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Chapter 1. General Provisions
Article 1 These Measures are enacted in accordance with the relevant laws
and administrative regulations to govern the investing behaviour of Qualified Foreign
Institutional Investors in the domestic securities markets of the PRC, promoting the
development of the PRC securities markets.
Article 2 The Qualified Foreign Institutional Investors (hereafter called
“Qualified Investors”) as mentioned in these Measures refer to overseas fund
management institutions, insurance companie s, securities companies and other asset
management institutions, which are in compliance with the conditions of these
Measures, have been approved by the China Securities Regulatory Commission
(“hereafter called CSRC”) for investing in the securities markets of the PRC, and
granted the limit from the State Administration of Foreign Exchange Control
(“hereafter called SAFE”).
Article 3 The Qualified Investors shall appoint domestic merchant banks as
custodian to hold in custody the assets and appoint domestic securities companies to
manage the domestic securities trading activities.
Article 4 The Qualified Investors shall abide by the laws, regulations and
other relevant rules of the PRC.
Article 5 CSRC and SAFE shall, in accordance with the law, supervise and
govern the securities investing activities undertaken by the Qualified Investors within
the territory of the PRC.
Chapter 2. Qualifications, Criteria and Approval Procedures
Article 6 Qualified Investors applicants should fall within the following
criteria:
(1) Applicants should be financially sound, trustworthy and meet the
requirement of the CSRC concerning the scale of assets, and their
risk control level shall meet the requirement of law and securities
regulatory authorities of the country or region in which they
operate;
(2) Qualification of the applicants’ employees shall meet the relevant
requirements for practitioners of the country or region in which
the applicants operate;
(3) Applicants should maintain a sound management structure and
proper internal control system and should conduct business in
accordance with the relevant regulations and have not been
seriously punished by the governing authorities of the country or
region in which they operate over the last three years prior to
application;
(4) The law and supervisory system of the country or region in which
applicants operate are sound and proper, and the securities
regulatory authorities of the country or region have signed
Memorandum of Understanding with the CSRC concerning their
co-operation, maintaining an efficient regulatory and co-operative
relationship;
(5) Other criteria as stipulated by the CSRC based on prudent
regulatory principles.
Article 7 The criteria of scale of assets as referred to in the aforesaid article
are:
Fund Management
Bodies : Having operated fund business for over 5 years with the most
recent fiscal year managing assets of not less than US$10
billion;
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 fiscal year;
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 fiscal year;
Commercial
Banks : Ranking among the top 100 of the world in the total assets for
the most recent fiscal year and managing securities assets of
not less than US$10 billion.
The CSRC may adjust the aforesaid criteria for scale of assets subject to the
development of the securities market.
Article 8 Applicants shall, through custodian, submit to the CSRC and the
SAFE respectively the following documents in respect of their qualification and
investment limit.
(1) Application Forms (including applicants’ basic status, investment
limit contemplated in their application and investment plan etc);
(2) Documentary evidence as stipulated in Article 6 of these
Measures;
(3) Draft Custodian Agreement signed with custodian;
(4) Audited Financial Reports for the most recent three years;
(5) Statement of source of funds and Letter of Undertaking
committing not to withdraw funds during the approved period;
(6) Power of Attorney of applicants;
(7) Other documents as required by the CSRC and SAFE.
All the aforesaid requisite documents, if written in foreign languages, must be
accompanied by Chinese translations or Chinese extracts.
Article 9 The CSRC shall, within 15 working days from the date the full set
of application documents are received, determine whether to grant approval or not.
Securities Investment Business Licence will be issued to those applicants whose
application has been approved whereas written notice will be given to those applicants
whose application has been rejected.
Article 10 Applicants shall apply to the SAFE through custodian for
investment limit after obtaining the Securities Investment Business Licence.
SAFE shall, within 15 working days from the date full set of application
documents are received, determine whether to grant approval or not. Applicants
whose application has been approved will be notified in writing their permitted
investment limit and a Foreign Exchange Registration Certificate will be issued.
Written notice will be given to those applicants whose application has been rejected.
The Securities Investment Business Licence will automatically become
void if applicants are unable to obtain the Foreign Exchange Registration Certificate
within one year after the Securities Investment Business Licence is granted.
Article 11 Preference will be given to the institutions managing closed-end
PRC funds subject to the requirements of Article 6 of these Measures or pension
funds, insurance funds and mutual funds with good investment records in other
markets with a view to introducing mid-and-long-term investments.
Chapter 3. Custody, Registration and Settlement
Article 12 A custodian shall meet the following requirements:
(a) has a specific fund custody division;
(b) with paid-in capital of not less than RMB 8 billion;
(c) has sufficient professionals who are familiar with custody business;
(d) can manage the entire assets of the fund safely;
(e) able to clear and settle safely and effectively;
(f) be qualified as a designated bank for foreign exchange and business
conducted in RMB;
(g) no material breach of Regulations on Foreign Exchange Control in the last
three years.
Domestic branches of foreign-invested commercial banks with more than three
years of continual operation are eligible to apply for the custodian qualification.
Its paid-in capital eligibility shall be based on its foreign headquarters' capital.
Article 13 Applications for the qualification of custodian shall be
reviewed and approved by CSRC, PBOC and SAFE.
Article 14 Domestic commercial banks applying for the qualification of
custodian shall submit the following documents to CSRC, PBOC and SAFE:
(a) Application letter;
(b) Copy of financial business permit;
(c) Management system in relation to its custody business;
(d) Documents proving the existence of effective and speedy information
technology system;
(e) 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:
(a) keep the entire assets which are under the custody of Qualified Investors;
(b) on behalf of Qualified Investors, operate settlement, sales, receipt, payment
and the business settled in RMB;
(c) supervise investment operations of Qualified Investors and report timely to
CSRC and SAFE in case their investment orders are found to have violated
laws and regulations;
(d) report to SAFE the remittance (in or out), conversion, receipt, payment of
capital of Qualified Investors within two working days upon Qualified
Investors remitting principal or revenue (either in or out);
(e) report to CSRC and SAFE the income and expenditure of RMB special
account of Qualified Investors within 5 working days after the end of each
month;
(f) prepare annual financial reports with regard to the domestic securities
investment of Qualified Investors in the previous year within three months
after the end of each fiscal year, and submit the reports to CSRC and SAFE;
(g) maintain information in relation to remittance (either in or out), conversion,
receipt, payment of capital and records on capital transaction of Qualified
Investors for at least 15 years;
(h) other duties as required by CSRC, PBOC and SAFE based on prudent
supervision principles.
Article 16 A custodian must strictly separate its own assets from the
assets under its custody.
A custodian shall open accounts for various Qualified Investors and the accounts
of assets under its custody shall be separately managed.
Each Qualified Investor shall appoint only one custodian.
Article 17 Qualified Investors shall appoint a custodian to apply for a
securities account at the securities registration institution on its behalf. In such
case, a custodian should possess valid documents, such as power of attorney
from Qualified Investors and its securities investment business license, and
report the relevant situation to CSRC within five working days upon the opening
of a securities account.
Qualified Investors shall appoint custodian to open on its behalf a RMB
settlement capital account at the securities registration institution for settlement
with securities registration institution. A custodian is responsible for capital
settlement of domestic securities investment of Qualified Investors, and shall
report the relevant situation to CSRC and SAFE within 5 working days upon the
opening of the RMB denominated capital account.
Chapter 4. The Investment
Article 18 Subject to approved investment facilities, Qualified Investors may
invest in the following RMB financial instruments:
(a) Shares listed on the stock exchange (excluding domestically listed foreign shares);
(b) National debt securities listed on the stock exchanges;
(c) Convertible bonds and enterprise bonds listed on the stock exchanges;
(d) Other financial instruments as approved by CSRC.
Article 19 Qualified Investors can appoint domestically established
securities companies to manage domestic securities investment.
Article 20 Domestic securities investment of Qualified Investors shall
observe the following requirements:
(a) Proportion of shareholding of a single Qualified Investor to a single listed
company shall not exceed 10% of the total number of shares of the listed
company;
(b) Sum of proportion of shareholding of all Qualified Investors to a single listed
company shall not exceed 20% of the total number of shares of the listed
company.
CSRC may adjust the said proportion based on the development of securities market.
Article 21 Qualified Investors investing in domestic securities shall comply
with the requirements as set out in the “Guidelines to Foreign Investors ”.
Article 22 Securities companies shall keep in record the transactions of
Qualified Investors and their trading activities of not less than fifteen years.
Chapter 5. Fund Management
Article 23 Upon approval of SAFE, Qualified Investors shall open a special
RMB account with the custodian.
Within five working days from the opening of a special RMB account by the
Qualified Investors, the custodian shall report to CSRC and SAFE of the relevant
situation.
Article 24 Use of the special RMB account includes: settlement of funds
(foreign exchange funds from overseas, and the accumulated settlement of the foreign
exchange funds shall not exceed the approved investment amount), proceeds from the
disposal of securities, dividends in cash, deposit interests, bonds interests. Expenses
of the special RMB account include: purchase of the price of securities (including
stamp duty, fees, etc), domestic custodian fees and management fee, purchase of
remittance funds (used for the remittance of principal and the receiving of revenues).
The capital of special RMB account shall not be used
for money lending or for facilitating guarantee.
Article 25 Qualified Investors shall, within three months from the granting
of the Permit for Securities Investment by CSRC remit the principal from outside the
country into the PRC, and after clearing, directly transfer to the special RMB account.
Principal remitted to the PRC by Qualified Investors shall be approved by SAFE as
convertible currency, and the amount remitted shall be limited to the amount
approved.
Within three months after obtaining the Foreign Exchange Registration, the Qualified
Investors’ actual remitted amount shall be regarded as approved amount; the
difference between approved amount and the actual amount shall not be remitted
inward prior to the obtaining of a newly approved investment amount.
The receiver of the above outward remittance shall be Qualified
Investors.
Article 26 Qualified Investors of the close-end PRC fund management
institutions, after remitting inward principal for three years, may appoint a custodian
with the submission of the necessary documents to SAFE to apply for the purchase of
foreign exchange for the repatriation of principal by batches or by instalments. Each
remittance shall not exceed 20% of the total principal, and consecutive remittances
shall not be conducted at an interval of less than one month.
Other Qualified Investors, after remitting inward principal for one year,
may appoint a custodian to submit the necessary documents to the
SAFE to apply for the purchase of foreign exchange for the
repatriation of principal by batches or by instalments. Each remittance
shall not exceed 20% of the total principal, and consecutive
remittances shall not be conducted at an interval of less than three
months.
The overseas payees of the above remittance shall be Qualified
Investors.
Article 27 Qualified Investors whose principal of approved investment
amount is remitted to the PRC for less than one year but over three months, after the
submission of Assignment application and Assignment Contract and upon approval of
CSRC and SAFE, may assign the approved investment amount to other Qualified
Investors or other applicants who have fulfilled the requirements of Article 6 of this
Provisional Measure.
Upon the approval by SAFE of the investment amount and the issue of Permit
for Securities Investment, if the assigned assets are below the approved amount of
SAFE, the difference may be remitted to the country as principal.
Article 28 Qualified Investors, when remitting to the PRC the principal that
was previously remitted out of the PRC, in whole or in part, shall be required to reapply
for the investment amount.
Article 29 In the event that Qualified Investors wish to remit out of the PRC
the profit after tax of the last financial year, as audited by certified public accountant
in the PRC, they shall instruct its custodian fifteen days in advance to apply to SAFE,
together with the following documents:
1. Remittance Application Form;
2. Financial Statement of the year where the profit is realised;
3. Auditor’s Report issued by a certified public accountant in the PRC;
4. Resolution of the distribution of profits or any other proper legal documents;
5. Tax Payment Certificates;
6. Other documents as required by SAFE.
The overseas payees of the above remittance shall be Qualified Investors.
Article 30 SAFE, in order to achieve a balance of foreign exchange for the
PRC, may adjust the expiring date for Qualified Investors to
remit the principal and the profits realised out of the PRC.
Chapter 6. Regulatory Management
Article 31 CSRC and SAFE may review annually the Securities Investment
Permit, which is granted to Qualified Investors in respect of their investment in
securities, and the Foreign Exchange Registration Certificate.
Article 32 CSRC, PBOC and SAFE may require Qualified Investors,
custodians, securities companies, stock exchanges and clearing institutions to provide
information on the investment activities undertaken by Qualified Investors within the
PRC. They may conduct field investment, when necessary.
Article 33 The stock exchanges and the clearing institutions may establish
the rules and measures which regulate the investment activities of the Qualified
Investors within the PRC, the implementation of which will be effective upon
approval of the CSRC.
Article 34 Within five days after the occurrence of any of the following,
Qualified Investors should notify the China Securities Regulatory Commission,
PBOC and SAFE:
1. Change of custodians;
2. Change of authorised representatives;
3. Change of controlling shareholders;
4. Adjustment of registered capital;
5. Litigation and other significant events;
6. Under injunction outside the PRC;
7. Other circumstances as stipulated by CSRC and SAFE.
Article 35 In the event of one of the following, Qualified Investors should
apply to renew their Security Investment Permit
1. Change of business name;
2. Acquisition by other companies;
3. Other circumstances as stipulated by CSRC and SAFE.
Article 36 In the event of one of the following, Qualified Investors should
surrender the Security Investment Permit and the Foreign Exchange Registration
Certificates to CSRC and SAFE:
1. Remittance in total of the principal;
2. Transfer of investment quota;
3. The dispersion of authorised entities, entering into the procedures of bankruptcy,
or assets being taken over by receivers;
4. Other circumstances as stipulated by CSRC and SAFE.
Failure to comply with the Articles in respect of the annual renewal of the Security
Investment Permit and the Foreign Exchange Registration Certificates in accordance
with Article 31 herein, and the automatic lapse of the documents shall result in the
Security Investment Permit and the Foreign Exchange Registration Certificates
automatically becoming invalid.
Article 37 In case of a breach of the provisional Articles, the China
Securities Regulatory Commission, PBOC and SAFE may give warnings or penalties
to the Qualified Investors, custodians, and securities companies, according to their
own authority. However, the same breach shall not be subject to two administrative
penalties or more.
Chapter 7. Supplementary Provisions
Article 38 Institutional Investors from the Hong Kong Special
Administration Region, the Macau Special Administration Region and Taiwan who
invest in the PRC shall be subject to the requirements herein.
Article 39 This Measure shall come into force as of 1 December 2002.
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