The China Securities Regulatory Commission issues the "Implementation Rules for Administrative Penalties in Cases of Illegal Transfer of Securities"

On October 19, the China Securities Regulatory Commission issued the "Implementation Rules for Administrative Penalties in Cases of Illegal Transfer of Securities," effective December 1, 2026. The Rules consist of eighteen articles. Article 1 sets out the basis for formulation. Articles 2 through 7 constitute the "Identification" section, successively clarifying the connotations and specific circumstances of "transfer of securities," "transfer of securities within the restricted transfer period," and "transfer of stocks not conforming to the provisions of laws, administrative regulations, and the securities regulatory authority of the State Council" as stipulated in Article 186 of the Securities Law, as well as the identification of persons acting in concert as illegal subjects. Articles 8 through 17 constitute the "Discretion" section, distinguishing four categories, setting differentiated discretion tiers, providing enumerated provisions on circumstances for adjusting penalties, and setting out advisory provisions on concurrent penalties and punishment under the heavier provision, circumstances for adjusted application, and market bans. The original text is as follows: Implementation Rules for Administrative Penalties in Cases of Illegal Transfer of Securities Article 1 In order to standardize the identification and discretion of administrative penalties in cases of illegal transfer of securities, severely crack down on illegal reductions of holdings, and effectively safeguard the legitimate rights and interests of investors, these Rules are formulated in accordance with the provisions of the Administrative Penalty Law of the People's Republic of China, the Company Law of the People's Republic of China (hereinafter referred to as the "Company Law"), the Securities Law of the People's Republic of China (hereinafter referred to as the "Securities Law"), the Basic Rules of the China Securities Regulatory Commission on Administrative Penalty Discretion (hereinafter referred to as the "Basic Discretion Rules"), and other laws, administrative regulations, and rules. Article 2 The term "transfer of securities" as used in these Rules refers to the transfer of securities through centralized bidding transactions, block trades, agreement-based transfers, or other transactional or non-transactional forms. The term "illegal transfer of securities" as used in these Rules refers to the violation of Article 36 of the Securities Law by transferring securities within the restricted transfer period, or transferring stocks not conforming to the provisions of laws, administrative regulations, and the China Securities Regulatory Commission (hereinafter referred to as the CSRC), which constitutes an illegal act subject to administrative penalties in accordance with Article 186 of the Securities Law. Article 3 Where an actor transfers securities under any of the following circumstances, in violation of the provisions of Article 36, Paragraph 1 of the Securities Law, it constitutes "transfer of securities within the restricted transfer period" as stipulated in Article 186 of the Securities Law: (1) Violating the provisions of Article 160, Paragraph 1 of the Company Law and other legal provisions by transferring shares within the restricted transfer period for shares issued prior to the initial public offering; (2) Directors and senior management personnel violating the provisions of Article 160, Paragraph 2 of the Company Law regarding the restricted transfer period by transferring shares within the restricted transfer period; (3) Acquirers violating the provisions of Article 75 of the Securities Law by transferring shares within the restricted transfer period; (4) Other circumstances of transferring securities within the restricted transfer period in violation of legal provisions. Article 4 Where an actor transfers shares that do not conform to administrative regulations or CSRC provisions regarding the holding period or timing of sale, and under any of the following circumstances, in violation of the provisions of Article 36, Paragraph 2 of the Securities Law, it constitutes "transfer of stocks not conforming to the provisions of laws, administrative regulations, and the securities regulatory authority of the State Council" as stipulated in Article 186 of the Securities Law: (1) Shareholders holding more than five percent of shares and actual controllers (hereinafter collectively referred to as "major shareholders") violating the provisions of Article 7 and Article 11, Paragraph 2 of the Interim Measures for the Administration of Share Reductions by Shareholders of Listed Companies (hereinafter referred to as the "Shareholder Reduction Management Measures") by transferring shares; (2) Controlling shareholders and actual controllers violating the provisions of Article 8, Article 10, and Article 11, Paragraph 1 of the Shareholder Reduction Management Measures by transferring shares; (3) Directors and senior management personnel violating the provisions of Article 4 and Article 13 of the Management Rules for Shares of the Company Held by Directors and Senior Management Personnel of Listed Companies and Changes Thereto (hereinafter referred to as the "Director and Senior Management Shareholding Change Rules") by transferring shares; (4) Specific objects violating the provisions of Article 59 and Article 63 of the Measures for the Administration of Registration of Securities Offerings by Listed Companies and Article 4 of the Measures for the Administration of Convertible Corporate Bonds by transferring shares; (5) Specific objects violating the provisions of Article 48 of the Measures for the Administration of Registration of Securities Offerings by Listed Companies on the Beijing Stock Exchange by transferring shares; (6) Specific objects violating the provisions of Article 47 of the Measures for the Administration of Major Asset Restructuring of Listed Companies by transferring shares; (7) Other circumstances where the transfer of shares does not conform to administrative regulations or CSRC provisions regarding the holding period or timing of sale. Article 5 Where an actor transfers shares that do not conform to the provisions of laws, administrative regulations, and the CSRC regarding the quantity sold, information disclosure, and other aspects, and under any of the following circumstances, in violation of the provisions of Article 36, Paragraph 2 of the Securities Law, it constitutes "transfer of stocks not conforming to the provisions of laws, administrative regulations, and the securities regulatory authority of the State Council" as stipulated in Article 186 of the Securities Law: (1) Transferring shares in excess of the prescribed quantity, including: 1. Major shareholders or other shareholders holding shares issued prior to the initial public offering violating the provisions of Article 12 and Article 14 of the Shareholder Reduction Management Measures by transferring shares; 2. Directors and senior management personnel violating the provisions of Article 160, Paragraph 2 of the Company Law regarding the restricted transfer ratio, or violating the provisions of Article 5 of the Director and Senior Management Shareholding Change Rules by transferring shares; 3. Venture capital investment funds violating the provisions of Article 2 of the Special Provisions on Share Reductions by Shareholders of Venture Capital Investment Funds in Listed Companies by transferring shares. (2) Transferring shares in violation of information disclosure requirements, including: 1. Major shareholders violating the provisions of Article 9 of the Shareholder Reduction Management Measures by transferring shares; 2. Directors and senior management personnel violating the provisions of Article 9 of the Director and Senior Management Shareholding Change Rules by transferring shares; 3. Major shareholders, directors, and senior management personnel violating the provisions of Article 20 of the Measures for the Continuous Supervision of Listed Companies on the Beijing Stock Exchange (Trial) by transferring shares. (3) Other circumstances where the transfer of shares does not conform to the provisions of laws, administrative regulations, and the CSRC. Article 6 Where an actor violates the provisions of Article 63, Paragraphs 1 and 2, and Article 70 of the Securities Law by transferring shares of a listed company in serious circumstances, in violation of the provisions of Article 36, Paragraph 1 of the Securities Law, penalties shall be imposed in accordance with Article 186 of the Securities Law. Article 7 Where all persons acting in concert jointly commit an illegal transfer of securities and constitute joint illegality, all shall be identified as illegal subjects. Where some of the persons acting in concert commit an illegal transfer of securities and there is no evidence proving that all persons acting in concert constitute joint illegality, the subjects who transferred the securities and are at fault shall be identified as illegal subjects. Article 8 Where shares are transferred within the restricted transfer period for shares issued prior to the initial public offering, falling under the circumstances specified in Article 3, Item (1) of these Rules, the actor shall be ordered to correct, given a warning, and have illegal gains confiscated; within the fine range stipulated in Article 186 of the Securities Law, the discretion tier shall be determined in the following manner: (1) Where the illegal transfer ratio is less than 2% of the total share capital of the listed company, or the illegal transfer amount is less than 40 million yuan, it falls under the lighter penalty tier, and a fine of not more than 30% of the illegal transfer amount shall be imposed; (2) Where the illegal transfer ratio is 5% or more of the total share capital of the listed company, and the illegal transfer amount is 500 million yuan or more, it falls under the heavier penalty tier, and a fine of not less than 50% and not more than 100% of the illegal transfer amount shall be imposed; (3) Circumstances other than those specified in the preceding two items fall under the general penalty tier, and a fine of not less than 30% and not more than 50% of the illegal transfer amount shall be imposed. Article 9 Where securities are transferred within the restricted transfer period in violation of legal provisions, falling under the circumstances specified in Article 3, Items (2) through (4) of these Rules, or where the holding period or timing of sale does not conform to administrative regulations or CSRC provisions, falling under the circumstances specified in Article 4 of these Rules, the actor shall be ordered to correct, given a warning, and have illegal gains confiscated; within the fine range stipulated in Article 186 of the Securities Law, the discretion tier shall be determined in the following manner: (1) Where the illegal transfer ratio is less than 2% of the total share capital of the listed company, or the illegal transfer amount is less than 40 million yuan, it falls under the lighter penalty tier, and a fine of not more than 20% of the illegal transfer amount shall be imposed; (2) Where the illegal transfer ratio is 5% or more of the total share capital of the listed company, and the illegal transfer amount is 500 million yuan or more, it falls under the heavier penalty tier, and a fine of not less than 30% and not more than 100% of the illegal transfer amount shall be imposed; (3) Circumstances other than those specified in the preceding two items fall under the general penalty tier, and a fine of not less than 20% and not more than 30% of the illegal transfer amount shall be imposed. Among the above, where shares are transferred in violation of the provisions of Article 7 and Article 8 of the Shareholder Reduction Management Measures or Article 4, Items (3) through (7) of the Director and Senior Management Shareholding Change Rules, a heavier penalty shall be imposed within the corresponding discretion tier. Article 10 Where the quantity sold, information disclosure, and other aspects do not conform to the provisions of laws, administrative regulations, and the CSRC, falling under the circumstances specified in Article 5 of these Rules, the actor shall be ordered to correct, given a warning, and have illegal gains confiscated; within the fine range stipulated in Article 186 of the Securities Law, the discretion tier shall be determined in the following manner: (1) Where the illegal transfer ratio is less than 2% of the total share capital of the listed company, or the illegal transfer amount is less than 40 million yuan, it falls under the lighter penalty tier, and a fine of not more than 10% of the illegal transfer amount shall be imposed; (2) Where the illegal transfer ratio is 5% or more of the total share capital of the listed company, and the illegal transfer amount is 500 million yuan or more, it falls under the heavier penalty tier, and a fine of not less than 20% and not more than 100% of the illegal transfer amount shall be imposed; (3) Circumstances other than those specified in the preceding two items fall under the general penalty tier, and a fine of not less than 10% and not more than 20% of the illegal transfer amount shall be imposed. Article 11 Where an illegal transfer of securities falls under the circumstances specified in Article 6 of these Rules, the actor shall be ordered to correct, given a warning, and have illegal gains confiscated; within the fine range stipulated in Article 186 of the Securities Law, the discretion tier shall be determined in the following manner: (1) Where the illegal transfer ratio is less than 2% of the total share capital of the listed company, or the illegal transfer amount is less than 40 million yuan, it falls under the lighter penalty tier, and a fine of not more than 3 times the illegal gains shall be imposed; where there are no illegal gains or the illegal gains are less than 1 million yuan, a fine of not more than 3 million yuan shall be imposed; (2) Where the illegal transfer ratio is 5% or more of the total share capital of the listed company, and the illegal transfer amount is 500 million yuan or more, it falls under the heavier penalty tier, and a fine of not less than 5 times and not more than 10 times the illegal gains shall be imposed; where there are no illegal gains or the illegal gains are less than 1 million yuan, a fine of not less than 5 million yuan and not more than 10 million yuan shall be imposed; where the circumstances are particularly serious, a fine of not less than 10 million yuan and not more than 30 million yuan shall be imposed; (3) Circumstances other than those specified in the preceding two items fall under the general penalty tier, and a fine of not less than 3 times and not more than 5 times the illegal gains shall be imposed; where there are no illegal gains or the illegal gains are less than 1 million yuan, a fine of not less than 3 million yuan and not more than 5 million yuan shall be imposed. The fine amount determined in accordance with the preceding paragraph shall not exceed the upper limit of the fine amount for the discretion tier determined under Article 10 of these Rules under equivalent circumstances. Article 12 Where an illegal transfer of securities involves circumstances specified in Article 7 and Article 8 of the Basic Discretion Rules, no penalty shall be imposed or the penalty shall be exempted in accordance with law. Article 13 Where, in an illegal transfer of securities, the actor voluntarily repurchases all securities in accordance with law and pays the price difference to the listed company before the administrative penalty decision is made, the penalty may be reduced by one discretion tier within the statutory range; where the penalty is already at the lighter penalty tier, a lower fine amount may be imposed within that tier. Where the circumstances specified in Article 9 of the Basic Discretion Rules are met, the penalty shall be mitigated. Where an illegal transfer of securities involves any of the following circumstances, a lower fine amount may be imposed within the corresponding discretion tier based on a comprehensive assessment of the entire case; where the relevant circumstances indeed have a significant impact, the penalty may be reduced by one discretion tier within the statutory range, and where the penalty is already at the lighter penalty tier, a lower fine amount may be imposed within that tier: (1) The actor is an investor other than a major shareholder, director, senior management personnel, or acquirer of the listed company; (2) The actor voluntarily repurchases part of the securities in accordance with law and pays the price difference to the listed company before the administrative penalty decision is made; (3) The actor voluntarily reports, announces, and ceases the transfer before discovery by the CSRC and its local offices or the securities trading venue, and the illegal transfer ratio and amount are relatively small; (4) The illegal transfer of securities occurs relatively close in time to the first trading day on which transfer is permitted; (5) Other lighter circumstances specified in Article 10 of the Basic Discretion Rules. Article 14 Where an illegal transfer of securities involves any of the following circumstances, a higher fine amount may be imposed within the corresponding discretion tier based on a comprehensive assessment of the entire case; where the relevant circumstances indeed have a significant impact, the penalty may be increased by one discretion tier within the statutory range, and where the penalty is already at the heavier penalty tier, a higher fine amount may be imposed within that tier: (1) Causing a change in the largest shareholder or actual controller of the listed company; (2) Selling a large quantity within a short period, with the quantity sold accounting for a relatively high proportion of the securities held by the actor, causing abnormal fluctuations in the price of the relevant securities; (3) Extensively borrowing others' accounts to conduct frequent trading; (4) Circumventing reduction restrictions through judicial enforcement, forced liquidation of stock pledges, gifts, or other channels to illegally transfer securities; or circumventing reduction restrictions through participation in derivative transactions with the company's own stocks as the underlying, securities lending of restricted shares, or short selling by holders of restricted shares, to illegally transfer securities; (5) Illegally transferring securities after organizing, participating in, or implementing financial fraud of the listed company, or where major shareholders, directors, or senior management personnel of the listed company, knowing of financial fraud by the listed company, still illegally transfer securities; (6) Other heavier circumstances specified in Article 11 of the Basic Discretion Rules. Article 15 Where an actor commits multiple independent illegal transfers of securities, penalties shall be imposed separately, and the fine amounts shall be calculated cumulatively. Where the same transfer act simultaneously violates multiple restrictive provisions on the transfer of securities described in Articles 3 through 6 of these Rules, penalties shall be imposed in accordance with the provision that carries the heavier penalty. Article 16 Where, in individual cases, indicators such as the amount of illegal transfer of securities or illegal gains are abnormally high but other circumstances are relatively minor, or the relevant indicators are relatively low but the social impact is extremely egregious, and other special circumstances exist such that discretion in accordance with these Rules might be clearly inappropriate or manifestly unfair, in accordance with the provisions of Article 20, Paragraph 2 of the Basic Discretion Rules, after approval by the principal person in charge of the CSRC or a decision through collective discussion, adjusted application may be permitted. Article 17 Where an illegal transfer of securities is serious, market ban measures may be imposed on the relevant responsible persons. The duration of the market ban shall be determined in accordance with Article 7 of the Provisions on Market Bans in the Securities Market, taking into comprehensive consideration the facts, nature, circumstances, and degree of social harm of the illegal act. Article 18 These Rules shall come into effect on December 1, 2026. Drafting Explanation of the "Implementation Rules for Administrative Penalties in Cases of Illegal Transfer of Securities" In order to standardize the identification and discretion of administrative penalties in cases of illegal transfer of securities, severely crack down on illegal reductions of holdings, and effectively safeguard the legitimate rights and interests of investors, the CSRC has drafted the "Implementation Rules for Administrative Penalties in Cases of Illegal Transfer of Securities" (hereinafter referred to as the "Rules"). The explanation is as follows: I. Drafting Background The 2019 Securities Law made significant changes to the identification and punishment of illegal acts of transferring securities, in particular expanding the regulatory scope from "violating legal provisions" to "violating laws, administrative regulations, and provisions of the securities regulatory authority of the State Council," and expanding the regulatory types from "violating the restricted transfer period" to "violating the restricted transfer period, holding period, timing of sale, quantity sold, manner of sale, information disclosure, etc.," thereby providing a sufficient legal basis for combating such illegal acts. Because the specific types of illegal transfer of securities are diverse and the circumstances complex, there are certain legal application issues in identification and punishment that need to be clarified through documents; after the "Basic Rules of the China Securities Regulatory Commission on Administrative Penalty Discretion" came into effect on March 1, 2025, it is also necessary to refine the standards for dividing discretion tiers and the circumstances for adjusting penalties in specific types of cases in accordance with those Rules. Based on the above considerations, the CSRC has summarized its enforcement experience and formulated these Rules. II. Drafting Principles The drafting of the Rules adheres to the following principles: First, law-based. The drafting of the Rules strictly complies with the provisions of superior laws such as the Administrative Penalty Law and the Securities Law, neither adding types of violations nor changing the scope of penalties, and only making detailed arrangements for specific types of illegal transfer of securities within the scope prescribed by law. Second, seeking truth from facts. The types of illegal transfer of securities are diverse, but under Article 186 of the Securities Law, all are subject to a fine of "not more than the equivalent value of the securities bought or sold." In order to achieve "proportional punishment," it is necessary to subdivide different types of violations and set differentiated penalty ranges for precise enforcement. Third, problem-oriented. The Rules focus on resolving difficult issues that are common and frequent in administrative penalty practice, and confirm established practices that have reached consensus in the form of provisions. III. Main Content The Rules consist of eighteen articles. Article 1 sets out the basis for formulation. Articles 2 through 7 constitute the "Identification" section, successively clarifying the connotations and specific circumstances of "transfer of securities," "transfer of securities within the restricted transfer period," and "transfer of stocks not conforming to the provisions of laws, administrative regulations, and the securities regulatory authority of the State Council" as stipulated in Article 186 of the Securities Law, as well as the identification of persons acting in concert as illegal subjects. Articles 8 through 17 constitute the "Discretion" section, distinguishing four categories, setting differentiated discretion tiers, providing enumerated provisions on circumstances for adjusting penalties, and setting out advisory provisions on concurrent penalties and punishment under the heavier provision, circumstances for adjusted application, and market bans. The key issues are explained as follows: (I) The connotations of "transfer of securities" and "illegal transfer of securities" in these Rules (Article 2) Article 2 of the Rules enumerates common specific circumstances of "transfer of securities," clarifying that it includes both transactional and non-transactional forms of transfer. "Illegal transfer of securities" has broad and narrow meanings. In a broad sense, Chapter III "Securities Trading" of the Securities Law provides for various prohibited trading acts, and any transfer of securities violating the provisions of that chapter constitutes illegal transfer of securities; in a narrow sense (which is the concept used in these Rules), it refers only to illegal acts subject to administrative penalties in accordance with Article 186 of the Securities Law. Illegal transfer of securities that has already been typified and separately provided with penalty provisions in Chapter XIII "Legal Liability" of the Securities Law is not within the regulatory scope of these Rules. (II) Classification of illegal transfer of securities (Articles 3 through 6) According to the provisions of Article 36 and Article 186 of the Securities Law, illegal transfer of securities is divided into "transfer of securities within the restricted transfer period" and "transfer of stocks not conforming to the provisions of laws, administrative regulations, and the securities regulatory authority of the State Council," with the specific obligatory provisions set out in the Company Law, the Securities Law, the Interim Measures for the Administration of Share Reductions by Shareholders of Listed Companies (hereinafter referred to as the "Shareholder Reduction Management Measures"), the Management Rules for Shares of the Company Held by Directors and Senior Management Personnel of Listed Companies and Changes Thereto (hereinafter referred to as the "Director and Senior Management Shareholding Change Rules"), and other laws, administrative regulations, rules, and normative documents of the CSRC. To facilitate enforcement, the Rules, based on the nature of the securities, the subject of the act, the characteristics of the act, and the degree of harm, subdivide the violations into four categories: "transfer of securities within the restricted transfer period" in violation of law (Article 3); non-conformity with administrative regulations or CSRC provisions regarding the holding period or timing of sale (Article 4); non-conformity with laws, administrative regulations, and CSRC provisions regarding the quantity sold, information disclosure, and other aspects (Article 5); and illegal transfer of stocks in acquisitions such as failure to suspend trading as required (Article 6). It should be noted that: regarding Article 6, where an actor violates the provisions of Article 63, Paragraphs 1 and 2, and Article 70 of the Securities Law by illegally transferring stocks in acquisitions such as failure to suspend trading as required, although this is also referenced to "transfer of securities within the restricted transfer period" as stipulated in Article 36, Paragraph 1 of the Securities Law and is subject to penalties under Article 186 of the Securities Law, such acts differ from what is commonly referred to as "illegal reduction of holdings." "Illegal reduction of holdings" refers to specific persons (mainly major shareholders, directors, senior management personnel, and specific objects) using their advantages to "dump" shares on the secondary market, cashing out in advance and overdrafting future returns, turning the capital market into a "money-grabbing" tool, seriously undermining the fairness of the capital market and harming the legitimate rights and interests of small and medium-sized investors. In contrast, "illegal transfer of stocks in acquisitions such as failure to suspend trading as required" violates the "slow-walk rule" of the secondary market, and such circumstances are not included in regulatory documents such as the Shareholder Reduction Management Measures and the Director and Senior Management Shareholding Change Rules. Based on the above considerations, Article 6 of the Rules separately provides for this, with corresponding separate discretion tiers. (III) Identification of persons acting in concert as illegal subjects (Article 7) In cases involving illegal transfer of securities by persons acting in concert, whether administrative penalties can be imposed on the actor mainly depends on whether the actor has subjective fault and whether joint illegality is constituted among the persons acting in concert. Where all persons acting in concert jointly commit an illegal transfer of securities and constitute joint illegality, all shall be identified as illegal subjects. Where some of the persons acting in concert commit an illegal transfer of securities and there is no evidence proving that all persons acting in concert constitute joint illegality, the subjects who transferred the securities and are at fault shall be identified as illegal subjects. (IV) Differentiated setting of discretion tiers (Articles 8 through 17) Articles 3 through 6 of the Rules distinguish the categories of illegal transfer of securities, with the main purpose of differentiation being to set differentiated discretion tiers and achieve "proportional punishment." Specifically: First, for the most harmful act of illegally transferring pre-IPO shares, three discretion tiers are divided based on the transfer amount at "0-30%-50%-100%." Second, for other transfers of securities violating restrictive provisions regarding the holding period or timing of sale, three discretion tiers are divided based on the transfer amount at "0-20%-30%-100%." Third, for transfers of securities violating restrictive provisions regarding the quantity sold, information disclosure, and other aspects, three discretion tiers are divided based on the transfer amount at "0-10%-20%-100%." Fourth, for illegal transfer of stocks in acquisitions such as failure to suspend trading as required, based on the nature of the act and the degree of social harm, within the range of not more than the equivalent value of the securities bought or sold, where the "multiple penalty" applies, three discretion tiers are divided based on illegal gains at "0-3 times-5 times-10 times"; where illegal gains are less than 1 million yuan and the "fixed-amount penalty" applies, three discretion tiers are divided at "0-3 million yuan-5 million yuan-10 million yuan." At the same time, considering that some cases involve particularly egregious circumstances such as one-way selling within a short period causing a change in control of the listed company, a provision is added within the heavier penalty tier that "where the circumstances are particularly serious, a fine of not less than 10 million yuan and not more than 30 million yuan shall be imposed." In addition, considering that the harm of illegal transfer of stocks in acquisitions such as failure to suspend trading as required is generally lower than that of typical illegal reduction of holdings under equivalent circumstances, Article 11, Paragraph 2 provides: "The fine amount determined in accordance with the preceding paragraph shall not exceed the upper limit of the fine amount for the discretion tier determined under Article 10 of these Rules under equivalent circumstances." After determining the discretion tier, Articles 12 through 14 of the Rules specify the circumstances for no penalty, exemption from penalty, mitigation of penalty, lighter penalty, and heavier penalty. Finally, Articles 15 through 17 of the Rules set out advisory provisions on concurrent penalties and punishment under the heavier provision, circumstances for adjusted application, and market bans. It should be noted that: the CSRC's "Arrangements for the Transitional Period for the Implementation of Supporting Institutional Rules for the New Company Law" clearly requires: (1) Listed companies shall, before January 1, 2026, provide in their articles of association for the establishment of an audit committee within the board of directors to exercise the powers of the board of supervisors as stipulated in the Company Law, and shall not establish a board of supervisors or supervisors; (2) Before a listed company adjusts the setup of its internal supervisory organs, the board of supervisors or supervisors shall continue to comply with the provisions on the board of supervisors or supervisors in the CSRC's existing institutional rules. Therefore, before a listed company adjusts the setup of its internal supervisory organs, where a supervisor violates the restrictive provisions on share reductions by supervisors in the CSRC's existing institutional rules, penalties shall be imposed in accordance with law as required by the above document. This article is selected from the official website of the CSRC, edited by GMTEight: Feng Qiuyi.