Announcement of the China Securities Regulatory Commission

 

[2008] No.12

 

To achieve business globalization and organization innovation of the fund management companies coupled with the implementation of the "Supplement IV to the 'Mainland and Hong Kong Closer Economic Partnership Arrangement'" (Supplement IV to the CEPA), the China Securities Regulatory Commission (CSRC) has worked out the “Provisions on Institution Establishment by Securities Investment Fund Management Companies in Hong Kong” according to the “Securities Investment Fund Law” and the “Administration Measures on Securities Investment Fund Management Companies” (CSRC Decree No.22). All fund management companies are required to follow the provisions announced hereby.

 

April 8, 2008

 

Provisions on Institution Establishment by Securities Investment Fund Management Companies in Hong Kong 

 

Article 1 Fund management companies can, according to their own business development, establish institutions in Hong Kong (hereinafter referred to as Hong Kong institutions) for assets management business.

 

Hong Kong institutions can be the branches, offices, subsidiaries or other forms approved by the CSRC.

 

Article 2 Before the fund management companies set up Hong Kong institutions, they should earnestly study the market potential, regulatory environment and laws and regulations of Hong Kong. Full considerations should be given to the financial strength and management ability, the long-term development plans as well as the normal operation of existing business. The establishment of Hong Kong institutions should by no means affect the business operation of the fund management company or jeopardize the interests of fund holders.

 

Article 3 Applicants for the establishment of Hong Kong institutions should meet the following requirements: 1. the fund management company should have basic qualifications of the “Administration Measures on Securities Investment Fund Management Companies” (CSRC Decree No.22) concerning setting up branches; 2. the establishment should be in line with the internal decision-making procedures of the company; 3. the business goal and plan is clear; 4. there are definite arrangements for the management of Hong Kong institutions; 5. the fund management company can maintain a sound financial status after the establishment of Hong Kong institution.

 

Article 4 If the fund management company applies for Hong Kong institution establishment, it should provide the following materials (the original copy and the transcript of it.)

 

I. Application report -- should at least include the registration place, form of organization, business scope of and the amount of investment in Hong Kong institution as well as the influence that the institution will exert on the operation of the fund management company;

 

II. Resolution of the board of directors or the Shareholders' Meeting;

 

III. Business plan -- should at least include the analysis on the necessity and feasibility of the establishment of Hong Kong institution as well as the market potential and laws and regulations of Hong Kong;

 

IV. The management and arrangement of Hong Kong institution -- should at least include the arrangements of persons in charge and main business operators of the institution, management systems and measures, and risk isolation measures as well;

 

V. Legal opinions issued by law offices; and

 

VI. Other documents as required by the CSRC.

 

Article 5 Fund management company can establish Hong Kong institution only after the former provide the CSRC with application materials according to this provision upon the resolution made by the board of directors or the Shareholders' Meeting.

 

Article 6 If major changes should occur in any item of the application material, the applicant should provide the CSRC with the revised material within 5 days from the day that the item changes.

 

Article 7 After examination, the CSRC should approve or deny the fund management company’s application for Hong Kong institution establishment within 60 days since it accepts the application.

 

The approval of the CSRC is valid within 6 months. The fund management company should establish Hong Kong institution within the time limit.

 

Article 8 Fund management company should work out and implement risk isolation measures concerning Hong Kong institution and the company itself by strengthening risk management of Hong Kong institution and thus, eliminating business risk that Hong Kong institution may bring to fund management company.

 

Article 9 Fund management company should, within 15 days from the time when the following circumstances occur, report to the CSRC and its agencies where the company is located.

 

I. The registration of Hong Kong institutions and the acquirement of the business license issued by Hong Kong regulatory authorities;

 

II. Decisions to change or revoke the Hong Kong institution;

 

III. Decisions to change the amount of investment, the shareholding proportions, or equity structure of Hong Kong institutions; and

 

IV. The change of persons in charge for Hong Kong institutions.

 

Article 10 Fund management company should, according to laws, administrative regulations and rules of the CSRC, announce the establishment, change or revocation of Hong Kong institutions.

 

Article 11 If any of the following circumstances occurs in the Hong Kong institution, the fund management company should report to the CSRC and its agencies where the company is located within 5 days.

 

I. The institution or its personnel is under investigation or punishment;

 

II. Financial status of the institution witnesses great changes;

 

III. After the on-site inspection by Hong Kong regulatory authorities; and

 

IV. Other circumstances that greatly influence the operation of the company.

 

Article 12 Fund management company, to take stake in institutions of property management in Hong Kong, or to set up institutions or take stake in institutions of property management in other regions and countries that have signed the Memorandum of Regulatory Cooperation with the CSRC should, with no exception, follow this provision.

 

Article 13 This provision shall come into effect as of the promulgation date.