Article 33 When conducting inherent business, no trust company may commit any of the following behaviors:

(1) To contribute funds or transfer property to any of its associated parties;

(2) To provide guarantee for any of its associated parties;

(3) To raise funds by pledging the equity held by any of this company's shareholder.

The associated parties of a trust company shall be defined according to the Company Law of the People's Republic of China and the related enterprise accounting standards.

Article 34 When conducting trust business, no trust company may commit any of the following activities:

(1) To seek improper interests by taking advantage of its status as trustee;

(2) To misappropriate its trust property for any non-trust purpose;

(3) To promise that the trust property would suffer no loss or guarantee a minimum return;

(4) To provide guarantee with trust property;

(5) Other activities prohibited by any law or regulation or the China Banking Regulatory Commission.

Article 35 A trust company shall, on the basis of fair market price, conduct associated transactions, report each transaction to the China Banking Regulatory Commission in advance and release the related information according to the related provisions.

Article 36 Except that it is otherwise stipulated by the China Banking Regulatory Commission, a trust company shall collect remunerations in the form of commission charge or brokerage expense as agreed to in the trust documents when operating any trust business.

A trust company shall inform the beneficiaries of the fact of collecting remunerations and shall explain the detailed charging rates to them.

Article 37 In case a trust company handles its trust property by disobeying the original trust purpose, or causes any loss to the trust property owing to its violation of management duties or improper handling of the trust affairs, it may not ask for remunerations before it recovers the trust property's original status or makes compensates correspondingly.

Article 38 The expenses spent and the liabilities assumed by a trust company for its disposal of trust affairs shall be undertaken with the trust property, provided that they are listed in the trust contract or expressly notified to the beneficiary. A trust company shall enjoy the priority of being compensated with the trust property, if it makes advance payment with its inherent property. The liabilities born and damages suffered by the trust company from its disobeying of management duties or improper management of trust affairs shall be undertaken by the trust company with its inherent property.

Article 39 In case a trust company handles its trust property in violation of the trust purpose, or if it has grave negligence in the management, operation or disposal of its trust property, the trustor or beneficiary has the right to fire the trust company as stipulated in the trust document or applies for the people's court to fire the trust company.

Article 40 In case the trustee is terminated in accordance with law, a new trustee shall be chosen as stipulated in the trust document; in the case of no such stipulations in the trust document, the trustor may make a selection at its own will; if the trustor is unable to make a selection, the beneficiary shall do it; in case the beneficiary is a person of no or limited capacity for civil conduct, his/her guardian may make a selection in accordance with law. Prior to the selection of a new trustee, the China Banking Regulatory Commission may design a temporary trustee.

Article 41 A trust company shall, when conducting trust business, terminate a trust where it faces any of the following circumstances:

(1) A cause for termination stipulated in the trust document occurs;

(2) The continuous existence of the trust goes against the trust purpose;

(3) The trust purpose has come true or can't be realized;

(4) The parties to the trust agree to do so upon negotiations;

(5) The trust period has expired;

(6) The trust has been rescinded;

(7) The trust has been canceled; or

(8) All the beneficiaries of the trust have abandoned the beneficiary right.

Article 42 In case a trust is terminated, the trust company shall make a liquidation report on disposing of trust affairs as stipulated in the trust document. In case no objection to the liquidation report is presented by the beneficiaries of the trust or the person entitled to owning the trust property, the trust company may be absolved from the items listed in the liquidation report, except for any misconduct committed by the trust company.

Chapter V Supervision and Management

Article 43 A trust company shall build up an organizational structure mainly composed of the shareholders' meeting, board of directors, board of supervisors and senior management level, etc., whose respective duties and responsibilities are clearly defined so as to guarantee their independent operation and effective check and balance, and form a scientific and highly efficient policy-making, incentive and constraint mechanism.

Article 44 A trust company shall, in accordance with the principle of separation of duties, arrange corresponding posts, ensure that the company may prevent risks from occurring in advance, control the emerging risks and supervise and correct the occurred risks, and form a sound internal control system and supervision system.

Article 45 A trust company shall formulate the rules for operating trust business and other businesses according to the related provisions, set up and perfect its business management system and internal control system and report them to the China Banking Regulatory Commission for record.

Article 46 A trust company shall set up and perfect its financial and accounting system according to the related provisions of the state and factually record and comprehensively reflect its business activities and financial situations. Its annual financial accounting statement shall be audited by a well qualified intermediary institution.

Article 47 The China Banking Regulatory Commission may check any trust company's business activities on a regular or irregular basis; it may require any trust company to provide the related auditing report issued by a well qualified intermediary institution when necessary.

A trust company shall provide the related statements and materials on its business activities and financial situation as required by the China Banking Regulatory Commission and accurately introduce the related business situation.

Article 48 Net capital management shall be adopted by the China Banking Regulatory Commission over trust companies. The specific measures shall be formulated by the China Banking Regulatory Commission separately.

Article 49 Five percent of its annual after-tax profits shall be drawn by a trust company as trust compensation reserve, but when the accumulated amount of the compensation reserve accounts for 20 percent of the registered capital of this company, it is not required to do so any longer.

A trust company's compensation reserve shall be deposited in a domestic commercial bank that possesses stable operation and certain strength or used to purchase treasury bonds or other forms of securities with low risk and high liquidity.

Article 50 An examination system shall be adopted by the China Banking Regulatory Commission for the post-holding qualifications of the trust companies' directors and senior managers. No director or senior manager who has not been examined or fails to pass the examination may hold the post.

In case a director or senior manager leaves the post, a trust company shall conduct a post-leaving audit and report to the China Banking Regulatory Commission the auditing result for record. In case the legal representative of a trust company is changed, the original legal representative may not leave his/her post until the China Banking Regulatory Commission examines and approves the post-holding qualification of the new legal representative.

Article 51 A trust business qualification management system shall be adopted by the China Banking Regulatory Commission with regard to the trust practitioners of trust companies. A qualification certificate shall be issued to anyone satisfying the conditions; those failing to obtain a qualification certificate for trust practitioners may not engage in the trust business.

Article 52 In case a director, senior manager or trust practitioner of a trust company violates any law, administrative regulation or any related provision of the China Banking Regulatory Commission, the China Banking Regulatory Commission has the power to cancel his/her post-holding qualification or professional qualification.

Article 53 The China Banking Regulatory Commission may, in light of the needs for performing its duties, hold talks on supervision and management with any director or senior manager of a trust company and requires him/her to explain the major issues involved in the business activities and risk management of the trust company.

Article 54 In case a trust company goes against the rule of prudent operation, the China Banking Regulatory Commission shall order it to make corrections within a certain time limit; if it fails to do so or its behavior seriously threatens its stable operations or infringes upon the lawful rights and interests of the beneficiaries, the China Banking Regulatory Commission may, in accordance with the Banking Supervision Law of the People's Republic of China and other relevant laws, adopt such regulatory measures as suspending its business or restricting its shareholders' rights, etc. in light of different circumstances.

Article 55 In case a credit crisis has already or may be encountered by a trust company and the lawful rights and interests of the beneficiaries are severely infringed upon, the China Banking Regulatory Commission may take over the trust company in accordance with law or urge it to conduct structural reorganization.

Article 56 In case the China Banking Regulatory Commission, after approving the establishment, alteration or termination of a trust company, discovers that there is any concealing or fabrication in the application materials, it may order the trust company to make up or correct or it may cancel the approval.

Article 57 A trust company may join the China Trustee Association to be a member therein and accept industrial self-discipline.

The China Trustee Association shall, when conducting activities, be subject to the guidance and supervision of the China Banking Regulatory Commission.

Chapter VI Penalty Provisions

Article 58 In case any entity or individual sets up any trust company without the approval of the China Banking Regulatory Commission, the China Banking Regulatory Commission shall cancel the trust company in accordance with law; if any crime is committed, criminal liabilities shall be investigated on it or him; where no crime is committed, the China Banking Regulatory Commission shall confiscate the illegal proceeds, and in case the illegal proceeds are 500,000 yuan or more, a fine of not less than the illegal proceeds but not more than five times that shall be imposed; if there are no illegal proceeds or that are less than 500,000 yuan, a fine of not less than 500,000 yuan but not more than 2 million yuan shall be imposed.

Article 59 In case any trust company sets up any branch institution without the approval of the China Banking Regulatory Commission or conducts any business as prohibited in Articles 19, 20, 21, 22, 33 or 34 of the present Measures, the China Banking Regulatory Commission shall order it to make corrections, confiscate its illegal proceeds (if any) and impose a fine of not less than the illegal proceeds but not more than five times that if the illegal gains are 500,000 yuan or more; if there are no illegal proceeds or that are less than 500,000 yuan, a fine of not less than 500,000 yuan but not more than 2 million yuan shall be imposed; if the circumstance is especially severe or the trust company fails to correct within the provisioned time limit, the China Banking Regulatory Commission shall order it to suspend its business for rectification or cancel its financial license; and where any crime is committed, criminal liabilities shall be investigated.

Article 60 In case any trust company violates any other provision of the present Measures, the China Banking Regulatory Commission shall, in accordance with the Banking Supervision Law of the People's Republic of China and other relevant laws and regulations, take corresponding punishment measures.

Article 61 In case a trust company commits any illegal operation or poor management, and if the trust company is not canceled, the financial order or the public interests would be seriously damaged, the China Banking Regulatory Commission shall cancel it in accordance with law.

Article 62 As regards a director, senior manager or any other personnel directly held liable for the trust company's violation, such punishment measures as imposing a fine and canceling his/her post-holding qualification or professional qualification shall be made by the China Banking Regulatory Commission in light of the different circumstances and according to the Banking Supervision Law of the People's Republic of China and other related laws and regulations.

Article 63 Any entity or individual that has objection to the punishment decision made by the China Banking Regulatory Commission may apply for administrative review or lodge an administrative lawsuit to the people's court in accordance with law.

Chapter VII Supplementary Provisions

Article 64 If a trust company does not perform its management duties by itself, namely, not undertaking the duties of investment manager, its registered may not be less than 100 million yuan or the equivalent convertible currency. The present Measures shall be applicable to trust companies of this category by analogy.

Article 65 The China Banking Regulatory Commission is responsible for interpreting the present Measures.

Article 66 The present Measures shall go into effect as of March 1, 2007. The Measures for Administering Trust and Investment Companies (Decree No.5 [2002] of the People's Bank of China) shall be repealed.

(Not the official translation. Source: www.fdi.gov.cn)