China Securities Regulatory Commission, Regulating the Entrusted Investment Management Business of Securities Companies Circular

Issued: 28 November 2001
Applicability: "Entrusted investment management business" means the business arising from an entrusted investment management contract between a securities company and a principal that authorizes the securities company to apply the assets entrusted to it towards an investment portfolio of shares, bonds and other financial instruments in the securities market with a view to maximizing the returns for the principal (Section One).

Main contents: No securities company shall engage in entrusted investment management business unless it has obtained the required qualifications from the China Securities Regulatory Commission (CSRC). A securities company must be a comprehensive securities company, have Rmb 200 million in net capital and a clean practice record in the last 12 months to be eligible for the required qualifications (Section Two, Paragraph One). Non-bank enterprises, social legal persons and natural persons may become entrusting parties unless prohibited by laws or regulations. They must warrant that the assets they entrust are from legitimate sources and for legitimate uses and that they are not using bank credits for such investment (Section Three, Paragraph Four). The entrusted securities companies shall manage the assets with professionalism and for the best interest of their principals. They shall provide at least quarterly reports to their principals on the status of the investment. Moreover, they shall submit monthly reports on their entrusted investment management business to CSRC (Section Three, Paragraph Two). The assets to be used for such investment must be cash funds or securities lawfully held under the securities custody registration system (Section Four, Paragraph Eight). The funds shall be invested only in securities and their derivatives that are listed on stock exchanges (Section Four, Paragraph 10).