Provisions for the Implementation of the «Measures for Pilot Projects for Securities Investment in China by the Renminbi Qualified Foreign Institutional Investors of Fund Management Companies and Securities Companies»

Repealed on March 01 2013: http://www.chinalawandpractice.com/Article/3175149/Provisions-for-the-Implementation-of-the-Measures-for-Pilot.html

(Issued by the China Securities Regulatory Commission on, and effective as of, December 16 2011.)

Announcement of the CSRC [2011] No.37

With a view to better carrying out the work associated with the pilot projects for participation in securities investment in China with renminbi proceeds raised in Hong Kong by the renminbi qualified foreign institutional investors of fund management companies and securities companies, we hereby provide as follows in respect of issues relevant to the implementation of the Measures for Pilot Projects for Securities Investment in China by the Renminbi Qualified Foreign Institutional Investors of Fund Management Companies and Securities Companies (the Measures):

1. The phrase “an account of the source of the funds and the plan for securities investment in China” in Item (6) of Article 7 of the Measures shall include the following: the source of the proceeds, the investment limit for which the Hong Kong subsidiary proposes to apply, details of the fund or product to be issued, asset allocation, the investment research team, compliance inspection and other back-office operation arrangements, the domestic and offshore custodians, and the securities company/companies that is/are to trade securities on behalf of the Hong Kong subsidiary.

For the purposes of Item (10) of Article 7 of the Measures, the term “legal opinion” means a legal opinion issued by a law firm, which shall include but not be limited to an opinion on whether the applicant or its domestic parent has been subjected to penalties by the local regulator during the most recent three years and an opinion on whether the applicant satisfies the requirements in respect of the relevant qualification conditions.

The application materials to be submitted pursuant to Article 7 of the Measures shall include one original and one duplicate. Where a photocopy of an application document needs to be submitted, it shall be verified against the original for consistency. If application materials are in English, a complete Chinese translation shall be provided. As for financial reports, only the auditor's opinion and the main statements need be translated.

2. A pilot institution that has secured the qualifications for securities investment in China (a Pilot Institution) shall submit its official custody agreement to the CSRC within five working days of opening its renminbi accounts.

3. A Pilot Institution shall entrust its custodian to apply to China Securities Depository and Clearing Corporation Limited to open securities accounts, and each such securities account shall correspond to the respective approved renminbi account.

A Pilot Institution shall open and use its securities accounts in accordance with the business rules of China Securities Depository and Clearing Corporation Limited, and shall be responsible for the management of such accounts.

4. A Pilot Institution may, within its approved investment limit, invest in stocks, bonds, warrants, securities investment funds and other financial instruments permitted by the CSRC and People's Bank of China that are listed and traded on stock exchanges.

A Pilot Institution may participate in new share offerings, offerings of convertible bonds, additional share offerings and rights issuances.

5. The asset allocation of a Pilot Institution that carries out securities investment in China with renminbi proceeds raised in Hong Kong shall satisfy the following requirements: within its approved investment limit, not more than 20% of the proceeds may be invested in stocks and stock funds and not less than 80% of the proceeds shall be invested in fixed return securities, including various types of bonds and fixed return funds.

6. If a Pilot Institution's securities investments in China reach the level where information disclosure is required, it, as a person with an information disclosure obligation, shall submit such information to the stock exchange. The domestic parent of the Pilot Institution shall strengthen its risk management in respect of the Pilot Institution.

7. Each Pilot Institution may appoint not more than three domestic securities companies to trade securities on each of the Shanghai and Shenzhen Stock Exchanges.

8. These Provisions shall be effective as of the date of issuance.