Laws and Regulations
Measures for the Administration of Securities Investment Fund Management Companies
Chapter I General Provisions
Article 1 The present Measures are formulated in accordance with the Securities Investment Fund Law, Company Law and other relevant laws and administrative regulations for the purpose of strengthening supervision over and administration of securities investment fund management companies, regulating acts of securities investment fund management companies, and protecting the lawful rights and interests of the fund share holders and the relevant parties concerned.
Article 2 The “securities investment fund management company” (hereinafter referred to as the fund management company) as mentioned in the present Measures shall refer to the enterprise legal person, which is established within the territory of the People’s Republic of China upon the approval of China Securities Regulatory Commission (hereinafter referred to as the CSRC) and undertakes securities investment fund management business.
Article 3 A fund management company shall abide by laws, administrative regulations and the provisions of the CSRC, function in good faith, stay prudent and diligent, loyal and fulfill its responsibilities to manage and operate fund property for the benefit of fund share holders.
Article 4 The CSRC and its branch offices shall conduct supervision over and administration on fund management companies and their business activities in accordance with the Securities Investment Fund Law, Company Law and other laws, administrative regulations and the provisions of the CSRC, as well as in light of the principle of prudent supervision.
Article 5 The fund industry association shall undertake self-disciplinary regulation on fund management companies and their business activities according to laws, administrative regulations, provisions of the CSRC and the self-disciplinary rules.
Chapter II Establishment of Fund Management Companies
Article 6 The following requirements shall be met for the establishment of a fund management company:
1. The shareholders shall meet the requirements of the Securities Investment Fund Law and the provisions of the present Measures;
2. Having articles of association complying with the Securities Investment Fund Law, Company Law and the provisions of the CSRC;
3. The registered capital shall be no less than RMB 100 million Yuan, which shall be contributed in full on the lump sum basis by shareholders, and the overseas shareholders shall make capital contribution in convertible currencies;
4. Having appointed senior management personnel complying with laws, administrative regulations and the provisions of the CSRC and personnel who undertake such businesses as research, investment, appraisal and marketing, etc., and the appointed senior management personnel and business personnel are no less than 15 persons and shall have been qualified for fund practicing;
5. Having a business venue, security facilities meeting the requirements and other facilities relating to the business;
6. Having set up organizations and work post with reasonable division of work and clear functions;
7. Having such internal monitoring systems as supervision and audit and risk control, which meet the provisions of the CSRC; and
8. Other conditions as prescribed by the CSRC upon the approval of the State Council.
Article 7 The main shareholders of a fund management company shall refer to those shareholders whose proportion of capital contribution accounts for the most of the registered capital of the fund management company (hereinafter referred to as the proportion of capital contribution), and is no less than 25% of the registered capital.
The main shareholders shall meet the following conditions:
1. Undertaking securities management, securities investment consulting, trust assets management or other financial assets management;
2. The registered capital shall be no less than RMB 300 million Yuan;
3. Having a good operation record, and the quality of the assets is in good condition;
4. Operating consecutively for more than 3 complete fiscal years, and having a sound corporate governance and internal monitoring systems;
5. Having no records of administrative punishment or criminal punishment due to acts of violation of law or breach of regulations in the past 3 years;
6. Having no acts of embezzling customers’ capitals or other acts impairing customers’ interests;
7. Not being under investigation by the regulatory authority due to acts in violation of laws and regulations, nor being in the correction period; and
8. Having good public credit standing, having no bad records in the administrative departments of taxation and industry and commerce, and such institutions as finance supervision, self-disciplinary management and commercial banks, etc..
Article 8 For other shareholders of a fund management company other than the main shareholders, their registered capital and net assets shall be no lower than RMB 100 million Yuan, the quality of the assets shall be in good condition, and the conditions as prescribed in Item (4) through (8) of paragraph 2 of Article 7 of the present Measures shall be met as well.
Article 9 In a Sino-foreign joint venture fund management company, the domestic shareholder who has the largest proportion of capital contribution shall meet the conditions for main shareholders as prescribed in paragraph 2, Article 7 of the present Measures. Other domestic shareholders shall have the conditions as prescribed in Article 8 of the present Measures.
The overseas shareholder in a Sino-foreign joint venture fund management company shall have the following conditions:
1. Being a financial institution that is established according to the law of the country or region it is located, operating lawfully and continuously, and having financial assets management experiences, steady and sound finance, good credit record, and not having been subject to the punishment of any regulatory institution or judicial department in the past 3 years;
2. The country or region it is located in has complete and sound securities laws and regulatory systems, and the securities regulatory authority thereof has entered into and memorandum of understanding for securities regulatory cooperation with the CSRC or other institutions recognized by the CSRC, and has been keeping effective regulatory cooperative relations;
3. The paid-up capital shall be in the convertible currency and worth no less than RMB 300 million Yuan; and
4. Other conditions as prescribed by the CSRC upon the approval of the State Council.
The preceding provisions shall be applied by analogy to the investment institutions in Hong Kong Special Administrative Region, Macao Special Administrative Region and Taiwan district.
Article 10 The proportion of capital contribution among shareholders of a fund management company shall comply with the provisions of the CSRC.
The shareholder of a fund management company shall not hold shares of other shareholders or own interests rights of other shareholders, nor shall it have the same actual controller as that of any other shareholder or have other affiliated relation.
The proportions of capital contribution or interests rights owned (directly and indirectly) by the foreign party of a Sino-foreign joint venture fund management company shall not, aggregately, exceed those as committed by China for the openness-up for the securities industry.
Article 11 An institution or institutions controlled by one same actual controller shall not own shares or interests rights of more than two fund management companies, of which only one fund management company may be controlled by it/these.
Article 12 When applying for establishing a fund management company, an applicant shall submit application materials for the establishment in accordance with the provisions of the CSRC.
The main shareholders shall organize and coordinate the relevant matters concerning the establishment of a fund management company, and shall undertake the main responsibility for the truthfulness and completeness of the application materials.
Article 13 In the event of any major change with regard to the matters involved in the application materials pending the CSRC examination, the applicant shall submit updated materials to the CSRC within 5 workdays from the date of occurrence of such change. If there is any change of shareholders, a new set of application materials shall be submitted.
Article 14 The CSRC shall accept the application for establishing a fund management company in accordance with the Administrative License Law and the provisions of paragraph 1, Article 14 of the Securities Investment Fund Law, and make examination and decision.
Article 15 The CSRC may take the following ways to make examination on the application for establishing a fund management company:
1. Soliciting opinions from the relevant authorities and agencies concerning the shareholders’ qualifications;
2. Examinating the contents of the application materials through ways such as expert’s appraisal and checking, etc.; or
3. Carrying out on-site inspection on the preparation for the establishment of the fund management company within 5 months from the date of acceptance.
Article 16 In case that the establishment of a fund management company has been approved by the CSRC, the applicant shall go through formalities for registration within 30 days from the date when the document of approval is received, and it shall obtain the Certificate of Qualification for Fund Management from the CSRC upon the strength of the Business License of Enterprise Legal Person issued by the administrative department for industry and commerce.
A Sino-foreign joint venture fund management company shall also apply for obtaining the Certificate of Approval for Foreign Investment Enterprises in accordance with the provisions of laws and administrative regulations and open a foreign exchange capital account.
A fund management company shall make a public notice regarding its establishment in the newspapers and journals designated by the CSRC within 10 days from the date when it has gone through the formalities for industry and commerce registration.
Chapter III Alteration and Dissolution of Fund Management Companies
Article 17 In case of altering the following major matters concerned, a fund management company shall report to the CSRC for approval:
1. Alteration of any shareholder, registered capital or proportion of capital contribution of shareholders;
2. Alteration of the name and residence;
3. Amendment to articles of association; and
4. Other major matters prescribed by the CSRC.
Article 18 After any fund management company alters any shareholder, registered capital, proportion of capital contribution of shareholders, the provisions of Chapter II of the present Measures shall be complied with for shareholder’s conditions, proportion of capital contribution of shareholders, the number of the fund management companies invested, and registered capital.
Article 19 A shareholder of a fund management company shall abide by the following provisions when disposing his/its capital contribution:
1. The shareholder shall be honest and in good faith when transferring capital contribution, and shall abide by the commitment he/it made in subscribing or acquiring capital contribution, and may not impair the lawful rights and interests of fund share holders;
2. When transferring capital contribution, the shareholder shall observe the provisions of the Company Law on the preemptive rights enjoyed by other shareholders, and may not do harm to the lawful rights and interests of other shareholders by taking such improper means as falsely reporting the transfer price, etc.;
3. The shareholder and the transferee shall clarify the relevant matters concerned in the transfer period, so as to ensure that it will not impair the lawful rights and interests of the fund management company and fund share holders. No shareholder may dispose his/its capital contribution by such ways as share right custody, trust contract or undisclosed agreement, etc.;
4. In case that the matters concerning the alteration of shareholders are not approved by the CSRC or the relevant legal procedures have not been gone through, the transferor shall continue to perform shareholder’s duties, and undertake the corresponding liabilities, and the transferee may not exercise shareholder’s rights in any form; or
5. Other provisions as prescribed by laws, administrative regulations and the articles of associations of the company.
Article 20 A shareholder must pay capital in currency in full for the registered capital increase by a fund management company.
Article 21 In case a fund management company alters any major matters, it shall file an alteration application in accordance with the provisions of the CSRC within 15 days from the date when the board of directors or the shareholders’ meeting makes resolution. If the alteration involves the transfer of capital contribution of any shareholder, and the fund management company fails to file an application as required, the shareholder concerned may file an application directly.
Article 22 The CSRC shall accept the application of any fund management company for alteration of major matters in accordance with the Administrative License Law and the provisions of paragraph 2, Article 14 of the Securities Investment Fund Law, and make examination and decision.
Article 23 The CSRC may make examination on the application of a fund management company for alteration of major matters concerned by taking such ways as inquiring the relevant personnel, expert’s appraisal and checking, etc..
For the alteration of the main shareholders of a fund management company, alteration of the shareholder whose total proportion of capital contribution exceeds 50%, or alteration of shareholders who have nominated the most of the board numbers, the CSRC shall make examination by referring to the provisions of the present Measures for the establishment of a fund company.
Article 24 In case the alteration of major matters of a fund company concerns the industry and commerce registration, a fund management company shall go through alteration registration formalities at the administrative department for industry and commerce within 30 days from the date of receiving the document of approval.
If a fund management company is changed into a Sino-foreign joint venture fund management company, it shall also apply for obtaining the Certificate of Approval for Foreign Investment Enterprises in accordance with the relevant provisions and open a foreign exchange capital account.
Article 25 The law, administrative regulations and the provisions of the CSRC shall be followed for the handling of the election and changing of senior management personnel of a fund management company.
Article 26 In case the major alteration matters of a fund management company involve the alteration of the contents of Certificate of Qualification for Fund Management, the fund management company shall substitute a new Certificate of Qualification for Fund Management for the original one at the CSRC.
Article 27 A fund management company shall make a public notice on the major alteration matters in accordance with laws, administrative regulations and the provisions of the CSRC.
Article 28 The dissolution of a fund management company may not be conducted until the CSRC has ended its fund management qualification.
The dissolution of a fund management company shall be handled in accordance with the Company Law and other laws and administrative regulations.
Chapter IV Establishment, Alteration and Revocation of the Branches of a Fund Management Company
Article 29 A fund management company may establish a branch company or branch institutions of other forms as prescribed by the CSRC.
A branch of a fund management company may undertake the development of fund products, fund marketing, and other business activities authorized by the company.
Article 30 A fund management company shall have the following conditions for establishing branches:
1. The corporate governance is complete and sound with internal monitoring system, stable business, and capacity of sustainable operation;
2. The company has not been subject to administrative punishments or criminal penalties due to acts in violation of laws and regulations in the past one year;
3. The company is not under investigation by the regulatory authorities due to acts in violation of laws and regulations, or not being in the correction period;
4. The branches to be established has qualified name, offices, business personnel, security facilities and other facilities relating to the business;
5. The branches to be established has clear functions and complete and sound management system; and
6. Other conditions as prescribed by the CSRC.
Article 31 A fund management company shall submit application materials according to the provisions of the CSRC for establishing branches within 15 days from the date when the board of directors or the shareholders’ meeting makes resolution.
Article 32 The CSRC shall accept the application of a fund management company for establishing branches in accordance with the Administrative License Law and the provisions of paragraph 2, Article 14 of the Securities Investment Fund Law, and make examination and decision.
The CSRC may make on-site inspection on the branches to be established.
Article 33 In case a fund management company alters or revokes branches, it shall report to the CSRC and the branch office of the CSRC at its locality within 15 days from the date of the occurrence of such alteration or revocation.
Article 34 A fund management company shall go through registration formalities for establishing branches at the administrative department for industry and commerce within 30 days from the date of receiving the document of approval.
A fund management company shall go through the relevant formalities for alteration or revocation of branches according to the relevant provisions at the administrative department for industry and commerce.
Article 35 A fund management company shall make a public notice on matters concerning the establishment, alteration or revocation of branches in accordance with laws, administrative regulations and the provisions of the CSRC.
Chapter V Control and Management of Fund Management Companies
Article 36 A fund management company shall establish a management structure with sound organizations, clear division of functions, effective control and supervision, reasonable incentives and checks in accordance with the Company Law and other laws, administrative regulations and the provisions of the CSRC, so as to eusure the company being operated up to the standard, and safeguard the interests of the fund share holders.
Article 37 Shareholders of a fund management company shall perform legal obligations, and may not contribute capital falsely, withdraw or withdraw in disguised form the capital contributed.
Article 38 A fund management company shall clarify the scope of functions and rules of procedures of the shareholders’ meeting.
A fund management company shall establish business separation mechanism with its shareholders. A shareholder shall exercise rights through shareholders’ meeting according to law, and may not arrogate shareholders’ meeting and the board of directors to directly interfere with the business management of the fund management company or the investment operation of fund property, nor may he force the fund management company to render cooperation in such business activities as securities underwriting and securities investment, etc. to impair the lawful rights and interests of fund share holders and other parties.
Article 39 In case that a fund management company is unable to carry out ordinary business operation, its main shareholders shall call in other shareholders and the relevant parties to handle the relevant matters concerned properly in light of the principle of being beneficial to protection of the interests of fund share holders.
Article 40 A fund management company shall clarify the scope of functions and rules of procedure of the board of directors. The board of directors shall formulate the basic systems of the company in accordance with the provisions of laws, administrative regulations and articles of association of the company, and make decision on the relevant major matters concerned, supervise and give rewards and punishments to the business management personnel.
The board of directors and the chairman of the board shall not interfere in the concrete business activities of the management personnel by exceeding the authority.
Article 41 A fund management company shall establish and improve independent director system, the independent directors may not be less than 3 persons, and may not be less than one third of the number of the board of directors.
When the board of directors discusses the following matters concerned, they shall be passed by more than two thirds of the independent directors:
1. Major connected transaction of the company or in fund investment operation;
2. Auditing affairs of the company and the fund, hiring or altering of accountant firms;
3. Half-year report and annual report of the funds under the management of the company; and
4. Other matters prescribed by laws, administrative regulations and articles of association of the company.
Article 42 A fund management company shall establish and improve supervisor[F1] system. The supervisor shall be hired by the board of directors and shall be responsible to the board of directors, and make supervision over and audit on the legality and compliance of business operation of the company.
In case the supervisor finds out that there exists great risk in the company or any act of the company in violation of laws and regulations, he shall notify the general manager and other relevant senior management personnel, and report to the board of directors, the CSRC and the branch office of the CSRC at its locality.
Article 43 A fund management company shall strengthen the role of the supervisory board or executing supervisor for their supervision over the finance of the company and the performance of duties by the board of directors, so as to safeguard the lawful rights and interests of shareholders.
Article 44 The general manager of a fund management company shall be responsible for the business management of the company. The senior management personnel and other staff members of a fund management company shall perform duties faithfully and diligently, and may not pursue improper interests for any shareholder, themselves or others.
Article 45 A fund management company shall establish an internal control system, which is scientific and reasonable, strictly controlled and operated with high efficiency in accordance with the provisions of the CSRC, establish a scientific and perfect internal monitoring system, keep the business operation lawful and compliant, and keep the internal monitoring sound and effective.
Article 46 A fund management company shall establish and improve an investment management system consisting of such links as authorization, research, decision-making, execution and appraisal, and treat fairly the different fund properties and clients’ assets under its management.
Article 47 A fund management company shall establish the sound fund financial business accounting and fund asset appraisal systems, strictly abide by the relevant state provisions, and reflect the status of fund property timely, accurately and completely.
Article 48 A fund management company shall establish and maintain an information management system, make strict information management to ensure the safety, truthfulness and completeness of clients’ materials and other information.
Article 49 A fund management company shall establish and improve customer service standards, strengthen sales management, regulate fund publicity and marketing, and may not have improper sale conducts and unfair competition acts.
Article 50 A fund management company may increase registered capital accordingly in light of the principle of prudent management and upon the need of business development.
A fund management company shall keep risk reserves as required.
Article 51 A fund management company shall manage and use its own capital in accordance with the provisions of the CSRC.
A fund management company shall, when managing or using its own capital, keep ordinary business operation of the company, and may not impair the lawful rights and interests of the fund share holders.
Article 52 A fund management company shall establish effective management system, strengthen management on its branches. The branches may not carry out business operation in the forms of contracting, leasing, custody and cooperation.
A fund management company may establish representative offices, which may not undertake profit-making activities.
Article 53 A fund management company shall establish emergency response system in accordance with the pre-arranged plan to properly handle emergencies that may seriously affect the interests of fund share holders, or may result in systematic risk, and seriously endanger the social stability.
Chapter VI Supervision and Administration
Article 54 In case any fund management company or any shareholder of a fund company disguises the relevant conditions or provides false materials when applying for approval of relevant matters, the CSRC shall not accept the application. In case the application has been accepted, it shall not be approved.
Article 55 The CSRC shall make off-site inspections and on-site inspections on the corporate governance, internal monitoring, business operation, risk status, and the relevant business activities of any fund management company in accordance with the provisions of laws, administrative regulations and the provisions of the CSRC and in light of the principle of prudent supervision.
Article 56 The off-site inspection shall mainly be carried out by ways of checking and approving the materials submitted by a fund management company.
A fund management company shall submit the following materials to the CSRC and the branch office of the CSRC at its locality:
1. Annual report of a fund management company audited by the accountant firm that has qualification of undertaking relevant securities business;
2. Annual appraisal report on the internal monitoring of a fund management company issued by the accountant firm that has qualification of undertaking relevant securities business;
3. Quarterly report and annual report of supervisions and audit; and
4. Other materials as required to be submitted by the CSRC in light of the principle of prudent supervision.
Article 57 A fund management company shall submit annual report and annual appraisal report of the fund management company within 3 months after the end of each year; and submit quarterly supervision and audit report within 15 days after the end of each quarter, and submit annual supervision and audit report within 30 days after the end of each year.
Article 58 In the event of any following circumstance, the fund management company shall report to the CSRC and the branch office of the CSRC at its locality within 5 days from the date of the occurrence:
1. The capital contribution of the shareholders of the company is under the litigation preservation or other measures taken by the judicial authorities;
2. The shareholders of the company dispose its capital contribution;
3. The shareholders of the company are under a merger, division or undertake major reorganization of assets and liabilities;
4. The shareholders of the company are under enforcement investigations of the regulatory or judicial authorities;
5. The shareholders enter into liquidation procedures or are taken over;
6. The company and its directors, senior management personnel, fund managers are subject to criminal or administrative penalties;
7. The company and its directors, senior management personnel, fund managers are under the investigation of regulatory or judicial authorities;
8. The financial status of the company has major changes; or
9. Other matters that have a great influence to the management of the company.
In case any fund management company occurs any of the emergencies as prescribed in Article 53 of the present Measures, it shall report immediately to the CSRC and the branch office of the CSRC at its locality.
In case a fund management company establishes, alters or revokes representative offices, it shall report to the CSRC and the branch office of the CSRC at its locality within 15 days from the date of establishment, alteration or revocation.
Article 59 In case the competent authority at the registration place or locality of main business activities of any overseas shareholder of a Sino-foreign joint venture fund management company has requirements for archival filing of overseas investment, the overseas shareholder shall, after having obtained document of approval of the CSRC according to law, submit the relevant archival filing materials to the competent authority at its registration place or locality of main business activities, and shall submit the duplicate to the CSRC at the same time.
Article 60 The CSRC may take the following measures to make on-site inspection on fund management companies, and determine the objects, contents, and frequency of on-site inspection according to the routine supervision conditions:
1. Entering a fund management company and its branches to make inspection;
2. Requiring a fund management company to provide the relevant documents, minutes of meeting, statements, credence, and other materials in relation to the inspection;
3. Inquiring the staff members of a fund management company and requiring them to make statements on the relevant matters inspected;
4. Consulting or reproducing the relevant documents or materials of a fund management company relating to the matters under inspection, and sealing up for keeping the documents or materials that are likely to be transferred, concealed or destroyed;
5. Checking the system of a fund management company for its application of electronic computers to manage business data; and
6. Other measures prescribed by the CSRC.
Article 61 When the CSRC makes on-site inspection on any fund management company, the inspectors shall be no less than two persons, and shall show their legal certificates. If the inspectors are less than two persons or fail to show their legal certificates, the fund management company shall have the right to refuse the inspection.
The CSRC may engage certified accountants, lawyers and other professionals to provide professional services for the inspection work.
Article 62 Any fund management company and the relevant personnel shall cooperate with the CSRC in the inspection, may not refuse or delay the provision of the relevant materials for any reason, or provide untrue, inaccurate or incomplete materials.
Article 63 The CSRC shall issue inspection conclusions to a fund management company under inspection after making the on-site inspection on the fund management company.
Article 64 In case any fund management company violates laws, administrative regulations or the provisions of the CSRC, or has substantial business risk, the CSRC may order it to rectify and correct, and suspend its license for certain business; and take administrative supervision measures against the person directly in charge and other persons directly liable such as the supervisory inquiring, issuing warning letters, recording into good faith archives, suspension of performance of duties, judgment as not suitable for assuming the relevant posts, etc..
After a fund management company has completed the rectification and correction, it shall submit rectification and correction report to the CSRC, who shall make inspection and check.
Article 65 In case any shareholder of a fund management company subscribes or transfers his/its capital contribution in violation of the provisions of Article 19 of the present Measures, or fails to perform legal obligations in violation of the provisions of Article 37 of the present Measures, the CSRC may order him/it to rectify and correct, and take administrative supervision measures against its relevant directors, supervisors or senior management personnel such as supervisory inquiring, recording into good faith archives, or judgment as not suitable for assuming the relevant posts, etc..
Article 66 In case any fund management company, shareholder or a fund management company and their person in charge who is directly responsible and other person directly liable violates laws, administrative regulations and the provisions of the CSRC, it/he shall be given an administrative punishment if it/he shall be subject to administrative punishment. If it/he is suspected of committing a crime, it/he shall be transferred to the judicial authority, and shall be subject to criminal punishment.
Chapter VII Supplementary Provisions
Article 67 The Sino-foreign joint venture fund management companies as mentioned in the present Measures shall include: fund management companies established by overseas shareholders and domestic shareholders jointly, and fund management companies altered through assignment or purchase of share rights of domestic fund management companies by overseas shareholders.
Article 68 The concrete measures for the administration of natural person to hold shares of fund management companies, fund management companies taking the form of joint stock limited company and establishing branches overseas shall be prescribed separately by the CSRC.
Article 69 The present Measures shall come into force as of October 1, 2004. The Rules on the Establishment of Foreign-invested Fund Management Companies by Order No. 9 of China Securities Regulatory Commission shall be repealed simultaneously.
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