Measures on the Administration of Foreign Institutions Providing Financial Information Services in China

Chinese regulators have lifted rules prohibiting foreign providers of financial information from directly offering services to clients in China, thus enabling them to compete with Xinhua, the official state news agency. At the same time, the State Council Information Office (SCIO) assumed responsibility from Xinhua for overseeing foreign providers of financial information, eliminating the news agency's controversial dual role as regulator and information provider, which had prompted complaints to the WTO by the U.S., European Union and Canada.

As part of its commitments when joining the WTO, China agreed to allow foreign financial information providers access to Chinese markets and to treat those providers the same as their Chinese competitors. In September 2006, however, China issued rules requiring all financial information to be provided through Xinhua or a Xinhua-designated agent. Meanwhile, Xinhua served as industry regulator—even as it launched its own financial information service branch, competing with the foreign providers it regulated. WTO complaints were settled in November 2008.

China's State Council Information Office (SCIO), Ministry of Commerce (MOFCOM) and State Administration for Industry and Commerce (SAIC) jointly issued the Measures on the Administration of Foreign Institutions Providing Financial Information Services in China (Financial Information Measures) on April 30, 2009, to reflect the Chinese government's commitments under the WTO settlement. In accordance with the Financial Information Measures, Xinhua was replaced as the industry regulator by SCIO, the state press regulator. Foreign financial information providers are now allowed to conduct business (except news-gathering activities) in China.

Definitions and Qualifications

The Financial Information Measures define a foreign financial information provider (FFIP) as a foreign institution that provides financial information and/or financial data on markets to financial analysts, traders, decision makers or other participants in financial activities. FFIPs in China must meet the following requirements:

• It must enjoy the corresponding qualifications in the country or region where it is domiciled.
• It must have a good credit standing in the industry.
• It must have specific services to be provided.
• It must have technological support and methods of transmitting information.
• It must meet all other requirements of relevant laws and regulations.

Approval Procedures and Filing of Records

Before engaging in substantive business activities in China, a foreign financial information provider must obtain SCIO approval. The SCIO is required to render its decision on whether or not to grant approval of an FFIP within 20 working days from acceptance of the application. SCIO approval is valid for two years and can be renewed 30 days before expiration.

An FFIP is required to sign written contracts with its Chinese clients when providing financial information services in China.

Within 30 days after receiving SCIO approval, the FFIP must report to the information office any contracts that were executed with Chinese clients before obtaining SCIO approval. An FFIP must also report the execution, change of recorded particulars or termination of any service contract with its Chinese clients to the SCIO within 30 days after the occurrence of any of the above changes. FFIPs must also report such details as the type and nature of information products being provided, method of provision, information on the client, and the length of the contract.

Establishment of the Enterprise

The Financial Information Measures for the first time permit foreign financial information providers actually to establish their business (i.e., a foreign-invested enterprise) in China. Previously, the only investment mechanism allowed was a representative office, which was prohibited from engaging in actual business. The establishment of a foreign-invested financial information service enterprise is subject to MOFCOM or its local agencies' approval. Basic procedures for establishing the enterprise are as follows:

• Apply to the SCIO for approval to provide financial information services.
• Apply to MOFCOM or its local agencies for approval of the establishment of an FFIP enterprise.
• Apply to the SAIC or its local branches for foreign enterprise registration.
• Apply for post-AIC filings.

Data Control and Liabilities

FFIPs are prohibited from providing information that:

• Violates the basic principles of the PRC constitution
• Undermines the unity, sovereignty or territorial integrity of China
• Jeopardizes China's state security or harms state interests
• Violates China's ethnic or religious policies, undermines inter-ethnic unity or propagates cult teachings
• Disseminates false financial information, disrupts the economic order or undermines economic stability or the stability of financial or capital markets, or of society
• Propagates obscenity, pornography, violence or terror
• Incites the commission of crimes
• Insults or slanders a third party or infringes upon the lawful rights and interests of a third party
• Contains other content as prohibited by the laws, regulations and rules of China

The SCIO is authorized under the Financial Information Measures to order corrections, warn and impose fines on foreign financial information providers that violate the approval or record filing requirements of the Financial Information Measures. The SCIO and other government agencies are also authorized to punish, in accordance with the law, any FFIP that violates the above-described restrictions on what types of information may be distributed.

Conclusion

Conceived and enacted as a concession to the WTO, the Financial Information Measures are in effect as of June 1, 2009, but most of the provisions are general and may be difficult to put into practice. New implementation rules are expected in the future to address the remaining uncertainties.