a unified information disclosure platform. Improve the mechanisms for disclosing information on cross‑market trading products and emergency events. Strengthen accountability mechanisms for abnormal disclosure circumstances, and intensify dynamic oversight of information disclosure by listed companies when sensitive events occur.
　　Fulfill information disclosure obligations in good faith. Prior to legally disclosing information, listed companies shall not unlawfully provide relevant information to any third party. Commitments made by controlling shareholders and actual controllers in information disclosure documents must be specific and actionable; in particular, they should clearly undertake liability for compensation or indemnification and faithfully honor such commitments. Listed companies shall specify the timing and methods for responding to investor inquiries and establish a robust mechanism for monitoring public sentiment.

IV. Improving the Voting Mechanism for Small and Medium-Sized Investors
　　Improve mechanisms such as voting by small and medium-sized investors. Encourage listed companies to adopt online voting for all shareholders’ meetings. Actively promote the cumulative voting system for the election of directors and supervisors. Listed companies shall not impose minimum shareholding thresholds on the solicitation of voting rights. Refine the third-party witnessing system for voting at shareholders’ meetings of listed companies. Study ways to improve the mechanism allowing small and medium-sized investors to propose motions to remove company directors. Self-regulatory organizations should strengthen the systems for filing independent directors and evaluating their performance.
　　Establish a separate vote-counting mechanism for small and medium-sized investors. When a listed company’s shareholders’ meeting deliberates on significant matters that affect the interests of small and medium-sized investors, votes cast by such investors shall be counted separately. The results of the separate vote count shall be promptly disclosed to the public and reported to the securities regulatory authorities.
　　Safeguard the lawful rights and interests of small and medium-sized investors. Improve systems for avoiding conflicts of interest, preventing同业 competition, and ensuring fair treatment of related-party transactions. Controlling shareholders and actual controllers of listed companies shall not restrict or obstruct small and medium-sized investors from exercising their lawful rights, nor shall they impair the rights and interests of the company or such investors. Enhance the mechanisms for bondholders’ meetings and trustee management in publicly issued corporate bonds. Fund managers must facilitate the exercise of voting rights by fund unit holders and encourage small and medium-sized investors to participate in unit holder meetings.

V. Establishing a Diversified Dispute Resolution Mechanism
　　Improve the dispute resolution mechanism. Listed companies and securities and futures operating institutions, among others, should assume primary responsibility for handling investor complaints, refine their complaint-handling procedures, and publicly disclose both the processes and the status of case resolution. Securities regulators should strengthen the registration and filing system, using the outcomes of complaint handling as a key criterion for assessing the compliance‑management standards of relevant entities. Investors should be encouraged to resolve disputes through negotiation with market participants or by reaching settlement agreements.
　　Harness the role of third-party institutions. Support self-regulatory organizations and market entities in conducting securities and futures‑related professional mediation, either independently or jointly, in accordance with the law, thereby providing free services to small and medium‑sized investors. Develop arbitration services for securities and futures matters and cultivate a pool of specialized arbitrators. Establish mechanisms to ensure seamless coordination among mediation, arbitration, and litigation.
　　Strengthen coordination and cooperation. Relevant departments shall work with judicial authorities to improve the civil litigation system for infringement cases, streamline procedures for small and medium-sized investors to protect their rights in accordance with the law, and reduce the costs of pursuing such rights. Establish and refine a mechanism for redress and rights protection that is tailored to the characteristics of civil tort claims brought by small and medium-sized investors in the capital market. Promote the enhancement of measures to safeguard investors’ interests in bankruptcy and liquidation proceedings.

VI. Improving the Compensation Mechanism for Small and Medium-Sized Investors
　　Urge parties who have engaged in violations or are implicated in cases to proactively compensate investors. Controlling shareholders and actual controllers of listed companies who bear responsibility for illegal acts shall, on their own initiative and in accordance with the law, use the company shares and other assets they hold to compensate small and medium-sized investors. Where false statements, misleading representations, or material omissions in a prospectus cause losses to investors, the responsible parties must compensate investors in accordance with the law, and intermediary institutions shall also assume corresponding liabilities. If fund managers, custodians, or other entities fail to fulfill their duties of due diligence, resulting in property losses to unit holders, they shall compensate in accordance with the law.
　　Establish a mechanism for addressing delisting risks faced by listed companies. Listed companies that face delisting risks due to violations of laws or regulations shall, in their periodic reports, conduct a dedicated assessment of such risks and propose corresponding contingency plans. Study the establishment of a debt‑service fund system for publicly issued corporate bonds. Introduce an insurance mechanism for the delisting of listed companies, adding a delisting‑insurance rider to relevant liability insurance policies. Improve the professional insurance system for securities intermediaries.
　　Improve the risk‑mitigation and investor‑compensation mechanisms. Securities and futures firms and fund managers should, within the existing policy framework, leverage their risk‑provision reserves to enhance self‑help relief mechanisms and compensate investors for losses in accordance with the law. Study the introduction of a sponsor‑guarantee deposit system for securities offerings and a risk‑provision reserve system for listed companies’ violations. Explore the establishment of an administrative settlement mechanism in the securities and futures sectors and launch pilot programs for such settlements. Examine ways to broaden the scope of use and diversify the sources of the Securities Investor Protection Fund and the Futures Investor Protection Fund.

VII. Strengthen Supervision and Enforcement Efforts
　　Improve regulatory policies. Securities regulators should ensure that the protection of the legitimate rights and interests of small and medium-sized investors is integrated throughout all aspects of their regulatory work. For securities and futures activities subject to administrative licensing, registration, or filing requirements, securities regulators must establish corresponding mechanisms to safeguard investors’ lawful rights and interests. Establish a pre‑disclosure system for share reduction plans by shareholders holding restricted shares; prior to such disclosure, these shareholders shall be prohibited from transferring their shares. Encourage shareholders of restricted shares to voluntarily extend the lock‑up period. Develop a market‑wide database of integrity records and facilitate inter‑departmental data sharing. Enhance mechanisms enabling small and medium-sized investors to access information on the integrity status of market participants. Put in place incentive measures for those who uphold integrity and punitive measures for those who breach it.
　　We will resolutely investigate and prosecute illegal acts that harm the legitimate rights and interests of small and medium-sized investors. We will rigorously address such misconduct as listed companies’ improper revisions of earnings forecasts, failure to disclose material events that cause abnormal stock price movements, premature release of information ahead of designated media, substituting press releases for required public announcements, fabricating or disseminating false information to mislead investors, as well as engaging in insider trading and market manipulation. We will also firmly crack down on any direct or indirect transfer or appropriation of a listed company’s assets by its controlling shareholders or actual controllers. In addition, we will establish a reward system for reporting securities and futures law violations.
　　Strengthen law enforcement cooperation. All regions and departments should align their understanding, coordinate closely, and crack down rigorously on all types of securities and futures‑related illegal and criminal activities, promptly rectifying any conduct that infringes upon the legitimate rights and interests of small and medium investors. Establish a rapid response and handling mechanism for incidents that harm the legitimate rights and interests of small and medium investors, formulate and refine contingency plans for responding to sudden mass‑action events, and ensure effective management of such incidents while maintaining social stability. Securities regulatory authorities and public security organs should continuously enhance law enforcement collaboration, improve working mechanisms, and intensify early‑stage intervention. Relevant departments shall cooperate with public security and judicial authorities to refine the standards for prosecuting securities and futures‑related crimes and to develop corresponding judicial interpretations.

VIII. Strengthening Investor Education for Small and Medium-Sized Investors
　　Strengthen efforts to promote public awareness of securities and futures. Gradually integrate investor education into the national education system, with pilot programs launched in regions that are well‑equipped to do so. Fully leverage the media’s role in shaping public opinion and delivering educational outreach. Securities and futures firms should assume responsibility for investor education related to all their products and services, ensuring adequate funding and staffing, and embedding investor education across all stages of their operations.
　　Enhance investors’ risk awareness. Self-regulatory organizations should strengthen their investor education functions and refine self-regulatory rules governing member‑provided investor education services. Small and medium‑sized investors should cultivate a rational investment mindset, exercise their rights and fulfill their obligations in accordance with the law, develop sound investment habits, refrain from crediting unsubstantiated rumors or engaging in blind herd behavior, and bolster their risk awareness and self‑protection capabilities.

IX. Improving the Investor Protection Organizational Framework
　　Establish a comprehensive protection framework. Accelerate the development of an integrated system encompassing legal safeguards, regulatory oversight, self‑regulatory measures, market‑based protections, and investor‑initiated initiatives, thereby institutionalizing, standardizing, and normalizing the protection of small and medium‑sized investors. Securities regulators, self‑regulatory organizations, and market participants should strengthen their organizational structures and operational procedures, increase resource allocation, upgrade infrastructure, and ensure smooth communication channels with small and medium‑sized investors. Securities regulators shall establish an inspection regime and an assessment‑evaluation framework for safeguarding the legitimate rights and interests of small and medium‑sized investors, making these mechanisms key criteria in routine supervision and the review of administrative licensing applications.
　　Improve the organizational framework. Explore the establishment of self-regulatory bodies and public-interest rights-protection organizations for small and medium-sized investors, providing them with relief and assistance, and enriching the range of rights‑protection mechanisms and methods, including settlement, mediation, arbitration, and litigation. Fully leverage the role of securities and futures‑specialized lawyers, and encourage and support them in offering pro bono legal assistance to small and medium-sized investors.
　　Optimizing the policy environment. Securities regulators should further refine policies and measures to enhance the protection of the legitimate rights and interests of small and medium-sized investors. State‑owned major shareholders or de facto controllers of listed companies shall exercise their rights in accordance with the law and support market participants in fulfilling their statutory obligations. Fiscal, tax, and securities authorities should improve relevant tax and fee regimes pertaining to trading and dividend distribution, thereby optimizing the investment climate. When departments under the State Council and local people’s governments request listed companies to disclose non‑public information, they must comply with applicable laws and regulations. Relevant authorities should streamline mechanisms for data collection and dissemination, strengthen information sharing, and establish a coordinated communication framework for safeguarding investors’ legitimate rights and interests. Furthermore, international regulatory cooperation and exchanges should be reinforced to ensure cross‑border oversight and protection of investors’ lawful rights and interests.
　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　General Office of the State Council
　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　December 25, 2013

Annex II
　　　　　　　　　　　　　　The General Office of the State Council has issued Opinions on Protecting the Rights and Interests of Small and Medium-Sized Investors, comprehensively advancing the foundational development of the capital market.

　　On December 25, 2013, the General Office of the State Council issued the “Opinions on Further Strengthening the Protection of the Legitimate Rights and Interests of Small and Medium-Sized Investors in the Capital Market” (hereinafter referred to as the “Opinions”).
　　The “Opinions” are grounded in the actual conditions of China’s capital market and guided by investors’ needs and the protection of their legitimate rights and interests. Addressing longstanding, salient issues in investor protection, they establish a systemic framework for safeguarding the rights and interests of small and medium-sized investors in the capital market, serving as a programmatic document that guides efforts to protect these investors and promotes the sustained, healthy development of the capital market.
　　CSRC spokesperson Deng Ge stated that the issuance of the “Opinions” marks an important milestone in the development of China’s capital market, carrying significant practical implications and poised to exert far-reaching influence. First, it will help safeguard the legitimate interests of hundreds of millions of people and uphold social fairness and justice. Second, it will bolster market confidence, invigorate market dynamism, encourage innovation, and accelerate the development of a multi-tiered capital market. Third, it will enhance market functions, shifting the focus from an overemphasis on financing to a balanced approach that prioritizes both financing and investment, enriching market instruments and products, strengthening risk‑based classification and management, and better meeting the diversified needs of investors. Fourth, it will further facilitate the transformation of government functions and advance regulatory reform, moving away from excessive ex‑ante approvals toward strengthened ongoing and ex‑post supervision, while effectively reinforcing law enforcement and holding market participants more accountable.
　　Deng Ge, spokesperson for the China Securities Regulatory Commission, stated that the Opinions are centered on the fundamental rights most important to small and medium-sized investors—namely, the right to returns, the right to information, the right to participate in oversight, and the right to seek redress—and have put in place targeted institutional arrangements.

　　First, we will improve the investor suitability framework. Suitability management serves as the first line of defense for investors entering the capital markets. By establishing unified regulations on investor suitability and market service standards, systematically categorizing the risk levels of various products and services, and defining appropriate investor access criteria and protective measures, a professional market service framework tailored to investor needs and rights protection can be put in place, thereby comprehensively enhancing the service quality of all market participants.

　　 Second, optimize the investment return mechanism. Obtaining a return on investment is a legitimate right of small and medium-sized investors. In response to issues such as low returns, limited return mechanisms, and an imperfect return‑generation framework, the Opinions call for guiding and supporting listed companies in enhancing their capacity for sustained returns, improving profit‑distribution policies, establishing a diversified return‑generation system, developing specialized intermediary institutions that serve small and medium-sized investors, and encouraging the development of low‑risk, stable‑return products tailored to this investor segment.

　　 Third, safeguard investors’ rights to participation and to information. Facilitating investors’ exercise of their rights is a fundamental safeguard for awakening awareness of investor rights and upholding fairness and justice. The “Opinions” set forth a series of coordinated measures to streamline the exercise of investor rights, providing robust support for fully implementing investors’ rights to information, participation, and oversight, and for enhancing corporate governance. The document calls for guiding listed companies to adopt online voting across the board, actively promote cumulative voting, prohibit imposing minimum shareholding thresholds on the solicitation of proxy votes, and refine the mechanism for minority shareholders to propose the removal of directors. It also establishes a separate vote-counting system for minority investors and mandates the public disclosure of vote‑counting results. With information disclosure at its core, the framework seeks to ensure investors’ right to know and equitable access to information, while enhancing the relevance of disclosures and formulating voluntary, streamlined disclosure standards. For matters that may trigger price volatility, issuers are required to promptly disclose or clarify relevant information, and mechanisms for holding accountable those responsible for breaches of information‑disclosure obligations are to be strengthened.

　　 Fourth, strengthen the resolution of disputes and the provision of compensation and relief for small and medium-sized investors. The Opinions propose establishing a range of mechanisms for resolving rights‑related disputes, supporting investors and market participants in negotiating settlements or reaching amicable agreements. They also endorse the provision of professional mediation and arbitration services and the establishment of linkages between mediation/arbitration and litigation. Furthermore, the framework seeks to refine civil litigation procedures for addressing infringement, streamlining the legal avenues available to small and medium‑sized investors for protecting their rights. In response to pressing issues involving violations of investor rights, the Opinions specify liability at every stage—ranging from securities issuance and corporate oversight to institutional regulation and delisting. To this end, they introduce systems such as a guarantee fund for underwriting securities issuances, a risk‑reserve fund for listed companies’ regulatory violations, risk‑reserve funds for various financial institutions, corporate debt‑repayment funds, professional liability insurance for securities intermediaries, and delisting‑liability insurance. At the same time, efforts to crack down on acts that harm the rights of small and medium‑sized investors will be intensified, with the creation of a market‑wide integrity‑record database and the enhancement of mechanisms for rewarding good faith and sanctioning misconduct.

　　 Fifth, strengthen investor education for small and medium-sized investors and improve the institutional framework for investor protection. The Opinions call for integrating investor education into the national education system. By strengthening educational services for small and medium-sized investors, they aim to foster a culture of rational investing, encourage the lawful exercise of rights and fulfillment of obligations, cultivate sound investment habits, discourage reliance on rumors and blind herd behavior, and enhance risk awareness and self‑protection capabilities. Securities and futures firms are urged to incorporate investor education into all aspects of their operations, including account opening, trading, marketing, and customer service. Protecting the rights and interests of small and medium-sized investors is a systemic undertaking that requires coordinated efforts to build a unified protective framework. The Opinions further emphasize the need to accelerate the establishment of a comprehensive protection system encompassing legal safeguards, regulatory oversight, self‑regulatory mechanisms, market‑based measures, and self‑protection.

　　CSRC spokesperson Deng Ge emphasized that the “Opinions” have established more than 80 policy measures across nine key areas to safeguard the rights and interests of small and medium-sized investors, featuring numerous institutional innovations and reform highlights. Fully implementing all the institutional arrangements set forth in the “Opinions” will further strengthen the foundation for capital market development, enhance the market’s intrinsic quality and operational efficiency, boost its investment appeal, and optimize resource allocation—thereby providing a fundamental guarantee for the market’s long-term, stable, and healthy growth.