The Financial Supervisory Commission issued the Jin-Guan-Zheng-Chuan-1060015654 Circular of June 15, 2017 (hereinafter, the “Circular”) to ease relevant requirements so that the term of lease of a securities firm’s idle assets may be negotiated between the securities firm and the lessee with no reporting requirement.
To activate idle assets of securities firms, this Circular agrees to ease the requirement that a securities firm’s lease of its idle assets shall not be longer than three years. In the future, the term of lease of a securities firm’s assets will be negotiated between the securities firm and its lessee on their own with no need to report to the Financial Supervisory Commission (hereinafter, the “FSC”).
To facilitate compliance of operators, the standards for the premises and equipment of affiliated securities firms or relevant rules should be submitted to the FSC as soon as possible. In addition, the Standards and Requirements for the Internal Control System of Securities Firms are also amended accordingly. For starter, with respect to the lease of idle assets, existing idle assets which a securities firm may lease should be limited to its own existing real estate previously used for operation which has been reported and approved pursuant to the Operating Guidelines for Review of Real Estate Acquisition by Securities Firms or to real estate previously used for operation by a non-surviving securities firm as a result of consolidation or assignment. In addition, the idle assets so leased shall still be included in the total operating real estate and equipment and the total non-operating real estate under Article 16 of the Regulations Governing Securities Firms, and relevant documents shall be retained. In addition, with respect to the sublease of leased business premises, when a securities subleases its leased business premises, a lease agreement shall be executed with the sublessee. Such lease agreement shall contain compulsory enforcement provisions and provisions which prohibit any further sublease and shall be notarized by a court. The rent set forth in the sublease agreement shall be the consideration (based on a reasonable going rate in the same area). If the sublessee is a related party, this should be sufficiently disclosed in financial reports.