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Rules for GEM await feedback

INVESTORS who intend to invest in start-up firms on China's Nasdaq-like growth-enterprise market must have two years of domestic share trading experience, according to draft rules, released by the country's securities regulator yesterday.

Qualified investors also need to sign an agreement with the brokerage that they are aware of risks on the GEM, and those who have traded stocks for less than two years are required to write a special notice to indicate that they are willing to undertake risks, the rules said.

High risks exist in the GEM, which is not suitable for all investors, so the brokerages must know clearly investors' identification, assets and income conditions, the China Securities Regulatory Commission said.

The commission said the brokerages also have to educate investors on the risks. The regulator assured that it will give investors adequate time to open a trading account before the GEM is launched. The regulator is seeking public opinions on the rules until June 23.

Companies can list on the GEM with annual net profits of at least 10 million yuan (US$1.5 million) in the previous two years, or 5 million yuan for one year with sales of at least 50 million yuan.

By contrast, companies on the main board must have net profits of at least 30 million yuan in the previous three years or total sales above 300 million yuan.

Companies on the GEM will face stricter disclosure requirements and limits on stock sales than those on the main boards at the Shanghai and Shenzhen bourses.


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