CSA AMENDS UNDERWRITING RULES

05/01/2004

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In line with the Securities and Futures Commis-sion's recent amendments to the Criteria Gov-erning Offering and Issuance of Securities by Securities Issuers, the Chinese Securities Asso-ciation (CSA) has amended its Self-Regulatory Code for Underwriter Members Assisting Issu-ing Companies in Offering and Issuing Securi-ties, its Rules for Securities Firms Handling Se-curities Underwriting or Resale, its Guidelines on the Required Content of Underwriters' Evaluation Reports on Issuers' Offering and Is-suance of Securities, and Annexes 2 (securities underwriting report form) and 3 (checklist for reporting underwriting contracts) of its Handling Procedures for Securities Firms' Reporting of Underwriting Contracts. The CSA has also is-sued its new Guidelines for the Required Content of Underwriters' Evaluation Reports on Offering and Issuance of Real Estate Asset Trust Benefi-ciary Certificates by Trustee. The main points are as follows:

The lock-up period during which the securities cannot be converted or exchanged into com-mon stock must be not less than one month.

When domestic convertible bonds or bonds with stock warrant are sold by competitive bidding or by book building, interested parties of the issuing company may not be subscrib-ers.

The provisions on special conversion price reset of convertible bonds are deleted.

In line with the amended provisions on lock-up periods, the former requirement that the conversion price must be "not less than" the reference price is amended to provide that the conversion price must be "higher than" the reference price.

To protect investors, the underwriter of a TSE or OTC initial public offering must retain 1,000 shares for subscription by the Securities and Futures Investors Protection Center.

New provisions are introduced to regulate underwriting procedures for real estate asset trust beneficiary certificates.