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The Administrative Punishment Law of the People's Republic of China has been amended twice since its implementation on October 1, 1996, and this year it has been overhauled. The draft of the revised draft has been published in full on the Chinese website for public comment. One of the most interesting points of this revision is that the types of administrative punishments have been adjusted and some new types of punishments have been added.

According to Article 9 of the Draft for Comments, the types of administrative punishments include: (1) warnings, circulating criticism; (2) Fines, confiscation of unlawful gains, and confiscation of illegal property; (3) Temporarily withholding licenses, lowering qualification levels, revoking licenses, or not applying for administrative licenses; (4) Ordering the suspension of production and business, restricting the development of production and business activities, restricting employment, ordering the cessation of conduct, and ordering the performance of conduct; (5) Administrative detention; (6) Other administrative punishments provided for by laws and administrative regulations.

What do you think? For practitioners in the securities industry, are there some familiar things in the types of administrative punishments proposed to be added in the Administrative Punishment Law? Yes, some of the new types of administrative penalties added in the Draft Revised Administrative Punishment Law cover the types of administrative regulatory measures taken by the CSRC.

This raises the question, if the draft amendment is passed, what will happen to the corresponding types of CSRC administrative supervision measures? The direct legal basis for CSRC to take administrative supervision measures against securities business institutions and their practitioners is the departmental rule "Measures for the Implementation of Measures for the Supervision and Administration of the Securities and Futures Market (for Trial Implementation)".

The Measures divide administrative supervision measures into supervision and management measures provided by laws and administrative regulations and supervision and management measures stipulated by CSRC rules. Among them, the supervision and management measures stipulated by laws and administrative regulations include ordering an increase in the number of internal compliance inspections, publicly reprimanding, ordering the punishment of relevant personnel, ordering the suspension of authority or dismissal from office,

Order the replacement of directors, supervisors and senior management or restrict their rights, revoke their qualifications, suspend the approval of new business or the application for the establishment or acquisition of commercial branches, restrict the business activities of securities and futures business institutions, restrict the rights of shareholders, or order the transfer of equity and temporary takeover.

The supervision and management measures stipulated in the CSRC's rules include ordering corrections, supervising interviews, issuing warning letters, ordering public explanations, ordering participation in training, ordering periodic reports, identifying as inappropriate candidates, and temporarily disaccepting documents related to administrative licensing.

There has long been considerable controversy about the nature of these oversight measures. One of the more common views is that the part of these supervision and management measures that has a punitive nature and has a derogating impact on the rights of the management counterparty should be administrative punishment in essence.

The current Administrative Punishment Law does not define what constitutes administrative punishment, but scholars generally believe that administrative punishment is a way for administrative organs to punish perpetrators who violate administrative management order. Article 2 of the Draft Revision of the Administrative Punishment Law states as follows: "Administrative punishment means that in the course of administrative management, an administrative organ

Citizens, legal persons, or other organizations that violate the order of administrative management are punished by reducing their rights or increasing their obligations in accordance with law. ”

Let's go back to the SFC's administrative regulatory measures.

01 The first is the administrative supervision measures prescribed by law. Articles 140 to 144 of the Securities Law stipulate the content of relevant administrative supervision measures. When a securities company has serious problems in corporate governance and internal control, and there are or occur major risks that endanger the market order and harm the interests of customers or investors, etc.,

The CSRC may take administrative supervision measures against securities companies and related personnel, and these provisions are independent of the chapter on legal liability of the Securities Law, which shows that the administrative supervision measures stipulated in the Securities Law are emergency measures with the nature of risk disposal and are not of a punitive nature.

02 The second is the administrative supervision measures stipulated by administrative regulations. The only administrative regulations concerning securities companies are the Regulations of the State Council on the Supervision and Administration of Securities Companies. Article 70 of the Regulations stipulates that the CSRC shall have an unsound governance structure, imperfect internal control, chaotic operation and management, establish off-the-books accounts or conduct off-the-books operations, refuse to implement supervision and management decisions,

Securities companies that violate laws and regulations may take supervision and management measures. It can be seen that in the Regulations on the Supervision and Administration of Securities Companies, administrative supervision measures have begun to have the nature of puniting violations of laws and regulations. However, the Regulations separately stipulate administrative supervision measures and administrative punishments, and do not include administrative supervision measures with a punitive nature in the types of administrative punishments.

03 Finally, there are the administrative supervision measures stipulated in the rules and regulations of the CSRC. There are many such provisions, and judging from their provisions, they focus on punishing offenders, and also include a small number of disposal of internal control problems and hidden risks of securities business institutions. For example, Article 33 of the Interim Provisions on Securities Investment Advisory Business, which came into effect on January 1, 2011, stipulates that

"Where securities companies, securities investment consulting institutions and their personnel engage in securities investment advisory business and violate laws, administrative regulations and these Provisions, the CSRC and its dispatched agencies may take measures to order corrections, conduct regulatory interviews, issue warning letters, order to increase the number of internal compliance inspections and submit compliance inspection reports, order the liquidation of illegal businesses,

Order the suspension of new customers, order the punishment of relevant personnel and other regulatory measures;

where the circumstances are serious, the CSRC shall impose administrative penalties in accordance with laws, administrative regulations and relevant provisions;

Where a crime is suspected, it shall be transferred to the judicial organs in accordance with law. Another example is Article 58 of the Administrative Measures for the Issuance and Trading of Corporate Bonds, "The CSRC may order corrections, supervise interviews, issue warning letters, order public explanations, order participation in training, order periodic reports, and identify as inappropriate persons for institutions and personnel that violate laws, regulations and the provisions of these Measures.

Temporary acceptance of documents related to administrative licensing and other relevant regulatory measures; Where administrative penalties should be imposed according to law, penalties shall be imposed in accordance with laws and regulations such as the Securities Law, the Administrative Punishment Law and the relevant provisions of the China Securities Regulatory Commission;

Where a crime is suspected, it shall be transferred to the judicial organ in accordance with law and their criminal responsibility shall be investigated. "This is already a completely punitive measure that treats administrative supervision measures as less severe than administrative punishment."

In practice, administrative supervision measures taken against illegal acts of securities business institutions and their practitioners in accordance with the Regulations on the Supervision and Administration of Securities Companies and the rules of the CSRC are generally regarded as acts of the same nature as administrative penalties, and no distinction is made between administrative supervision measures and administrative penalties in media reports.

collectively referred to as penalties; In the CSRC's Provisions on the Classification and Supervision of Securities Companies, points are also deducted for criminal sanctions, administrative penalties and administrative supervision measures, but the value of the points deducted is different. However, the Administrative Punishment Law clearly stipulates that only laws and administrative regulations can stipulate the types of administrative punishments.

Departmental rules do not have the authority to stipulate the types of administrative punishments, and can only provide for the specific enforcement of administrative punishments in accordance with the provisions of laws and administrative regulations. If the administrative supervision measures taken against the offender are considered to be administrative punishments,

Then the so-called administrative supervision measures stipulated in the CSRC rules fundamentally violate the provisions of the Administrative Punishment Law and are illegal and invalid.

In this regard, both the court and the China Securities Regulatory Commission have adopted an evasive attitude, that is, evading the legal nature of administrative supervision measures (anyway, the Administrative Punishment Law does not stipulate what administrative punishment is,

It only stipulates the types of administrative punishments, and the CSRC does not call these regulatory measures administrative penalties), and in terms of law enforcement procedures, it tries to rely on the procedures of administrative punishments and implements them with reference to the procedural requirements of administrative punishments.

But now we are facing this dilemma: after the passage of the Draft Amendment to the Administrative Punishment Law, can the CSRC's administrative supervision measures still be regarded as an administrative act with a punitive nature that is different from administrative punishment?

There is no doubt that once Article 9 of the Draft Amendment to the Administrative Punishment Law is passed, the measures in the administrative supervision measures of the securities industry will be how to order how to do it, as well as the restrictions on the rights of directors, supervisors, and high powers.

Measures such as revocation of qualifications, suspension of approval of new businesses or applications for the establishment or acquisition of commercial branches, restrictions on the business activities of securities and futures business institutions, and suspension of acceptance of documents related to administrative licensing will have to be classified as administrative penalties. In this way, the first thing that needs to be amended is the Securities Law, which has just completed its overhaul.

The types of administrative punishments in the Law are still designed in accordance with the provisions of the current Administrative Punishment Law, which is inconsistent with the provisions of the Draft Revised Administrative Punishment Law for Comments. Second, it is necessary to amend the Regulations on the Supervision and Administration of Securities Companies.

In the face of the revised Administrative Punishment Law, I am afraid that those measures included in the types of administrative punishment will have to be moved from the provisions of administrative supervision measures to the administrative punishment section according to the provisions of the new law.

The most difficult thing is that the regulatory measures stipulated by the rules of the CSRC do not have a corresponding type in the Administrative Punishment Law and the Regulations on the Supervision and Administration of Securities Companies.

At this point, the author has a suggestion: it is advisable to take the opportunity of the revision of the Administrative Punishment Law to thoroughly sort out and reconstruct the system of administrative supervision measures in the securities industry. Remove the part of the administrative supervision measures that punishes violations of laws and regulations, and retain the part that deals with institutions with internal control problems and potential risks.

Letting Caesar's to Caesar and God's to God, so that administrative supervision measures are no longer disciplinary measures, so as to completely eliminate situations that conflict with legal provisions, is not a problem solving idea.

(This article is translated by software translator for reference only.)