China Securities Regulatory Commission People’s Bank of China Decree No. 12 The “Provisional Measures on Administration of Domestic Securities Investments of Qualified Foreign Institutional Investors (QFII)”, CSRC Chairman: Zhou Xiaochuan PBOC Governor: Dai Xianglong Nov. 5th 2002 Provisional Measures on Administration of Domestic Securities Investments of Qualified Foreign Institutional Investors (QFII)
Chapter 1. General Provisions Article 1. Based upon China’s relevant laws and administrative regulations, this Regulation was promulgated for the purpose of governing Qualified Article 2. Qualified Foreign Institutional Investors (hereinafter referred to as “QFII” which can be a single or a plural, as the case may be) Article 3. QFII should mandate domestic commercial banks as custodians and domestic securities companies as brokers for their domestic securities Article 4. QFII should comply with laws, regulations and other relevant rules in China. Article 5. CSRC and SAFE shall, in accordance with the laws, supervise and govern the securities investing activities undertaken by QFII within Chapter 2. Qualifications, Criteria and Approval Procedures Article 6. A QFII applicant should fall within the following criteria: (1) The applicant should be in sound financial and credit status, should meet the requirements set by CSRC on assets size and other (2) Employees of the applicant should meet the requirements on professional qualifications set by its home country/region; (3) The applicant should have sound management structure and internal control system, should conduct business in accordance with the (4) The home country/region of the applicant should have sound legal and regulatory system, and its securities regulator has signed (5) Other criteria as stipulated by CSRC based on prudent regulatory principles. Article 7. The criteria of assets scale and other factors as referred to in the aforesaid article are: For fund management institutions: Having operated fund business for over 5 years with the most recent accounting year managing assets For insurance companies: Having operated insurance business for over 30 years with paid-in capital of not less than US$1 billion and managing securities assets of not less than US$10 billion in the most recent accounting For securities companies: Having operated securities business for over 30 years with paid-in capital of not less than US$1 billion and managing securities assets of not less than US$10 billion in the most recent accounting For commercial banks: Ranking among the top 100 of the world in the total assets for the most recent accounting year and managing securities assets of not less than US$10 billion. CSRC may adjust the aforesaid requirements subject to the developments of securities market. Article 8. To apply for QFII qualification and investment quota, an applicant should submit the following documents to CSRC and SAFE respectively 1. Application Forms (including basic information on the applicant, investment quota applied for and investment plan, etc.); 2. Documents to verify that the applicant meets requirements set in Article 6; 3. Draft Custody Agreement signed with its expected custodian; 4. Audited financial reports for the most recent 3 years; 5. Statement on sources of the funds, and Letter of Undertaking promising not to withdraw funds during the approved period; 6. Letter of authorisation by the applicant; 7. Other documents as required by CSRC and SAFE. All the aforesaid documents, if written in languages other than Chinese, must be accompanied by their Chinese translations or Chinese Article 9. The CSRC shall, within 15 working days from the date the full set of application documents are received, determine whether to grant Article 10. Applicants shall apply to the SAFE through their custodians for investment quotas after obtaining the Securities Investment Licences. SAFE shall, within 15 working days from the date full set of application documents are received, determine whether to grant approval The Securities Investment Licence will automatically become void if an applicant is unable to obtain the Foreign Exchange Registration Article 11. In order to encourage medium and long-term investments, preference will be given to the institutions managing closed-end Chinese Chapter 3. Custody, Registration and Settlement Article 12. A custodian should meet the following requirements: (1) Has a specific fund custody department; (2) With paid-in capital of no less than RMB 8 billion; (3) Has sufficient professionals who are familiar with custody business; (4) Can manage the entire assets of the fund safely; (5) Has qualifications to conduct foreign exchange and RMB business; (6) No material breach of foreign exchange regulations for the recent three years. Domestic branches of foreign-invested commercial banks with more than three years of continual operation are eligible to apply for Article 13. Approvals from CSRC, People’s Bank of China (hereinafter referred to as “PBOC”) and SAFE are required for custodian status. Article 14. Domestic commercial banks should submit the following documents to CSRC, PBOC and SAFE to apply for custodian status: 1. Application Forms; 2. Copy of its financial business licence; 3. Management system in relation to its custody business; 4. Documents verifying that it has efficient information and technology system; 5. Other documents as required by CSRC, PBOC and SAFE. CSRC, together with PBOC and SAFE, will review application documents and decide whether to approve the applications or not. Article 15. A custodian shall perform the following duties: 1. Safekeeping all the assets that QFII put under its custody; 2. Conducting all QFII related foreign exchange settlement, sales, receipt, payment and RMB settlement businesses; 3. Supervising investment activities of QFII, and reporting to CSRC and SAFE in case QFII investment orders are found to have violated 4. Reporting to SAFE about foreign exchange remittance and repatriation of QFII, in two working days after QFII remits/repatriates 5. Reporting to CSRC and SAFE about the status of QFII’s RMB special account, in five working days after the end of each month; 6. Compiling an annual financial report on QFII’s domestic securities investment activities in the previous year and sending it to 7. Keep the records and other related materials on QFII’s fund remittance, repatriation, conversion, receipt and payment for no less 8. Other responsibilities as defined by CSRC, PBOC and SAFE based on prudent supervision principles. Article 16. A custodian should strictly separate its own assets from those under its custody. A custodian should set up different accounts for different QFII, and manage those accounts separately. Each QFII can only mandate one custodian. Article 17. QFII should mandate its custodian to apply for a securities account on its behalf with securities registration and settlement institution. QFII should mandate its custodian to open a RMB settlement account on its behalf with securities registration and settlement institution.
Chapter 4. Investment Operations Article 18. Subject to the approved investment quota, QFII can invest on the following RMB financial instruments: 1. Shares listed in China’s stock exchanges (excluding B shares); 2. Treasuries listed in China’s stock exchanges; 3. Convertible bonds and enterprise bonds listed in China’s stock exchanges; 4. Other financial instruments as approved by CSRC. Article 19. QFII may mandate domestically registered securities companies to manage their domestic securities investments. Each QFII can only mandate one investment institution. Article 20. For domestic securities investments, QFII should observe the following requirements: 1. Shares held by each QFII in one listed company should not exceed 10% of total outstanding shares of the company; 2. Total shares held by all QFII in one listed company should not exceed 20% of total outstanding shares of the company. CSRC may adjust the above percentages based on the developments of securities market. Article 21. QFII’s domestic securities investment activities should comply with the requirements as set out in the Guidance for Foreign Investments Article 22. Securities firms should preserve the trading and transaction records of QFII for at least 15 years. Chapter 5. Fund Management Article 23. Upon the approval of SAFE, a QFII should open a RMB special account with its custodian. Within five working days after the opening of the RMB special account, the custodian should report to CSRC and SAFE for filing. Article 24. Revenue articles in the RMB special account shall include: settlement of funds (foreign exchange funds from overseas, and accumulated The capital of special RMB account shall not be used for money lending or guarantee. Article 25. Within three months after receiving Securities Investment Licence from CSRC, QFII should remit principals from outside into China If QFII has not fully remitted the principals within three months after receiving Foreign Exchange Registration Certificate, the actual Article 26. In the case that a QFII is a closed-end Chinese fund management company, it can mandate its custodian, with the submission of required Other types of QFII can mandate their custodians, with the submission of required documents, to apply to SAFE to repatriate the principals The overseas receivers of the above-mentioned repatriation should be the QFII themselves. Article 27. QFII whose principal of approved investment quota is remitted to China for less than one year but over three months, after the submission After getting Securities Investment Licence from CSRC and investment quota from SAFE, the transferee can remit the difference as its Article 28. If QFII intends to remit principals inwards again after it partially or fully repatriates its principals, it should re-apply for Article 29. If QFII needs to purchase foreign exchange to repatriate their post-tax profits of the previous accounting year which have been audited 1. Repatriation Application Form; 2. Financial reports of the accounting year in which the profits are generated; 3. Auditor’s report issued by Chinese CPA; 4. Profits distribution resolutions or other effective legal documents; 5. Tax payment certificates; 6. Other documents as required by SAFE. The overseas receivers of the above-mentioned repatriation should be the QFII themselves. Article 30. SAFE may adjust the timeframe required for QFII to repatriate its principal and proceeds, subject to the needs of China’s foreign Chapter 6. Regulatory Issues Article 31. CSRC and SAFE should annually review QFII’s Securities Investment Licence and Foreign Exchange Registration Certificate. Article 32. CSRC, PBOC and SAFE may require QFII, custodians, securities companies, stock exchanges, and securities registration and settlement Article 33. Stock exchanges and securities registration and settlement institutions may enact new operation rules or revise previous operation Article 34. In the event of any of the followings, QFII should file with CSRC, PBOC and SAFE in five working days: 1. Change of custodians; 2. Change of legal representatives; 3. Change of controlling shareholders; 4. Adjustment of registered capital; 5. Litigations and other material events; 6. Being imposed substantial penalties overseas; 7. Other circumstances as stipulated by CSRC and SAFE. Article 35. In the event of any of the followings, QFII should re-apply for its Securities Investment Licence: 1. Change of business name; 2. Acquired by or merged with other institution(s); 3. Other circumstances as stipulated by CSRC and SAFE. Article 36. In the event of any of the followings, QFII should surrender its Securities Investment Licence and Foreign Exchange Registration 1. Having repatriated all its principals; 2. Having transferred its investment quota; 3. Dispersion of authorised entities, entering into bankruptcy procedures, or assets being taken over by receivers; 4. Other circumstances as stipulated by CSRC and SAFE. If QFII fail to pass the annual review on Securities Investment Licences and Foreign Exchange Registration Certificates, as mentioned Article 37. In accordance with their respective authorities, CSRC, PBOC and SAFE will give warnings or penalties to QFII, custodians and securities Chapter 7. Supplementary Provisions Article 38. This Regulation is also applicable to institutional investors from Hong Kong Special Administrative Region, Macao Special Administrative Article 39. This Regulation will come into effect from 1 December 2002.
|
Source:China Net |
EDITOR:Victor |