Author: Chen Yunfeng
Due to China's strict control over the securities trading market and the foreign exchange market, many US stocks, Hong Kong stock investment platforms, and foreign exchange platforms have emerged as the times require, providing investors with funds to purchase overseas stocks. However, the qualifications and agency legality of these platforms cannot be guaranteed. As a result, many investors face great risks. Recently, there is a digital asset trading platform to open a "currency" trading model, that is, through the system to convert the investor's digital currency into USDT, to buy US stocks for investors to the overseas securities market. This paper mainly analyzes the legality of currency trading and personal foreign exchange restrictions of digital currency exchanges or related websites, in order to draw lessons from practitioners.
I. Path to invest in US stocks and Hong Kong stocks
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At present, the path of domestic investors investing in US stocks and Hong Kong stocks includes:
(1) Securities investment funds established in China, approved by the China Securities Regulatory Commission to invest in securities, securities and other securities of overseas securities markets; or investment in the indexed index of the Hong Kong stock index; or investment in US stocks, Hong Kong stocks a financial plan; or a Shanghai-Hong Kong-Shenzhen fund that invests in stocks with a Hong Kong-listed stock; or a Hong Kong mutual fund that invests in Hong Kong stocks, which means that it is established, operated and publicly traded in Hong Kong in accordance with Hong Kong law and passed through China. The CSRC approves unit trusts, mutual funds or other forms of collective investment plans that are publicly sold in the Mainland; or growth funds that invest in US growth companies, that is, funds that invest primarily in small businesses in the United States.
(2) Investing in the overseas securities market through domestic agents of overseas securities service institutions, that is, directly investing in overseas securities companies in overseas securities companies through domestic agencies.
(3) Purchasing Hong Kong stocks through the opening of Hong Kong Stock Connect under the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect.
(4) Buy US stocks and Hong Kong stocks directly in the securities accounts of US securities companies and Hong Kong securities companies that open US stocks and Hong Kong stocks.
2. Restrictions on engaging in overseas securities business
(1) Securities brokerage business
In the domestic securities investment business engaged in China, the main qualifications and business types are subject to the restrictions of the regulatory authorities. In particular, some overseas securities operating institutions cooperate with domestic Internet companies and payment institutions to provide trading channels and services for domestic investors to invest in overseas securities markets through the platform websites or mobile clients of domestic Internet companies, and comply with the relevant laws and regulations of China. .
According to Article 95 of the Regulations on the Supervision and Administration of Securities Companies (Order No. 653 of the State Council) and the “Guidelines for Administrative Licensing Services” under the “Business Guide” section of the website of the CSRC, the overseas securities management institutions shall conduct the examination and approval of securities business in China. The relevant provisions of the "Regulations on the operation of securities business by overseas securities operating institutions in China shall be subject to the approval of the securities regulatory authority under the State Council. "
In addition, on July 26, 2016, the China Securities Regulatory Commission, under its official website “Illegal Securities Futures Risk Warning”, prompts investors “ At present, except for the qualified domestic institutional investors (QDII) and “Shanghai-Hong Kong Stock Connect” mechanism, the CSRC has not Approve any domestic and foreign institutions to carry out services for domestic investors to participate in overseas securities transactions. "
Therefore, for domestic Internet companies to participate in overseas securities market transactions through platform websites or mobile clients, they should obtain securities business operation qualifications.
(2) Agency sales restrictions
For some fund products invested in US stocks and Hong Kong stocks, relevant institutions such as those engaged in the sale of such products shall have corresponding sales qualifications.
According to Article 8 of the Measures for the Administration of Securities Investment Funds, “the fund manager can handle the sales of the fund products it raises. Commercial banks (including foreign-invested corporate banks in China, the same below), securities companies, futures companies, insurance Where an institution, a securities investment consulting institution, an independent fund sales organization, or other institution recognized by the China Securities Regulatory Commission engages in fund sales business, it shall register with the dispatched office of the China Securities Regulatory Commission at the place where the industrial and commercial registration is registered and obtain corresponding qualifications ."
Article 15 of the Interim Provisions on the Management of Mutual Recognition Funds in Hong Kong stipulates that "the Hong Kong Mutual Recognition Fund's sales organizations in the Mainland shall obtain the qualifications for fund sales business . The sale of Hong Kong Mutual Recognition Funds in the Mainland shall comply with the laws and regulations on the sale of public funds in the Mainland and This regulation."
Therefore, if you are engaged in sales of funds invested in US stocks and Hong Kong stocks in China, you should obtain corresponding sales qualifications.
In addition, according to the “Administrative Measures for the Appropriateness of Securities and Futures Investors”, for domestic investors (mainly for ordinary investors), securities companies must be related to the risks when opening the Hong Kong Stock Connect business under the Shanghai-Hong Kong Stock Connect or Shenzhen-Hong Kong Stock Connect. Investors are informed, warned and need to record or video the whole process. Notices and warnings should be sent to investors in writing and confirmed by them to be fully understood and accepted. Domestic investors (mainly targeting ordinary investors) after performing the above procedures ) The stocks under the Hong Kong stocks can only be purchased through the Hong Kong stock exchange channel.
Therefore, for overseas securities companies to expand their US stocks and Hong Kong stocks securities business to domestic markets and domestic investors through Internet company's platform website or mobile client, they need to obtain approval according to current Chinese laws and regulations before they can carry out related business. .
3. Restrictions on foreign exchange purchases by domestic investors investing in overseas securities
Domestic entities invest abroad, whether it is equity investment or purchase of overseas real estate, the compliant exit of funds is the most critical factor, and foreign exchange business is still under strict control.
According to Article 17 of the Regulations on Foreign Exchange Control as amended in 2008, “domestic institutions or domestic individuals who directly invest abroad or engage in the issuance or trading of overseas securities and derivatives shall be registered in accordance with the regulations of the foreign exchange administrative department of the State Council. Where the state requires prior approval or filing by the relevant competent authority, it shall go through the approval or filing formalities before the foreign exchange registration." This article clearly stipulates that individuals can make overseas direct investment, including securities investment, but foreign exchange registration is required according to regulations.
On November 7, 2018, the State Council promulgated the "Notice on Supporting Several Measures for Deepening Reform and Innovation in the Pilot Free Trade Zone", which mentioned:
“Allow banking financial institutions in the Pilot Free Trade Zone to handle RMB derivative products for overseas institutions in accordance with relevant regulations on the premise of legal compliance and risk control. (Responsible departments: People's Bank, Banking Regulatory Commission, Foreign Exchange Bureau)
Support qualified individuals in the Pilot Free Trade Zone to conduct overseas securities investment in accordance with regulations. (Responsible department: CSRC, People's Bank)
However, the State Administration of Foreign Exchange has not issued any implementation rules or measures on how to apply for approval or filing procedures for personal offshore direct investment. As a result, investment in physical investment or capital market for domestic individuals is still only at the legislative level and lacks operationality.
According to the relevant regulations of China's Shanghai-Hong Kong Stock Connect business rules, domestic investors use the Hong Kong stocks under the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect to purchase Hong Kong stocks, and invest in public funds with investment scopes of Hong Kong stocks, Hong Kong stocks and Hong Kong stocks. For transactions, it is not applicable to the foreign exchange limit of 50,000 US dollars per person per year. Domestic investors can conduct cross-border investment in RMB. However, if a domestic investor directly opens a cross-border investment in an overseas securities account, it will be subject to the laws and regulations related to the purchase of foreign exchange.
According to the second article of the “Implementation Rules for the Administration of Individual Foreign Exchanges”, “the annual total amount of foreign exchange settlement and domestic purchase of foreign exchange is carried out. The total annual amount is equivalent to 50,000 US dollars per person per year. The State Administration of Foreign Exchange may Status, adjust the total amount of the year."
According to the actual operation of the current foreign exchange purchase, whether it is at the bank counter or through electronic channels such as online banking or mobile banking, no matter what reason to apply for the purchase of foreign exchange, you must fill out the new "Application for Foreign Exchange Purchase" (abbreviated) ""application""). The "Application" clearly states that "when a domestic individual purchases foreign exchange, it shall not be used for overseas investment in housing, securities investment, purchase of life insurance and investment return dividend insurance, etc. The offenders will be included in the 'list of concern'. There is no personal convenience credit for the year and the following two years."
Therefore, the transfer of cross-border funds by domestic investors should be based on the provisions of the “Implementation Rules for the Measures for the Administration of Individual Foreign Exchanges”, and truthfully report personal foreign exchange information. Otherwise, according to the regulations of the State Administration of Foreign Exchange, false declarations, fraudulent collections, fraud, money laundering, Individuals who illegally use and illegally transfer foreign exchange funds are included in the “list of attention”, restrict or prohibit the purchase of foreign exchange within a certain period of time, include personal credit records, and impose administrative penalties in accordance with the “Regulations on Foreign Exchange Administration”; The Money Laundering Law cooperates with the State Anti-Money Laundering Department to conduct anti-money laundering investigations; if it is suspected of committing a crime, it shall be transferred to the judicial organ for criminal responsibility.
Fourth, the relevant risks
For entities that are not authorized to engage in securities business, they are mainly exposed to criminal risks. According to the person in charge of the Legislative Affairs Office of the State Council, “ Illegal financial business activities refer to the unauthorized conduct of financial activities without the approval of the relevant financial regulatory authorities, including illegal banking business, illegal securities business and illegal insurance business activities. ”
According to the "Illegal Financial Institutions and Measures for the Banning of Illegal Financial Business Activities", "illegal business activities in securities business refers to the following activities without the approval of the CSRC: (1) securities and futures brokers; (2) securities and securities Investment fund, futures investment consulting; (3) financial advisers related to securities trading and securities investment activities; (4) securities underwriting and sponsorship; (5) securities asset management; (6) securities investment fund raising and management; (7) Other illegal securities business activities identified by the CSRC in accordance with the law."
If the above-mentioned activities constitute a crime, criminal responsibility shall be investigated according to law; if it does not constitute a crime, the People's Bank of China shall confiscate the illegal income and impose a fine of 1 to 5 times the illegal income; if there is no illegal income, it shall be 100,000 yuan. A fine of less than 500,000 yuan. Therefore, whether it is overseas or the operation of the domestic securities market, its business entity, source of funds, and mode of operation are regulated by relevant regulatory authorities. The entities engaged in securities business should first obtain approval from the host country and conduct business in accordance with relevant regulations. Otherwise, it will face administrative responsibility and even criminal responsibility.