中国证券投资基金业协会

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[CSRC Decree No.46] Measures for Administration of Overseas Securities Investment by Qualified Domestic Institutional Investors (Trial)

[2015-07-20]

Promulgating Date: 06/18/2007  Effective Date: 07/05/2007

Chapter 1:  General Provisions

Article 1     With a view to regulating overseas securities investment by qualified domestic institutional investors, and safeguarding the lawful rights and interests of investors, these Measures are hereby formulated in accordance with the Law of Securities Investment Funds, the Securities Law and other relevant laws and administrative regulations.

Article 2     For the purpose of these Measures, "qualified domestic institutional investors" (hereinafter referred to as "QDIIs") shall mean such domestic securities institutions as fund management companies and securities companies that meet the requirements prescribed in these Measures and that raise funds within the territory of China upon approval by the China Securities Regulatory Commission (hereinafter referred to as the "CSRC"), so as to conduct overseas securities investment management in the form of asset portfolios with part or all of the funds raised.

Article 3     QDIIs engaged in overseas securities investment shall place their assets custody business in the charge of domestic commercial banks, and may entrust overseas securities service agencies with their securities trading.

Article 4     The CSRC and the State Administration of Foreign Exchange (hereinafter referred to as "SAFE") shall by law supervise and administer overseas securities investment by QDII in line with their respective functions.

Chapter 2:  Qualifications and Procedures for the Examination and Approval of QDII

Article 5     When applying for QDII qualification, applicants shall satisfy the following requirements:

(1) Applicants shall have stable financial status and good credibility, and meet the requirements prescribed by the CSRC in terms of the management scale and operation period of assets;

(2) having qualified personnel experienced in overseas investment management according to provisions;

(3) having sound governance structures, complete internal control systems, and a proper business manner;

(4) free of severe penalties imposed by regulatory authorities, and of any significant event put on record for investigation by judicial or regulatory authorities within the preceding three years; and

(5) Other requirements specified by the CSRC on the principle of prudential supervision.

Article 6     The requirements referred to in Item (1) of Article 5 include:

(1) fund management companies: net assets of no less than RMB200 million, having conducted management of securities investment funds (hereinafter referred to as "funds") for over two years, and the scale of asset management by the end of the preceding quarter being no less than RMB20 billion or foreign exchange assets of  equivalent value; and

(2) securities companies: risk control indicators meeting the specified standards; net capital of no less than RMB800 million; the proportion of net capital to net assets being no less than 70%; the assets pool management plan (hereinafter referred to as the "pool plan") being conducted for more than one year; and the size of asset management by the end of the preceding quarter being no less than RMB2 billion or foreign exchange assets of equivalent value;

Article 7     The requirements referred to in Item (2) of Article 5 include: at least one managerial executive above the middle level with over five years of experience in management of overseas securities investment and other related qualifications, and no less than three staff with over three years of experience in the management of overseas securities investment.

Article 8     When applying for QDII qualification, applicants shall submit the following documentation (including the original and a duplicate thereof):

(1) application form;

(2) certification documents satisfying the provisions of Article 5 hereof; and

(3) other documentation required by the CSRC.

Article 9     The CSRC shall review the complete qualification application materials after the receipt thereof and make a decision on whether or not to approve such application. If the application is approved, the CSRC shall issue to the applicant licensing documentation for overseas securities investment; otherwise, the CSRC shall notify the applicant in writing.

Article 10     The applicant may file a product flotation application to the CSRC after obtaining qualification as a QDII.

Article 11     The CSRC shall review the complete application materials for product flotation before making a decision on whether or not to give approval and notifying the applicant in writing of their decision.

Article 12    QDIIs shall, pursuant to relevant provisions, file an application to SAFE for foreign exchange business qualification.

Chapter 3:  Overseas Investment Consultancy

Article 13     For the purpose of these Measures, "overseas investment consultancy" (hereinafter referred to as "investment consultancy") shall mean any overseas financial institution that satisfies the requirements prescribed in these Measures, and that provides QDIIs engaged in overseas securities investment with such services as securities trading consultancy or investment portfolio management as per contracts in that regard, so as to gain earnings therefrom.

Article 14     QDIIs may entrust their overseas securities investment to investment consultancies that satisfy the following requirements:

(1) established overseas and engaged in investment management under approval by the regulatory authorities of the country or region of their location;

(2) regulatory authorities of the country or region of their location have signed a memorandum of understanding with the CSRC regarding mutual supervision and cooperation, and are cooperating effectively in this regard;

(3) having conducted investment management for over five years, and managed assets in securities in the preceding fiscal year of no less than USD10 billion or its foreign equivalent; and

(4) having sound governance structures, complete internal control systems and a proper business manner, and being free of severe penalty imposed by the regulatory authorities of the country or region of its location, and of any significant events put on record for investigation by judicial authorities or regulatory authorities within the preceding five years;

Item (3) of the preceding paragraph shall not apply to branches that are established overseas by QDIIs as investment consultancies.

Article 15     QDIIs shall undertake fiduciary duty, and perform due diligence in selecting and entrusting an investment consultancy.

Article 16     Investment consultancies shall (a) earnestly observe the relevant provisions as specified in domestic laws and regulations, fund contract and assets pool management contracts concerned, and put priority on the interests of holders of funds and those in the pool plan, put forth advice on investment so as to pursue the optimal trading execution of funds and the pool plan on a reasonable basis; (b) treat all clients on the basis of fairness and impartiality, and execute decisions on investment consistently following the investment targets, strategies, policies, guidelines and restrictions of funds and the pool plan; and (c) disclose all the significant facts involving conflicts of interest and keep clients' information confidential.

Article 17     QDIIs that entrust investment consultancies with investment decisions, shall specify in the agreement concerned the corresponding responsibilities that investment consultancies shall undertake for any possible damages to the assets resulting from their own fault, negligence or failure to perform the duties concerned and other reasons.

Chapter 4:  Asset Custody

Article 18     QDIIs engaged in overseas securities investment shall place their asset custody under the charge of a bank qualified for the custody of securities investment funds (hereinafter referred to as the "custodian").

Article 19     The custodian may entrust their overseas asset custody to an overseas custodian of assets that satisfies the following requirements:

(1) being established in a country or region outside Mainland China, and subject to supervision and administration by the local government, and financial or securities authorities;

(2) paid-in capital in the preceding fiscal year of no less than USD1 billion or its foreign equivalent, or the scale of assets under custody being no less than USD100 billion or its foreign equivalent;

(3) being equipped with sufficient full-time personnel familiar with overseas custody;

(4) being positioned for the safekeeping of assets;

(5) being capable of safe and efficient liquidation and delivery; and

(6) being free of severe penalty imposed by regulatory authorities, and of any significant events put on record for investigation by judicial or regulatory authorities within the preceding three years.

Article 20     The custodian shall perform the following duties as an entrustee in accordance with relevant laws and regulations:

(1) safeguarding the interests of holders, supervising routine investment pertinent to funds and the pool plan as well as inward and outward remittance of funds according to relevant provisions, and reporting promptly to the CSRC and SAFE in case of any violation of laws and regulations regarding investment directives or inward and outward remittance of funds;

(2) safeguarding fund assets and assets in the pool plan, informing QDIIs of business activity promptly so as to secure the timely collection of revenue for funds and the pool plan;

(3) ensuring that the funds and the pool plan are administered in accordance with relevant laws and regulations, and conducting administration of the investment targets and restrictions agreed upon in the funds contract and the assets pool management contract;

(4) carrying out the orders given by QDIIs and investment consultancies in accordance with relevant laws and regulations, and subject to the stipulations agreed upon in the funds contract and the assets pool management contract, and conducting liquidation and delivery promptly;

(5) ensuring that the net asset value of funds and the pool plan are calculated by the method stipulated in relevant laws and regulations, the funds contract and the assets pool management contract;

(6) ensuring that funds and the pool plan execute such routine transactions as application for subscription, subscription and redemption in accordance with the relevant provisions of laws and regulations, the funds contract and the assets pool management contract;

(7) ensuring that funds and the pool plan are executed in accordance with the relevant laws and regulations, the funds contract and the assets pool management contract concerned so as to determine and implement the scheme on distribution of fund proceeds;

(8) registering the assets in the name of the entrustee or their designated agent in accordance with the relevant provisions of laws and regulations, the funds contract and the assets pool management contract;

(9) reporting to the CSRC and SAFE on overseas investment by QDIIs within seven working days following the end of each month, and declaring the international receipts and payments according to relevant provisions; and

(10) other duties specified by the CSRC and SAFE on the principle of prudential supervision.

Article 21     With regard to fund assets and assets in the pool plan overseas, the custodian may entrust an overseas custodian to perform the duties on its behalf as an agent. The overseas custodian shall undertake corresponding liability for any damage to funds and the pool plan caused by their own fault or negligence in performing their duties.

Article 22     The custodian shall perform the following duties in accordance with relevant laws and regulations:

(1) safekeeping fund assets and assets in the pool plan, and opening a fund account and a securities account;

(2) undertaking business related to the settlement, sale, collection and payment of foreign exchange as well as RMB settlement for QDIIs;

(3) keeping materials related to the inward and outward remittance of funds, conversion of capital, collection and payment of foreign exchange, capital transaction, and authorization and transaction records for no less than 20 years; and

(4) other duties specified by the CSRC and SAFE on the principle of prudential supervision.

Article 23     The custodian and the overseas custodian shall discriminate those assets belonging to themselves from those managed by QDIIs.

Chapter 5:  Fund Raising, Investment Operation and Information Disclosure

Article 24     Fund management companies qualified as QDIIs may, in accordance with relevant laws and regulations, raise funds by publicly issuing fund shares, so as to invest in the overseas securities market with the fund assets. Fund management companies that apply to raise funds shall submit application materials in accordance with relevant laws and regulations.

Article 25     Securities companies qualified as QDIIs may raise funds by such means as establishment of a pool plan, so as to invest in the overseas securities market with the funds raised thereby. Where there is a pool plan, QDIIs shall submit application materials in accordance with the relevant provisions for fund raising and investment operation.

Article 26     The funds for which an application for fund raising was made shall, in accordance with relevant provisions, adopt a benchmark for investment performance comparison.

Article 27     Funds and pool plans shall be used to invest in the financial products or instruments specified by the CSRC.

Article 28     Funds and pool plans shall comply with the provisions on proportions of investment.

Article 29     QDIIs or investment consultancies that select and entrust overseas securities service agencies with their securities trading, shall perform their fiduciary duty, and administer the trading procedures of investment, information disclosure and record keeping in accordance with relevant provisions.

Article 30     Where QDIIs and investment consultancies conduct securities trading and arrange research services with overseas securities service agencies, the following principles shall be observed:

(1) The trading commission belongs to the assets of the holders of funds and pool plans;

(2) QDIIs and investment consultancies shall be responsible for the quality of their trading on behalf of the holders, including but not limited to:

(a) pursuing optimal trading execution;

(b) minimizing trading costs; and

(c) benefiting the holders by utilizing their trading commission.

Article 31     QDIIs that conduct overseas securities investment shall abide by the relevant laws and regulations of local regulatory authorities and securities exchanges.

Article 32     Obligors such as QDIIs and the custodian shall disclose information in strict accordance with the provisions prescribed in relevant laws and regulations.

Chapter 6:  Quota and Fund Management

Article 33     QDIIs shall, according to the market tendencies and features of products, specify an appropriate ceiling amount in the flotation scheme, report to SAFE for filing and undergo the relevant formalities thereof. The quota within the existence period of funds and pool plans shall be administered in accordance with relevant provisions.

Article 34     QDIIs shall open custody accounts at the custodian's premises for the custody of all fund assets or pool plan assets.

Article 35     The custodian shall open a settlement account and a securities custody account for funds and pool plans so as to conduct fund settlement and securities custody with securities registration and settlement institutions.

Article 36    The scope of the revenue and expenditure in the custody account, the settlement account and the securities custody account shall comply with relevant provisions and the funds in such accounts may not be used as loans or guarantees to any other party.

Article 37     QDIIs shall report regularly to SAFE on the use of quotas and the inward and outward remittance of funds.

Chapter 7:  Supervision and Administration

Article 38     The CSRC and SAFE may request that QDIIs and the custodian present materials related to the QDIIs' overseas investments and where necessary, conduct on-site inspection.

Article 39     In any of the following circumstances, QDIIs shall report to the CSRC for filing and make announcements within five working days following the occurrence thereof:

(1) change of  custodian or overseas custodian;

(2) change of investment consultancy;

(3) litigations and other significant events happening overseas; or

(4) other circumstances prescribed by the CSRC.

Where custodians or overseas custodians are changed, QDIIs shall concurrently report to SAFE for filing.

Article 40    In any of the following circumstances, QDIIs shall, within 60 working days following the occurrence thereof, reapply for their qualification for overseas securities investment, and re-undergo formalities with SAFE in regard to foreign exchange business applications and the filing of quotas for investment:

(1) altering the name of the institution;

(2) merging with or being acquired by other institutions; or

(3) other circumstances prescribed by the CSRC and SAFE.

Article 41     Where there is any severe violation of laws and regulations arising from securities investment conducted by QDIIs with fund assets or assets in pool plans, the CSRC may by law take such measures as restricting their transactions, and SAFE may by law take such measures as restricting the inward and outward remittance of their funds.

Article 42     Where there is any severe violation of laws and regulations by the custodian, the CSRC may by law make a decision on restricting their custody business.

Article 43     The CSRC and SAFE shall impose corresponding administrative penalties by law upon QDIIs or custodians who violate any of these Measures.

Chapter 8:  Supplementary Provisions

Article 44     QDIIs that invest in financial products or instruments in the Hong Kong Special Administrative Region or the Macao Special Administrative Region, shall conduct such business by reference to these Measures.

Article 45     Fund management companies qualified as QDIIs that raise funds for a specific object or are entrusted by such objects to invest in the overseas securities market, shall conduct such business by reference to these Measures.

Article 46     Securities companies qualified as QDIIs that engage in client-specific asset management business or specific-object asset management business, and invest in the overseas securities market with assets under their management, shall conduct such business by reference to these Measures.

Article 47     These Measures shall come into effect as of July 5, 2007.