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Decree of China Securities Regulatory Commission
No.51
The Trial Measures for Fund Management Companies to Provide Asset Management Services for Specific Clients, which were deliberated and adopted at the 218th executive meeting of the chairman of China Securities Regulatory Commission on November 29, 2007, are hereby promulgated and shall enter into force as of January 1, 2008.
Shang Fulin, Chairman of China Securities Regulatory Commission
November 29, 2007
Trial Measures for Fund Management Companies to Provide Asset Management Services for Specific Clients
Chapter I General Rules
Article 1
With a view to regulating the provision of asset management services for specific clients by fund management companies (hereinafter referred to as "specific asset management services") and protecting the legitimate rights and interests of the parties concerned, these Measures are formulated in accordance with the Law on Securities Investment Funds and other related laws and regulations.
Article 2
These Measures are applicable to such activities in which a fund management company raises capital from specific clients or accepts the asset entrustment of specific clients to act as the asset manager and invests the entrusted assets in securities for the interests of asset trustors with the entrusted assets under the trusteeship of commercial banks.
Article 3
To provide specific asset management services, a fund management company shall abide by the principles of free will, fairness, good faith and normalization, maintain the normal order of securities market, protect the legitimate rights and interests of all parties concerned, and never make interest transportation in any form.
The asset manager and trustee shall scrupulously abide by their respective duties, fulfill the obligations of good faith, wariness and diligence and equally treat all the investors.
The asset trustor shall ensure lawful sources of its funds, and may not damage the national interests, public interests or legitimate rights and interests of others.
Article 4
When a fund management company provides specific asset management services, the entrusted assets shall be separated from the assets owned by the asset manager and the asset trustee, and shall be separated from the assets under management of the asset manager and that under the entrustment of the asset trustee. No asset manager or asset trustee may incorporate the entrusted assets into its/his own assets.
The assets and proceeds obtained from the management or utilization, etc. of entrusted assets by the asset manager and the asset trustee shall be incorporated into the entrusted assets.
Where the asset manager or the asset trustee is subject to liquidation due to dissolution, revocation or bankruptcy, etc. according to law, the entrusted assets may not belong to the liquidation property.
Article 5
China Securities Regulatory Commission (hereinafter referred to as the CSRC) shall conduct supervision and administration on specific asset management services according to laws, administrative regulations and these Measures.
Article 6
Stock exchanges and futures exchanges shall make respective supervision on securities transactions and futures transactions involving specific asset management services in accordance with laws, administrative regulations and these Measures.
Chapter II Business Rules
Article 7
The fund management company may adopt the following methods to provide specific asset management services:
(1)
to provide specific asset management services for a single client; and
(2)
to provide specific asset management services for specific several clients.
Article 8
A fund management company that meets the following conditions may, upon approval of the CSRC, change its business scope and provide specific asset management services:
(1)
Its net asset and asset management scale meet the related provisions of the CSRC;
(2)
It has conducted businesses normally, engaged in securities investment fund management for more than two years, and has not ever been subject to any administrative penalty or been ordered to make rectifications by the supervisory organ or is not being investigated by the supervisory organ due to violation of laws or regulations within the latest one year;
(3)
Having employed proper professionals for providing specific asset management services;
(4)
Having set down effective business rules and measures against interest transportation, illegal commitment to give proceeds or bear loss, and unfair competition, etc.;
(5)
Having established rules for the management of fair trade, and defined principles and contents for fair trade as well as specific measures for achieving fair trade;
(6)
Having established the effective investment monitoring system and reporting system, and being able to timely detect any abnormal transaction; and
(7)
Other requirements as determined by the CSRC in light of the principle of prudent supervision.
Article 9
As for providing specific asset management services for a single client, the assets initially entrusted by the client shall be not less than 50 million Yuan, unless it is otherwise stipulated by the CSRC.
Article 10
When providing specific asset management services, a fund management company shall place the entrusted assets under the trusteeship of commercial banks of the qualifications for fund trusteeship.
Article 11
When providing specific asset management services, the asset trustor, manager and trustee shall enter into a written asset management contract so as to definite and stipulate their respective rights and obligations as well as other matters.
The contents and format of the asset management contract shall be separately provided for by the CSRC.
Article 12
The asset manager and trustee shall, in the asset management contract, make sufficient disclosure of risks that may result from management and utilization of entrusted assets for investment, make the asset trustor completely be aware of related rights and obligations and willing to bear corresponding investment risks.
Article 13
The entrusted assets shall be used for investigation in:
(1)
Stocks, bonds, securities investment funds, central bank bills, short-term financing bills, asset-backed securities and financial derivatives; and
(2)
Other investment products as prescribed by the CSRC.
Article 14
When a fund management company provides specific asset management services, the portfolio of entrusted assets shall accord with laws, regulations and related provisions of the CSRC; when the company participates in stock issuance and subscription, the amount applied for under a single portfolio may not exceed the total assets of that portfolio, and the number of shares applied for under the single portfolio may not exceed the total number of shares to be issued for the current time as scheduled by the share-issuing company.
Article 15
When providing specific asset management services, the asset manager, trustee and trustor shall, in accordance with laws, regulations and related provisions of the CSRC, perform the obligation of reporting and disclosing the information about specific asset management services.
Article 16
The management fee rate or trusteeship fee rate for specific asset management services may not be respectively lower than 60% of that for a securities investment fund with the same or similar investment target and investment strategy.
The asset manager may stipulate with the asset trustor to draw proper performance rewards in light of the conditions on management of entrusted assets. Within one period of entrusted investment, the proportion of performance rewards as drawn may not be higher than 20% of the net proceeds from the managed assets for the same period, and the fixed management fees and performance rewards may be collected simultaneously.
Article 17
Before concluding an asset management contract, an asset trustor shall completely notify the asset manager of the basic information on its investment objectives, investment preferences, investment restrictions and risk tolerance, and make special explanations and a written promise about the lawful sources of its funds and securities assets.
An asset trustor shall, when making asset entrustment, initiatively get to know the features of risks and proceeds from targeted investment products, and satisfy the requirements for business decision making procedures.
Article 18
An asset trustor shall, in accordance with laws, regulations and these Measures, prudently and carefully conclude the asset management contract, faithfully perform various obligations as stipulated in the asset management contract, and may not commit any of the following acts during the period of asset entrustment:
(1)
Hiding the truth or providing false materials;
(2)
Entrusting assets from an unclear source for money laundry;
(3)
Providing or asking commercial bribes to or from the asset manager;
(4)
Requiring the asset manager to illegally guarantee proceeds;
(5)
Requiring the asset manager to derate or return the management fee;
(6)
Requiring the asset manager to make use of other assets under the manager's management for seeking unjustifiable interests for it;
(7)
Requiring the asset manager to provide coordination for it in the securities underwriting, securities investment or other business activities;
(8)
Violating the asset management contract by intervening in the investment made by the asset manager;
(9)
Engaging in other activities that may damage the legitimate rights and interests of other assets under management of the asset manager or under trusteeship of the asset trustee; or
(10)
Any other act prohibited by any law, regulation or the CSRC.
Article 19
The asset manager shall get to know the risk preferences, risk cognitive abilities and risk bearing abilities of its clients, evaluate the financial situations of its clients, explain related laws, regulations, operating markets and modes of related investment tools to its clients, and make sufficient disclosure of the related risks.
Article 20
The asset manager and trustee shall, in accordance with the related provisions of the CSRC, open securities accounts and capital accounts specially for entrusted assets to make securities transaction so as to handle related business registration and settlement.
The fund management company shall fairly treat different assets under its management, set up an effective daily monitoring system of abnormal transactions, monitor the obverse transactions and reverse transactions occurred between different portfolios (including the transaction time, price, quantity and causes, etc.), and regularly report such transactions to the CSRC.
It shall be strictly prohibited to conduct reserve transactions or other transactions that may result in unfair trade or interest transportation between a same portfolio or between different portfolios on the same trading day.
A portfolio that makes securities investment in strict compliance with the composition of related indexes may not be subject to the preceding Paragraph.
Article 21
The fund management company shall initiatively avoid possible conflict of interests, make explanations on any affiliated transaction in which the conflict of interests does exist or may exist in the asset management contract or the foresaid transaction, and make a report to the CSRC.
Article 22
Where a fund management company provides specific asset management services, it shall set up a special business department, and rigidly separate the investment manager's office from that of the securities investment fund manager. Neither the investment manager nor the fund manager may hold a concurrent post with each other.
The investment manager in charge of the provision of specific asset management services shall be reported to the CSRC for archival purpose.
Article 23
When providing specific asset management services, a fund management company may not conduct any of the following acts:
(1)
Making use of other assets under its management to seek unjustifiable interests for any specific asset trustor or to make interest transportation;
(2)
Making use of the special assets of clients under its management to seek unjustifiable interests for any third party or to make interest transportation;
(3)
Returning the management fee to the asset trustor in any form;
(4)
Illegally guaranteeing proceeds or bearing losses for clients;
(5)
Mixing its own assets or any other's assets with the entrusted assets for securities investment;
(6)
Violating the stipulations in the asset management contract to exceed the management power when making securities investment;
(7)
Publicly recommending any specific asset management service scheme through newspaper, television, radio, internet (except its own website) or any other public medium;
(8)
Seeking for or accepting unjustifiable interests other than the remunerations for specific asset management services;
(9)
Engaging in insider trading, manipulation of securities trading prices or any other unjustifiable securities trade; or
(10)
Committing any other act as prohibited by laws, regulations or the CSRC.
Article 24
Where the asset trustee finds that the investment instruction sent out by the asset manager violates any law, regulation or other related provision or the asset management contract, it shall refuse to execute that instruction, immediately notify the violation to the asset manager and the asset trustor, and timely make a report to the CSRC.
Where the asset trustee finds that the investment instruction of the asset manager, which has entered into force according to the trading procedures, violates any law, regulation or other related provision or the asset management contract, it shall immediately notify the violation to the asset manager and trustor, and timely make a report to the CSRC.
Chapter III Supervision and Administration
Article 25
An asset manager shall, within five working days after the conclusion of an asset management contract, report it to the CSRC for archival purpose.
In the event of any change or supplement to the asset management contract in any form, the asset manager shall report it to the CSRC for archival purpose within five working days upon occurrence of the foresaid change or supplement.
Article 26
The asset manger shall, in light of the asset management contract, set down an investment report on entrusted assets and submit it to the asset trustor, and make explanations about the investments of entrusted assets within the reporting period. And the asset trustee shall check the foresaid report and issue written opinions.
Article 27
The asset manager and the asset trustee shall ensure that the asset trustor can inquire about the investment operation and trusteeship of the entrusted assets in light of the time and method as stipulated in the asset management contract. In the case of occurrence of any significant matter that is stipulated in the asset management contract and may affect the client's interests, the asset manager shall timely inform the asset trustor of the situation.
Article 28
The fund management company shall make analysis on the performances of securities investment funds and portfolios of entrusted assets under its management. Within a term of entrusted investment, where there occurs obvious difference between the performance of securities investment funds and portfolios of entrusted assets under its management with the corresponding similar investment target and strategy, the fund management company shall issue a written analysis report, which shall be signed separately by the investment manager, the supervisor in chief and the general manager and then be reported to the CSRC for archival purpose.
Article 29
The fund management company shall, within 15 working days after the end of each quarter, finish a quarterly report on specific asset management services, and submit it to the CSRC for archival purpose. The quarterly report on specific asset management services shall make special explanations about the implementation of the fair trade system, comparison of performances between specific asset management services and securities investment funds, as well as abnormal trades, and be signed separately by the investment manager, the supervisor in chief and the general manager.
The asset manager and trustee shall, within 3 months after the end of each year, respectively finish the annual management report and the annual trusteeship report on specific asset management services, and submit them to the CSRC for archival purpose.
Article 30
The asset manager and trustee shall, in accordance with laws, administrative regulations and the related provisions of the CSRC, preserve all the accounting materials about specific asset management services and properly keep related contracts, agreements, trading records as well as other documents and files.
Article 31
Stock exchanges and futures exchanges shall strictly monitor the abnormal transactions occurred between securities investment funds and portfolios of entrusted assets under the management of a same fund management company, and timely report the related situation to the CSRC.
Chapter IV Legal Liabilities
Article 32
Where an asset manager, trustee or trustor violates any law, administrative regulation or these Measures, the CSRC or its dispatched office shall order it to make corrections, suspend or terminate its specific asset management services, suspend the fund sales or the continued fund sales, or take other administrative and supervisory measures; and as for the persons in charge and other persons directly responsible, the CSRC or its dispatched office shall impose upon the administrative and supervisory measures of holing supervisory talks, issuing a letter of warning, recording the violation in his credit archives, suspending the performance of duty and affirming him as being unsuitable for holding a related post, etc.
Article 33
Where an asset manager, trustee, trustor, any person in charge or any other person directly responsible provides specific asset management services against these Measures, the CSRC shall give administrative penalties according to related provisions in laws and regulations, or according to these Measures in case no laws or administrative regulations have prescribed related situations. And if a crime is involved, the CSRC shall transfer the liable entity or individual to the judicial organ for investigation of its/his criminal liability.
Article 34
Where an asset manager or trustee draws the management fee or trusteeship fee against Article 16 of these Measures, it shall be ordered to make corrections, be warned and fined separately or simultaneously; where the circumstance is serious, its related business qualification shall be ordered to be suspended or terminated; the persons in charge and other persons directly responsible shall be warned and fined separately or simultaneously; where the circumstance is serious, the banning on entry into the securities market shall be applied according to related provisions.
Article 35
Where an asset manger or trustee violates Item (1) of Article 23 of these Measures to seek for unjustifiable interests or make interest transportation for any specific asset trustor by making use of securities investment funds under its management or trusteeship, it shall be punished in accordance with Article 89 of the Law on Securities Investment Funds; where an asset manger or trustee violates Item (1) of Article 23 of these Measures to seek for unjustifiable interests or make interest transportation for any specific asset trustor by making use of assets other than the securities investment funds under its management or trusteeship, it shall be ordered to make corrections, be warned and fined separately or simultaneously; and its related business qualification shall be ordered to be suspended or terminated where the circumstance is serious; the persons in charge and other persons directly responsible shall be warned and fined separately or simultaneously; where the circumstance is serious, the banning on entry into the securities market shall be applied according to related provisions.
Article 36
Where an asset manger or trustee is under any of the following circumstances, it shall be ordered to make corrections, be warned and fined separately or simultaneously; and its related business qualification shall be ordered to be suspended or terminated where the circumstance is serious; the persons in charge and other persons directly responsible shall be warned and fined separately or simultaneously; where the circumstance is serious, the banning on entry into the securities market shall be applied according to related provisions:
(1)
Violating Article 8 of these Measures to change the business scope and illegally providing specific asset management or trusteeship services without approval of the CSRC;
(2)
Failing to place the entrusted assets under the trusteeship of the asset trustee according to Article 10 of these Measures;
(3)
Violating Articles 13 and 14 of these Measures to exceed the investment scope or investment restrictions;
(4)
Failing to treat various kinds of assets under its management fairly according to Article 20 of these Measures;
(5)
Violating Items (2) up to (10) of Article 23 of these Measures; or
(6)
Failing to go through the archival filing formality according to Article 25 of these Measures.
Article 37
Where an asset trustor violates Article 17 or 18 of these Measures, it shall be ordered to make corrections, be warned and fined separately or simultaneously; the persons in charge and other persons directly responsible shall be warned and fined separately or simultaneously; where the circumstance is serious, the banning on entry into the securities market shall be applied according to related provisions.
Article 38
Where a professional institution issuing audit reports or written legal opinions, etc. for specific asset management services fails to be diligent and fulfill the duties and produces or issues documents containing any false record, misleading statement or major omission, it shall be ordered to make corrections, be warned and fined separately or simultaneously; the persons in charge and other persons directly responsible shall be warned and fined separately or simultaneously; where the circumstance is serious, the banning on entry into the securities market shall be applied according to related provisions.
Chapter V Supplementary Rules
Article 39
The concrete implementation arrangements on specific asset management services for several clients as mentioned in Item (2) of Article 7 of these Measures shall be separately provided for by the CSRC.
Article 40
These Measures shall enter into force as of January 1, 2008.
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Promulgated by China Securities Regulatory Commission on 2007-11-29
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