1. Question: Are the concepts of “nominee holder” and “beneficial owner of securities” recognized under regulations and rules of the China Securities Regulatory Commission(herein referred to as the “CSRC”)?
Answer: Yes. Article 18 of the Administrative Measures for Registration and Settlement of Securities (Decree No.29 of CSRC) stipulates that “Securities shall be recorded in the accounts of the actual securities holders, unless laws, administrative regulations or CSRC rules otherwise provide that the securities may be recorded in accounts opened in the name of nominee holders. In order to perform its functions in accordance with law, the securities registration and settlement institution may require a nominee holder to provide the relevant information about beneficial owners in its name.” The first paragraph of Article 16 of the Administrative Measures of Domestic Securities Investment by Qualified Foreign Institutional Investors(Decree No.36 of CSRC), jointly promulgated by CSRC, People’s Bank of China and State Administration of Foreign Exchange, stipulates that“A QFII may apply to the securities registration and settlement institution for opening a securities account, in the name of actual holders or nominee holder.”
2. Question：Are rights and interests of beneficial owner of securities held in the QFII/RQFII’s nominee accounts recognized by the CSRC ?
Answer: The legal relationship between beneficial owner of securities(client) and QFII/RQFII nominee holder（client’s asset manager）, including such arrangements to segregate client’s assets from those of asset manager, shall be defined by legally established contracts between the client and the asset manager, and be governed by laws, regulations and rules of the jurisdiction where such contracts are entered into. The CSRC fully respects those contracts that are legally entered into and binding under the laws of such jurisdiction including provisions concerning the client’s rights and interests over relevant assets as set forth therein.
3. Question：Does the A-share account system support the recognization of the rights and interests of beneficial owners of securities held under QFII/RQFII’s separate account scheme?
Answer: Yes. Relevant laws and regulations allow QFII/RQFII to open nominee accounts, and the A-share account system can support the recognization of rights and interests of beneficial owners of securities as held under QFII/RQFII’s separate account scheme. Article 7 of the Provisions on Issues concerning the Implementation of the Administrative Measures for Domestic Securities Investment by Qualified Foreign Institutional Investors(Announcement NO. 〔2012〕17 of CSRC) stipulates that “A QFII shall separately apply for opening securities accounts for its own assets and its client’s assets. In the case where a QFII opens a securities account for its client’s assets, the name of the account may be set as ‘QFII + name of the client’. In the case where a QFII applies for opening a securities account for long-term investment funds such as mutual funds, insurance assets, pension funds, charities, and sovereignty funds, the name of the account may be set as‘QFII + name of fund (or insurance asset, etc.)’. The assets in the account shall belong to such relevant fund (insurance asset, etc.) and shall be separate from and independent of the QFII or custodian banks. ” In practice, a QFII/RQFII that operates a separate account scheme may choose to apply for opening accounts in the form of “QFII+client’s funds” or “QFII+name of the client”,to further demonstrate those assets in the above-mentioned accounts belong to relevant beneficial owner of securities, and are separate from and independent of those of the asset manager. As shown in relevant statistics, as of end of 2015, 23% of QFII accounts and 20% of RQFII accounts were opened in forms of “QFII+client’s funds”.