PRC Securities Investment Fund Law

Revised on April 24 2015. Latest revision can be found at:
http://www.chinalawandpractice.com/Article/3457510/PRC-Securities-Investment-Fund-Law-Revised-in-2015.html

Promulgated: October 28 2003
Effective: June 1 2004
Applicability: The Law applies to public sale of fund shares to raise capital for securities investment funds that are managed by fund managers, kept in trust by custodians and put into securities investment activities by investing in a portfolio of assets for the benefits of holders of fund shares (Article 2).
Specific procedures governing the raising of capital from designated investors or keeping in trust property of designated investors to engage in securities investment activities shall be separately formulated by the State Council in accordance with the Law (Article 101).
Procedures governing such activities as raising capital by public issue of shares to establish securities companies and engage in securities investment shall be separately formulated by the State Council
(Article 102).

Main contents: The Law comprises 103 articles in 12 parts:
- Part One: General Provisions
- Part Two: Fund Managers
- Part Three: Fund Custodians
- Part Four: Raising of Capital by Funds
- Part Five: Transactions of Fund Shares
- Part Six: Purchase and Redemption of Fund Shares
- Part Seven: Operation and Information Disclosure of Funds
- Part Eight: Changes to and Termination of Fund Contracts and Settlement of Fund Assets
- Part Nine: Rights and Interests of Holders of Fund Shares and the Exercise Thereof
- Part Ten: Regulation
- Part Eleven: Legal Liability
- Part Twelve: Supplementary Provisions
The Law makes it clear that fund assets shall be independent of the fund custodians' and fund managers' own assets. Property and proceeds derived from the management, use or other circumstances of the fund property shall be included in the fund property
(Article 6).
The Law stipulates that a fund custodian shall refuse to carry out a fund manager's investment instructions if it finds the instructions to be illegal or against relevant provisions or the fund contract. Even if the transaction procedures made under such instructions have become effective, the fund custodian shall still immediately inform the fund manager and report to the State Council securities regulatory organ in a timely manner (Article 30).
When disclosing fund information to the public, forecasts on the securities investment performance, or promises on the profits or bearing of losses against relevant provisions are prohibited
(Article 64).
Article 70 states that it is the rights of a holder of fund shares to request a general meeting of the holders of fund shares and to exercise their voting rights on matters discussed in the meeting.
Article 99 stipulates that if a party violates this Law it shall bear civil liability for damages and pay fines, and if its assets are not enough to pay both it shall first bear the civil liability for damages.