The China Securities Regulatory Commission has published a State Council regulation governing how securities firms, accounting firms, law firms and other intermediaries provide and charge for services to companies publicly issuing shares in China. The framework sets baseline conduct expectations and restricts fee practices, including prohibiting arrangements that make fees conditional on audit conclusions or public issuance and listing outcomes, with the rules taking effect from 15 February 2025. Fees must be set on a market basis reflecting workload and resource input and agreed in contracts. Securities firms may collect sponsorship fees in stages based on work progress, but whether and how much to charge cannot be conditioned on issuance and listing results, and underwriting fees must comply with securities regulator requirements and cannot use increasing percentage rates based on issuance size. Accounting firms face a similar ban on outcome-linked audit fees, while law firms must charge centrally through the firm in line with relevant legal service fee rules. The regulation bars off-contract charges, side agreements to evade supervision, cross-business fee adjustments that violate the rules, improper equity participation, and “listing reward” payments, and requires issuers to disclose intermediary fee standards, amounts and payment arrangements in prospectuses or other disclosure documents. Local governments are prohibited from granting rewards to issuers or intermediaries conditional on issuance and listing results, and the rules apply by reference to services for Chinese depositary receipts and bonds convertible into shares. Securities supervision, finance, justice administration and other departments are tasked with coordinated oversight, including the option of joint on-site inspections. Violations can trigger rectification orders, warnings, confiscation of illegal gains and fines of one to ten times illegal gains, or CNY 100,000 to CNY 1,000,000 where gains are absent or below CNY 100,000, alongside penalties for responsible individuals and potential suspensions from relevant business for serious staff misconduct. Compliance will be incorporated into the securities market integrity records, relevant departments may issue implementing measures, and any prohibited local government rewards granted after the effective date must be recovered with accountable officials subject to disciplinary action.
China Securities Regulatory Commission 2025-01-10
China Securities Regulatory Commission publishes State Council rules banning outcome-linked fees for public share issuance intermediaries
The China Securities Regulatory Commission has issued a regulation setting conduct standards and fee restrictions for intermediaries in public share issuances, effective 15 February 2025. It prohibits outcome-linked fees and mandates market-based fee setting, with detailed rules for securities, accounting, and law firms. Violations may result in fines, rectification orders, and disciplinary actions, with compliance integrated into market integrity records.