Memorandum of Understanding on the Joint Punishment of Subjects Who Seriously Breach Trust in the Financial Sector

Notice Issung the

Memorandum of Understanding on the Joint Punishment of Subjects Who Seriously Breach Trust in the Financial Sector

Development and Reform Commission Document no. 454 [2017]

In order to implement the spirit of the 18th Party Congress, and of the 3rd, 4th, 5th, 6th Plenums, to implement the requirements of the ‘State Council Opinions on Promoting Fair Competition and Safeguarding the Normal Order of the Market’ (State Council Document no. 20 [2013]) of the ‘State Council Notice Issuing the Planning Outline on the Construction of a Social Credit System (2014-2020)’ (State Council Document no. 21 [2014]) and the general requirements of “praising integrity, punishing breaches of trust”, promoting sharing and integration of big data, innovating and driving a sound social credit system, in accordance with stipulations of the ‘Notice on the Work of Strengthening Supervision and Management on the List of Persons who Severely Breach Trust in the Field of Finance’, the national Development and Reform Commission, the People’s Bank of China, the CBRC, the CSRC, the CIRC, the Supreme People’s Court, the Central Propaganda Department, the Public Sector Reforms Commission, the Central Spiritual Civilization Office, the Cyberspace Administration, the Ministry of Industry and Information Technology, the Ministry of Finance, the Ministry of Human Resources and Social Security, the Ministry of Commerce, SASAC, the General Administration of Customs, the General Administration of Taxation, SAIC, AQSIQ, The Department of Foreign Exchange and other departments have reached the following unanimous opinion:

9 March 2017

Annex: Memorandum of Understanding on the Joint Punishment of Subjects Who Seriously Breach Trust in the Financial Sector

In order to implement the spirit of the 18th Party Congress, and of the 3rd, 4th, 5th, 6th Plenums, to implement the requirements of the ‘State Council Opinions on Promoting Fair Competition and Safeguarding the Normal Order of the Market’ (State Council Document no. 20 [2013]) of the ‘State Council Notice Issuing the Planning Outline on the Construction of a Social Credit System (2014-2020)’ (State Council Document no. 21 [2014]) and the general requirements of “praising integrity, punishing breaches of trust”, promoting sharing and integration of big data, innovating and driving a sound social credit system, in accordance with stipulations of the ‘Notice on the Work of Strengthening Supervision and Management on the List of Persons who Severely Breach Trust in the Field of Finance’, the national Development and Reform Commission, the People’s Bank of China, the CBRC, the CSRC, the CIRC, the Supreme People’s Court, the Central Propaganda Department, the Public Sector Reforms Commission, the Central Spiritual Civilization Office, the Cyberspace Administration, the Ministry of Industry and Information Technology, the Ministry of Finance, the Ministry of Human Resources and Social Security, the Ministry of Commerce, SASAC, the General Administration of Customs, the General Administration of Taxation, SAIC, AQSIQ, The Department of Foreign Exchange and other departments have reached the following consensus on the joint punishment of persons who severely breach trust in the financial sector.

I. Subjects of Joint Punishment

Subjects of joint punishment are parties that shall be included in the list of persons who seriously breach trust in the financial sector. Where the party is an enterprise, the subject of joint punishment shall be its legal representative, its actual controller, the board member, supervisor, senior manager, directly responsible member of staff who bears individual responsibility, or direct leadership responsibility. Where the party is a social organization, the subject of joint punishment shall be the social organization, and its legal representative, and directly responsible member of staff. Where the party is a physical person, the subject of punishment shall be the physical person.

II. Joint Punishment Mechanism

Departments compiling the list of persons who seriously breach trust in the financial sector shall transmit the name of the person breaching trust, its unified social credit number, the circumstances of the breach of trust, the punishment decision and other information to the National Development and Reform Commission through the unified format of the National Credit Information Sharing Platform.The National Development and Reform Commission establishes a system to manage the list of persons who seriously breach trust in the financial sector, and transmits relevant information to the departments signing the present Memorandum of Understanding through the National Credit Information Sharing Platform.All the departments signatories to the Memorandum of Understanding shall, according to the law and regulations, compile the list of persons who seriously breach trust in the financial sector, enforce the punishment measures stipulated in the present Memorandum of Understanding individually or in a coordinated fashion, and provide quarterly feedback on enforcement to the National Development and Reform Commission through the above mentioned system.

III. Punishment Measures and Enforcing Departments and Units

(a) Limitation to the participation in construction projects and government procurement activities to be awarded through tendering and bidding in accordance with the law.

Parties included in the list of persons who seriously breach trust in the financial sector shall be limited, according to the law, in their participation in construction projects to be awarded through tendering and bidding according to the law, or in their participation as suppliers in government procurement activities. Relevant departments such as the National Development and Reform Commission and the Ministry of Finance [shall] enforce [this punishment].

(b) Prudent consideration in the allocation of subsidies

Information about persons seriously breaching trust in the financial sector shall be prudently considered in the process of allocating subsidies and social security funds.To be implemented by relevant departments such as the National Development and Reform Commission, the Ministry of Finance, the Ministry of Human Resources and Social Security, and SASAC.

(c) Prudent consideration of preferential policies

The circumstance of whether relevant institutions and their legal representative, actual controller, board member, supervisor, senior manager, are included on the list of persons seriously breaching trust in the financial sector shall be the object of a careful consideration in their enjoyment of preferential policies in such fields as investment, taxation etc. To be enforced by the National Development and Reform Commission, the Ministry of Commerce, the General Administration of Taxation, and AQSIQ.Where parties included on the list of persons seriously breaching trust in the financial sector apply for a customs certification, such a certification shall be denied. Enterprises that have already obtained such a certification shall have their rating level reduced in accordance with regulations.A strict supervision on import and export of goods shall be enforced on parties included on the list of persons seriously breaching trust in the financial sector. Document audits and inspections of customs clearance shall be intensified. To be implemented by the General Administration of Customs, and AQSIQ.

(d) Strengthening Day-to-day Supervision and Inspection

Parties included on the list of persons seriously breaching trust in the financial sector shall be major targets of an intensified supervision. The force of day-to-day supervision shall be increased in accordance with relevant provisions, the proportion and frequency of random inspections shall be increased, and administrative supervision measures shall be adopted on them in accordance with the law and regulations. To be enforced by municipal market supervision authorities and by industry supervision departments.

(e) Prudent consideration of applications to establish commercial banks or branches thereof, as well as representative offices, and equity participation and acquisition of commercial banks.

Consideration of requests to establish securities companies, fund management companies, future companies, or to be a manger of private investment funds, in applications to establish insurance companies, insurance asset management companies, insurance agent companies, insurance brokerage companies. Consideration to the registration of insurance appraisal organizations. Limitations to the creation of financing guarantee companies. Limitations to the creation of non-bank payment services. Prudent consideration of applications to create bank card clearing institutions. Limitations to the creation of internet loans information intermediary agencies.

Where information relevant to the list of persons seriously breaching trust in the financial sector shall be prudently considered in applications to establish commercial banks or branches thereof, representative offices, and in equity participation, in the acquisition of commercial banks, CBRC shall be responsible. Where information relevant to the list of persons seriously breaching trust in the financial sector shall be used during the approval of securities companies, fund management companies, future companies, or when it shall be the basis of or shall be considered for the registration as a manager of private investment funds, SFC shall be responsible. Where information relevant to the list of persons seriously breaching trust in the financial sector shall be provided to establish insurance companies, insurance asset management companies, insurance agent companies, and it shall be the basis of or it shall be considered in the creation of insurance appraisal organizations, CIRC shall be responsible. Limitations to the creation of non-bank payment services shall be a responsibility of the People’s Bank. Careful consideration of the approval to the creation of bank card clearing institutions shall be a responsibility of the People’s Bank and CRBC. Limitations to the creation of internet loans intermediary agents shall be a responsibility delegated by provincial people’s governments to local departments for financial supervision.

(f) Limitations to the issuance of corporate bonds and to the public issuance of corporate bonds; limitations to registration of non-financial enterprise debt financing tools on the inter-bank market, and strengthening of information disclosure in accordance with requirements relevant to the work of registration, strengthening investor protection mechanisms to prevent relevant risks, major emphasis on ex durante and ex post supervision in case of acquisition of listed companies.

Where an enterprise on the list issues corporate bonds, and the circumstances are serious, a major focus shall be placed on the ex durante and ex post supervision of the company that has been taken over, under the responsibility of the Securities and Futures Commission. The People’s Bank shall be responsible for enforcing limitations to the issuance of non-financial enterprise debt financing tools on the interbank market by parties who are on the list of persons seriously breaching trust in the financial sector. Limitations to the issue of corporate bonds by enterprises on the list shall be enforced by the National Development and Reform Commission.

(g) Prudent consideration of the approval and management of relevant foreign exchange quotas.

Information recorded on the list of persons seriously breaching trust in the financial sector shall be the basis of a prudent consideration in the approval and management processes of the quotas of qualified foreign institutional investors, and qualified domestic institutional investors. To be enforced by the Administration of Foreign Exchange.

(h) Prudent consideration of credit financing by financial institutions.

Financial institutions shall be guided, upon credit financing, to inquire where the credit recipient and its legal representative, actual controller, director, supervision, senior managements are parties on the list. The People’s Bank of China and CBRC shall conduct a strict examination of parties who are on the list of persons seriously breaching trust in the financial sector.

(i) Suspension of shareholding incentive schemes of state-owned holding listed company or termination of equity incentive plans.

If parties on the list of persons seriously breaching trust in the financial sector are state-owned controlled listed companies, their qualification for equity incentive plans or their qualification as a subject of incentive schemes shall be termianted by SASAC in coordination with the Ministry of Finance.

(j) Limitations to the appointment as legal representative, director, supervisor, senior manager of state-owned enterprises.

Where parties on the list of persons seriously breaching trust in the financial sector are individuals, their appointment as senior managers of state-owned enterprises and as legal representatives, directors, supervisors of state-owned capital holding companies shall be limited, as well as their appointment as directors, and supervisors of state capital holding companies, and state capital shares companies. Where they already hold one of these posts, an opinion shall be raised, to remove them from such posts.To be enforced by SASAC, the Ministry of Finance, SAIC and local people’s governments.

(k) Limitations to the appointment as director, supervisor, senior manager of financing guarantee companies, or financial institutions. Limitations to the appointment as director, supervisor, senior manager of securities companies fund managment companies, and futures companies. Strict audit of their application for professional qualification in the field of securities, funds and futures, and strict attention towards those who have already become certified professionals in the fields of securities, funds, and futures. Limitations to the appointment as chairman, executive director, senior manager of insurance agent companies, insurance brokerage companies, insurance valutation companies. Limitations to the appointment as legal representative, chairman, executive director, general manager, senior manager, executive partner and other senior management roles in private equity fund management. Limitations to the appointment as director, supervisor, senior manager of non bank payment services. Limitations to the appointment as director, supervisor senior manager of bank card clearing institutions.

Limitations to the appointment as director, supervisor, high level manager of financial institutions of parties on the list of of persons seriously breaching trust in the financial sector shall be lawfully enforced by the CRBC, the National Development and Reform Commission, CIRC, the Ministry of Information, the Ministry of Finance and the General Administration of Industry and Commerce in coordination with departments with the statutory function to examine and approve appointments and qualifications at financial institutions. Limitations to the appointment as director, supervisor, high level manager of financing guarantee companies of parties on the list of persons seriously breaching trust in the financial sector shall be lawfully enforced by departments with the statutory function to supervise financing guarantee companies, which have been designated by the local government. Limitations to the appointment as director, supervisor, senior manager of securities companies, fund management companies, futures companies shall be placed on parties on the list of persons seriously breaching trust. Their applications for professional qualifications in securities, funds, futures shall undergo a strict audit. Where they have already obtained qualification in securities, funds, futures they shall receive a strict attention by SFC. Limitations to their appointment as chairman, executive director, senior manager of insurance agent companies, insurance brokerage companies, insurance valutation companies shall be enforced by CIRC. Limitations to the appointment as legal representative, chairman, executive director, general manager, senior manager, executive partner and consideration of other senior management roles in private equity fund management shall be enforced by SFC. Limitations to the appointment as director, supervisor, senior manager of non bank payment services shall be enforced by the People’s Bank. Limitations to the appointment as director, supervisor, and consideration of the appointment as senior manager of bank card clearing institutions shall be enforced by the People’s Bank and by CBRC.

(l) Limitations to the registration as the legal representative of a public service unit.

Where parties on the list of persons seriously breaching trust in the financial sector are individuals, limitations to their registration as the legal representative of a public service unit shall be enforced by the Public Sector Reform Commission.

(m) Limitations to the enrollment (recruitment) as a civil servants or staff or public service units.

Limitations to the enrollment (recruitment) as civil servants or staff of public service institutions of parties on the list of persons seriously breaching trust in the financial sector shall be enforced by the Central Organization Department, the Ministry of Human Resources and Social Security, the Civil Service Bureau and other relevant departments.

(m) Prohibition to the nomination as a civilized unit, or a model of ethics.

Where an institution, an enterprise service unit, a social organization or their leading members have been included on the list of persons seriously breaching trust in the financial sector, they shall not take part to the selection of civilized units, and the honorary titles of civilized units already obtained shall be revoked.No one of the categories of parties on the list of persons seriously breaching trust in the financial sector shall take part to selections as ‘Model of Ethics’ , and the honorary titles of ‘Model of Ethics’ already obtained shall be revoked.To be enforced by the Central propaganda Department and the Central Civilization office.

(n) Limitations to industry certifications as an inspector.

Personnel on the list of persons seriously breaching trust in the financial sector shall have their industry certification as an inspector limited.To be enforced by the Certification and Accreditation Administration of the People’s Republic of China.

(o) Limitations to access to certifications as an institutional inspector, limitations to access to approved credentials.

Legal persons on the list of persons seriously breaching trust in the financial sector shall have their certification as an institutional inspector limited. Their access to approved credentials shall be limited, and approved credentials they already have obtained shall be suspended, or corresponding certifications shall be revoked. To be enforced by the Certification and Accreditation Administration of the People’s Republic of China.

(p) Disclosure to the public of information through the ‘Credit China’ website and the Enterprise Credit Information Publicity System.

Public disclosure of information on parties on the list of persons breaching trust shall be enforced by the National Development and Reform Commission, and by the State Administration of Industry and Commerce through the ‘China Credit’ website, and the Enterprise Credit Information Publicity System.

(q) Disclosure to the public through major news information websites.

The Cyberspace Administration shall coordinate public dissemination of information about parties on the list of persons breaching trust by relevant internet news information service units.

IV. Other Matters

All departments should work closely together to implement the present Memorandum of Understanding, formulate relevant implementation rules and procedures for the use, management, and supervision of information on the list of persons seriously breaching trust in the financial sector, and guarantee the sharing of information on the list of persons seriously breaching trust in the financial sector, as well as their joint punishment, by June 2017.

Concrete operational issues arising in the course of implementation of the present Memorandum of Understanding shall be solved in coordination by each respective department.

Appendix: Table of relevant laws and regulations (omitted).


While useful for academic analyses, the English version of the document presented in this post is not legally valid before Chinese courts, and administrative agencies. Readers interested in the official version of this document are encouraged to consult the official website of the National Development and Reform Commissionwhere the official version of this Memorandum of Understanding was first posted. This translation is offered ‘as it is’, and for reference only.  All rights on this work belong to the Foundation for Law and International Affairs and to The Coalition for Peace and Ethics. Reproduction of this work is not allowed in any form without prior written consent.  Please consult this Blog’s Terms and Conditions.

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