Download Trial Measures for Overseas Securities Investment by Qualified

Trial Measures for Overseas Securities Investment by
Qualified Domestic Institutional Investors
Chapter I General Provisions
Article 1 The Measures is enacted to regulate the securities investment overseas by
investors of qualified domestic institutions and protect the legitimate interests and rights of
the investors according to the “Law of the People's Republic of China on Securities
Investment Fund”, the “Securities Law of the People’s Republic of China”, and other
relevant laws and administrative regulations.
Article 2 The qualified domestic institutional investors (‘domestic institutional
investors’) as termed in the Measures refer to the securities business institutions including
domestic fund management companies and securities companies who have met the
requirements stipulated in the Measures, and who raise funds in the People's Republic of
China and use some or all of the funds to conduct management of securities investment
overseas by way of portfolio with the approval by the China Securities Regulatory
Commission (CSRC).
Article 3 When the domestic institutional investors conduct the securities investment
business overseas, the domestic commercial banks shall be responsible for the assets
custody business and the domestic institutional investors can entrust overseas securities
service institutions with securities trading.
Article 4 The CSRC and the State Administration of Foreign Exchange (the ‘State
Administration’) shall implement the supervision and management of the securities
investment overseas by the domestic institutional investors according to their functions.
Chapter II Qualification Requirements for Domestic Institutional Investors and
Examination & Approval Procedures
Article 5 Domestic institutions applying for investment overseas shall meet the following
requirements:
(1) A stable financial status and good credit; with their scale of assets management and
their duration of operation meeting the stipulations of the CSRC;
(2) Qualified personnel who meet the relevant stipulations and who have the related
experience in management of investment overseas;
(3) A sound governance structure and internal control system and a standardized code of
behavior;
(4) No record of major penalty by the relevant regulatory authority in the last 3 years and
no significant event being subject to the inspection or investigation by the judicial authority
or the regulatory authority; and
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(5) Other qualifications as required by the CSRC according to the principle of prudential
supervision and control.
Article 6 Terms and conditions specified in Clause (1) of Article 5 are:
(1) For a fund management company: the net assets shall not be less than RMB200
million; the operation of the securities investment fund (the fund) management business
shall exceed 2 years; and the assets management scale shall not be less than RMB20
billion or the assets of equal value in the end of the latest quarter;
(2) For a securities company: all the indexes of risk control shall meet the stipulated
standards; the net capital shall not be less than RMB800 million; the proportion of the net
capital to the net assets shall not be lower than 70%; the operation of the pooled assets
management scheme (the scheme) business shall exceed one year; and the assets
management scale shall not be less than RMB2 billion or the assets of equal values in the
end of the latest quarter.
Article 7 The terms and conditions specified in Clause (2) of Article 5 are: management
personnel of mid-level or higher shall not be less than one in number, who should have
more than 5 years’ experience in management of overseas securities market investment,
or the relevant professional qualification; and personnel who have more than 3 years’
experience in the relevant management of overseas securities market investment shall
not be less than 3 in number.
Article 8 The applicant for the status of a domestic institutional investor shall submit the
following documents (one original copy and one duplicated copy) to the CSRC:
(1) the application form;
(2) the documents in conformity with the stipulations in Article 5 of the Measures; and
(3) other documents as required by the CSRC.
Article 9 After receiving the complete documents for application for qualification, the
CSRC shall examine and verify the application materials and make a decision as to
approval or disapproval. If the application is approved, the CSRC shall issue a license for
securities investment business overseas; and if the application is disapproved, the CSRC
shall inform the applicant in writing to the effect.
Article 10 The applicant can submit the application product raising documents after he/she
obtains the qualification as a domestic institutional investor.
Article 11 After receiving the complete documents for application for product raising, the
CSRC shall examine and verify the application materials before making a decision on
approval or disapproval and informing the applicant in writing of the decision.
Article 12 The domestic institutional investor shall apply to the State Administration for the
qualification for operation of exchange business overseas according to the relevant
regulations.
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Chapter III Overseas Investment Consultants
Article 13 The overseas investment consultant (‘investment consultant’) as termed in the
Measures refers to the overseas financial institution, who meets the requirements
stipulated in the Measures, provides services including securities trading suggestion and
portfolio management for the domestic institutional investors according to the contracts,
and achieves gains.
Article 14 The domestic institutional investor can entrust the investment consultant, who
has met the following requirements, with the securities investment overseas:
(1) The investment consultant is established overseas and is engaged in the investment
management business with the approval by the regulatory authority of the country or
region where it is located;
(2) The local regulatory authority has signed a memorandum of understanding on the
bilateral regulatory cooperation with the CSRC and maintained an effective cooperative
relationship;
(3) The investment consultant is of experience in the related business has for more than 5
years and the securities assets managed by the investment consultant in the latest fiscal
year shall be not less than USD10 billion or a currency of equivalent value; and
(4) The investment consultant shall have a sound governance structure and internal
control system, and a standard operation system; there shall be no record of major
penalty imposed by the regulatory institution in the recent 5 years and no significant event
is subject to the inspection or investigation by the judicial authority or the regulatory
institution.
If a domestic securities company performs as an investment consultant in the branch
established overseas, it will not be subject to the stipulations in the aforesaid Clause (3).
Article 15 The domestic institutional investor shall assume the fiduciary duties and fulfill
the obligations of diligence during the process of selecting and entrusting an investment
consultant.
Article 16 The investment consultant shall strictly observe the stipulations of relevant
domestic laws and regulations, contracts on funds and contracts on pooled assets
management, give priority to the interests of holders of funds and schemes, give the
investment suggestions according to a reasonable basis, seek for the best transaction
implementation of funds and schemes, fairly and subjectively treat all the clients,
implement the decisions on implementation according to the investment targets,
strategies, policies, instructions and restrictions, fully disclose all the important facts
involving the interest conflicts, and respect the secrecy of the clients’ information.
Article 17 If the domestic institutional investor authorizes an investment consultant to take
charge of investment decisions, it shall be specified in the agreement that the investment
consultant shall take the corresponding responsibilities for the property loss due to their
own fault in, negligence of or failure of the fulfillment of obligations.
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Chapter IV Assets Custody
Article 18 When the domestic institutional investor conducts the overseas securities
investment business, the banks having the qualifications for custody of securities
investment funds shall be responsible for the assets custody business.
Article 19 The custodian can entrust the overseas assets custodian, who has met the
following requirements, with the overseas assets custody business:
(1) The overseas assets custodian is established in the country or region out of the
mainland of China and is regulated by the local government, financial authority or
securities regulatory authority;
(2) The paid-in capital of the overseas assets custodian is not less than USD1 billion or
the currencies of equivalent value or the custody assets scale is not less than USD100
billion or the currencies of equivalent value in the latest fiscal year;
(3) The overseas assets custodian has enough specialized personnel who are familiar
with the overseas custody business;
(4) The overseas assets custodian has met the requirements of safe custody of assets;
(5) The overseas assets custodian has the ability to conduct liquidation and delivery safely
and effectively; and
(6) The overseas assets custodian has no record of being imposed with major penalty by
the relevant regulatory authority in the last 3 years and there has occurred no significant
event where the overseas assets custodian is under the inspection or investigation by the
judicial authority or the regulatory authority.
Article 20 The custodian shall fulfill the following obligations according to the relevant laws
and regulations:
(1) protecting the holders’ interests and supervising the day-to-day investments and
capital remittances of funds and schemes according to regulations; the investment
instruction or capital remittance, which is found to be illegal, shall be reported to the CSRC
and the State Administration in time;
(2) safely protecting the property of the funds and schemes, and informing the domestic
institutional investor of the information of the companies’ activities on time to ensure that
the funds and schemes can obtain all the receivable incomes;
(3) ensuring the management on the fund and the scheme according to the relevant laws
and regulations and the investment targets and restrictions as stipulated in the contracts
on funds and the contracts on pooled assets management;
(4) implementing the instructions of the domestic institutional investor and the investment
consultant according to the stipulations of the relevant laws and regulations, the contracts
on funds and the contracts on pooled assets management; and handling the liquidation
and delivery in time;
(5) ensuring that the net value of unit is calculated according to the method stipulated in
the relevant laws and regulations, contracts on funds and contracts on pooled assets
management;
(6) ensuring that the day-to-day transactions including application, subscription and
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redemption of the fund and the scheme can be conducted according to the relevant laws
and regulations and the stipulations of the contract on funds and contract on pooled
assets management;
(7) ensuring that the funds and the scheme can be confirmed and their profit distribution
schemes implemented according to the relevant laws and regulations, contract on funds
and contract on pooled assets management;
(8) registering the assets in the name of the custodian according to the stipulations in the
relevant laws and regulations, contract on funds and contract on pooled assets
management;
(9) reporting the overseas investment of the domestic institutional investor to the CSRC
and the State Administration and carrying out the application for international balance of
payments according to the relevant regulations within 7 days after the end of each month;
and
(10) other duties stipulated by the CSRC and the State Administration according to the
principle of prudential supervision and control.
Article 21 The custodian can authorize an overseas custodian to fulfill the trustee duties
concerning the overseas property of the fund and the scheme which shall be undertaken
by the aforesaid custodian. During the process of fulfilling the duties, the overseas
custodian shall take the corresponding responsibilities for the loss of property of the funds
and the scheme due to his own fault, negligence or some other reasons.
Article 22 The custodian shall fulfill the following custody duties according to the relevant
laws and regulations:
(1) safely keeping the property of the funds and the scheme, and opening a capital
account and a securities account;
(2) handling the relevant businesses of settlement, sale, earning and payment of foreign
exchanges and the RMB capital settlement of the domestic institutional investor;
(3) preserving the relevant materials of the domestic institutional investor concerning
capital remittances, exchanges, foreign exchange earnings, foreign exchange payments,
capital exchange, commission and transaction record, with the preservation time being
not less than 20 years; and
(4) other duties as stipulated by the CSRC and the State Administration according to the
principle of prudential supervision and control.
Article 23 The custodian and the overseas custodian shall strictly separate their own
assets from the property managed by the domestic institutional investor.
Chapter V Fundraising, Investment Operation and Information Disclosure
Article 24 The fund management companies, having obtained the qualifications as
domestic institutional investors can use the fund property to invest in the overseas
securities market by fundraising through the public issuance of fund units according to the
relevant laws and regulations. The fund management companies applying for fundraising
shall submit the application materials according to the relevant laws and regulations.
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Article 25 The securities companies having obtained the qualifications as domestic
institutional investors can raise the funds through establishing the schemes and by other
means, and use the raised funds to invest in the overseas securities market. The
securities companies who establish the schemes shall submit the application materials
according to the relevant regulations in order to conduct the fundraising and investment
operation.
Article 26 The comparison benchmarks of investment performance shall be chosen for the
funds being applied for raising according to the relevant stipulations.
Article 27 The funds and schemes shall be invested in the financial products and tools as
stipulated by the CSRC.
Article 28 The funds and schemes shall be in conformity with the stipulations related to the
restriction of investment proportions.
Article 29 When choosing and entrusting an overseas securities service institution with the
agency of securities trading, the domestic institutional investor and the investment
consultant shall strictly perform the fiduciary duties and manage the investment trading
procedures, the information disclosure and the record preservation of the investment
transactions according to the relevant stipulations.
Article 30 The arrangements for securities trading and research service between the
domestic institutional investor & the investment consultant and the overseas securities
service institution shall be made according to the following principles:
(1) The transaction commission shall belong to the property of the holders of the funds
and schemes; and
(2) the domestic institutional investor and the investment consultant have the
responsibilities to ensure the transaction quality on behalf of the holders, including but not
limited to:
1. seeking for the best implementation of transaction;
2. sparing no effort to minimize the transaction costs; and
3. gaining profits for the holders with their transaction commissions.
Article 31 The overseas securities investment by the domestic institutional investor shall
comply with the stipulations in the relevant laws and regulations formulated by the local
regulatory authorities and exchanges.
Article 32 The domestic institutional investor, the custodian and those who have the
obligations regarding information disclosure shall conduct the information disclosure
distinctly according to the requirements of the relevant laws and regulations.
Chapter VI Quota and Funds Management
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Article 33 The domestic institutional investor shall set up a reasonable upper limit of the
quota scale in the raising plan according to the market situation and product properties,
making filing at the State Administration and undergo the relevant procedures with the
State Administration according to the relevant regulations. The management of the quota
scale within the existence of the funds and schemes shall be conducted according to the
relevant regulations.
Article 34 The domestic institutional investor shall open a custody account at the
custodian to entrust all the funds and schemes to be placed under management.
Article 35 The custodian shall open a settlement account and a securities custody account
for the funds and schemes for fund settlement business and securities custody business
with the securities registration and settlement institutions and others.
Article 36 The scope of income and payment of the custody account, settlement account
and securities custody account shall meet the relevant requirements. The funds in the
aforesaid accounts shall not be loaned to a third party or be used as a guarantee for a
third party.
Article 37 The domestic institutional investor shall report on the use of his quota and the
remittances of funds to the State Administration regularly.
Chapter VII Supervision and Management
Article 38 The CSRC and the State Administration can require the domestic institutional
investor and the custodian to provide the relevant materials of the domestic institutional
investor’s overseas investment; if necessary, the on-the-site inspection can be conducted.
Article 39 If any of the following applies to the domestic institutional investor, the investor
shall report to the CSRC for filing and make the corresponding announcement within 5
working days after the occurrence:
(1) change of the custodian or the overseas custodian;
(2) change of the investment consultant;
(3) litigation involved in the overseas country or region and some other significant event;
and
(4) some other circumstance as stipulated by the CSRC.
If the custodian or the overseas custodian is changed, the domestic institutional investor
shall report to the State Administration for filing.
Article 40 If any of the following applies to the domestic institutional investor, the investor
shall re-apply for the qualification for overseas securities investment business within 60
working days after the occurrence and re-handle the application for qualification for
overseas securities investment business and the procedures for filing of investment quota
at the State Administration:
(1) change of the name of the institution;
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(2) merger by some other institution; and
(3) some other circumstance as stipulated by the CSRC and the State Administration.
Article 41 If there exist major illegal activities in the securities investment conducted by the
domestic institutional investor by using the property of the funds and schemes, the CSRC
can take corresponding measures including trading restriction according to laws and the
State Administration can take corresponding measures including the restriction on fund
remittance according to law.
Article 42 If the custodian has seriously violated the laws and regulations, the CSRC can
make a decision on restricting the custody business of the custodian according to law.
Article 43 If the domestic institutional investor and the custodian have violated the
Measures, the CSRC and the State Administration shall impose corresponding
administrative penalty on them according to law.
Chapter VIII Supplementary Provisions
Article 44 If the domestic institutional investor invests in the financial products or tools of
the Hong Kong Special Administrative Region and the Macao Special Administrative
Region, the Measures shall be applied.
Article 45 If the fund management company, who has obtained the qualification as a
domestic institutional investor, raises funds from special objects or accept the property
consignment of special objects to invest in the overseas securities market, the Measures
shall be applied.
Article 46 If the securities company, who has obtained the qualification as a domestic
institutional investor, conducts directional assets management, or special assets
management, and invests in the overseas securities market by using the funds under his
management, the Measures shall be applied.
Article 47 The Measures comes into legal force commencing on July 5, 2007.
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