Tentative Provisions for the Engagement in the Public Securities Investment Fund Management Business by Asset Management Firms

(Promulgated by the China Securities Regulatory Commission on February 18 2013 and effective as of June 1 2013.)

CSRC Announcement [2013] No.10

Article 1: These Provisions have been formulated pursuant to laws and regulations such as the Securities Law, the Insurance Law and the Securities Investment Fund Law in order to regulate the engagement in the management of public securities investment funds (Funds) by qualified asset management firms, safeguard the lawful rights and interests of Fund unit holders and promote the sustained healthy development of the fund industry and capital markets.

Article 2: For the purposes of these Provisions, the term “asset management firm” means a securities company, insurance asset management company or an asset management firm specialising in the management of privately offered securities investment funds (a Private Fund Management Firm) lawfully established in China.

Article 3: When an asset management firm applies to the China Securities Regulatory Commission (the CSRC) to engage in the Fund management business, the CSRC shall approve its business qualifications in accordance with the law.

Article 4: The CSRC and its agencies shall regulate the engagement in Fund management business activities by asset management firms in accordance with the law.

The Asset Management Association of China (the AMAC) shall implement self-regulation over the engagement in Fund management business activities by asset management firms.

Article 5: An asset management firm applying to engage in the Fund management business shall satisfy the following conditions:

(1) having at least three years of securities asset management experience and having a good performance in the management of securities-type products during the most recent three years;

(2) having sound corporate governance and internal controls, and effective risk management;

(3) having a good business position and stable finances during the most recent three years;

(4) acting in good faith and being compliant, not having a record of a major violation of laws or regulations with the regulators during the most recent three years, and not currently being investigated by a regulator for a violation of laws or regulations or currently undergoing rectification;

(5) being a member of the AMAC; and

(6) satisfying other conditions as specified by the CSRC.

Article 6: A securities company applying to engage in the Fund management business shall, in addition to complying with Article 5, satisfy the following conditions:

(1) having total assets under its management of not less than Rmb20 billion or a pooled asset management business of not less than Rmb2 billion; and

(2) its risk control indicators during the last 12 months continuously being in compliance with the prescribed standards.

Article 7: An insurance asset management company applying to engage in the Fund management business shall, in addition to complying with Article 5, satisfy the following conditions:

(1) having assets under its management of not less than Rmb20 billion; and

(2) having net assets of not less than Rmb500 million as at the end of the last quarter.

Article 8: A Private Fund Management Firm applying to engage in the Fund management business shall, in addition to complying with Article 5, satisfy the following conditions:

(1) having paid-in capital or actually paid-in capital contributions of not less than Rmb10 million; and

(2) having securities assets under its management averaging not less than Rmb2 billion per annum during the most recent three years.

Article 9: An asset management firm applying to engage in the Fund management business shall submit the application materials to the CSRC, and the CSRC shall review the asset management firm's application in accordance with the law. The CSRC shall issue a Fund Management Qualification Certificate to the asset management firm if it secures Fund management business qualifications.

Article 10: An asset management firm that engages in the Fund management business shall comply with laws, administrative regulations and CSRC provisions, act in good faith and with due diligence, honesty and dedication, and manage and apply Fund property in the interests of the Fund unit holders.

Article 11: An asset management firm that engages in the Fund management business shall establish a dedicated Fund business department, and an independent Fund investment decision-making procedure and relevant firewall system so as to effectively guard against the diversion of benefits and conflicts of interest.

An asset management firm that engages in the Fund management business shall have an information system and security facilities that satisfy requirements or have a sound information system and business outsourcing plan. An asset management firm may provide support such as research, risk control, inspection and auditing, human resources management, information technology and operation services for the engagement in the Fund management business.

Article 12: An asset management firm shall establish management systems for fair trading and affiliated transactions, improve its mechanism for the monitoring of fair trading and irregular transactions, treat different assets under its management in an equal manner and guard against insider trading.

Article 13: An asset management firm that engages in the Fund management business shall have senior management personnel who satisfy the provisions of laws and regulations, and have not fewer than 10 professionals who engage in investment and research and have Fund business qualifications.

Senior management personnel and other Fund business employees shall comply with laws and regulations, abide by professional ethics and codes of conduct, perform their duties of good faith and due diligence and may not engage in activities that harm the interests of Fund unit holders.

Article 14: The CSRC shall, in accordance with laws and regulations, conduct offsite and onsite inspections of the operation of the Fund management business by asset management firms.

Article 15: If an asset management firm, in conducting its Fund management business, violates relevant laws, regulations or CSRC provisions, the CSRC shall take administrative regulatory measures against it and against its manager directly in charge and other directly responsible persons in accordance with the law. If administrative penalties are required in accordance with the law, such administrative penalties shall be imposed in accordance with relevant provisions. If a criminal offence is suspected, the case shall be transferred in accordance with the law to the judicial authorities to pursue criminal liability.

Article 16: If a securities company engages in the Fund management business through an asset management subsidiary controlled by it, matters shall be handled with reference hereto.

If an equity investment management firm, venture investment management firm or other such asset management firm satisfying the conditions set forth in Articles 5 and 8 hereof applies to engage in the Fund management business, matters shall be handled with reference hereto.

Article 17: Where these Provisions are silent in respect of the engagement in the Fund management business by asset management firms, the Securities Investment Fund Law and relevant laws, regulations and CSRC provisions shall apply.

Article 18: These Provisions shall be effective as of June 1 2013.

Attachment

LIST OF APPLICATION MATERIALS FOR AN ASSET MANAGEMENT FIRM APPLYING TO ENGAGE IN THE FUND MANAGEMENT BUSINESS

1. An undertaking as to the truthfulness, accuracy, completeness and compliance of the submitted application materials;

2. A written application including at least information such as the basic particulars of the asset management firm, the objective of engaging in the Fund management business, an account of satisfaction of the conditions for the qualifications to engage in the Fund management business, etc.;

3. A feasibility study including at least information such as the necessity and feasibility of the asset management firm engaging in the Fund management business, an account of the conduct of the existing asset management business, the advantages possessed, the Fund management business development plan, etc.;

4. The resolution or decision consenting to engagement in the Fund management business made through the asset management firm's own decision-making procedure;

5. The organisational structure for the asset management firm's engagement in the Fund management business, arrangements for the business separation mechanism and business sharing mechanism between the Fund management business to be launched and the asset management firm's existing asset management business, and the arrangements for the mechanism guarding against conflicts of interest;

6. Details of the asset management firm's equity stakes in fund management companies, considerations on the issue of inter-affiliate competition between directly engaging in the Fund management business and the fund management companies in which it has an equity stake, business synergy and overall strategy development arrangements;

7. Supporting documentation evidencing satisfaction of the conditions to engage in the Fund management business, including but not limited to: documents evidencing legal person qualifications and business qualifications, audited financial reports for the last three years, proof of the size of the assets under management issued by the custodian or other institution, etc.;

8. The application materials for the position of the principal persons in charge of the Fund management business and of the person in charge of compliance (to be provided with reference to the application materials for the qualifications for the positions of senior management personnel in the securities investment fund industry);

9. The principal management systems for the Fund management business, including at least the investment management system, risk control system, Fund accounting system, information disclosure system, inspection and auditing system, performance evaluation and assessment system, contingency handling system, etc. as well as the information system, business outsourcing and other such agreements;

10. A legal opinion issued by a law firm; and

11. Other documents as specified by the CSRC.