PRC Securities Investment Fund Law (Revised in 2015)

Article 2: This Law shall govern securities investment funds (Funds) established with publicly or privately raised funds, the management and custody of which are handled by Fund managers and Fund custodians respectively and the securities investment activities of which carried out in the interests of Fund unit holders in the People's Republic of China. Where this Law is silent, the PRC Trust Law, the PRC Securities Law and other relevant laws and administrative regulations shall apply.

Article 3: The rights and obligations of Fund managers, Fund custodians and Fund unit holders shall be specified in Fund contracts in accordance herewith.

Fund managers and Fund custodians shall perform their entrusted duties in accordance with this Law and Fund contracts.

Holders of units in a Fund established through a public offering (Public Fund) shall enjoy the returns and bear the risks therein in proportion to their unit holdings; the distribution of returns from and the bearing of risks in a Fund established through a private offering (Private Fund) shall be specified in the Fund contract.

Article 4: When engaging in Fund activities, the principles of free will, fairness and good faith shall be abided by, and state interests and the public interest may not be prejudiced.

Article 5: The liabilities attached to Fund property shall be borne by the Fund property itself and Fund unit holders shall be liable for the liabilities attached to the Fund property to the extent of their capital contributions, unless, in accordance herewith, otherwise provided in the Fund contract, in which case such provisions shall apply.

Fund property shall be separate from the property of the Fund manager and Fund custodian. Fund managers and Fund custodians may not incorporate Fund property into their own property.

The property and returns of Fund property obtained in the course of the management, application or otherwise by the Fund manager and Fund custodian shall be incorporated into the Fund property.

If a Fund manager or Fund custodian is liquidated because it is dissolved in accordance with the law, is closed down in accordance with the law or is declared bankrupt in accordance with the law, Fund property shall not constitute part of its property subject to liquidation.

Article 6: The claims attached to Fund property may not be set off against the liabilities attached to the property of the Fund manager or Fund custodian. The claims and liabilities attached to the property of different Funds may not be set off against each other.

Article 7: Liabilities not borne by Fund property itself may not be enforced against the Fund property.

Article 8: Taxes related to the investment of Fund property shall be borne by the Fund unit holders and the same shall be withheld by the Fund manager or other withholding agent in accordance with relevant state provisions on taxation.

Article 9: When a Fund manager or Fund custodian manages or applies Fund property or a Fund service firm engages in Fund service activities, it shall duly perform its duties and perform its obligations of good faith and due diligence.

When using Fund property to invest in securities, a Fund manager shall comply with the rules of prudent operation, formulate objective and rational investment strategies and risk management systems and effectively guard against and control risks.

Fund business employees shall have Fund business qualifications, comply with laws and administrative regulations and duly abide by professional ethics and codes of conduct.

Article 10: Fund managers, Fund custodians and Fund service firms shall establish securities investment fund industry associations (Fund Industry Associations) in accordance herewith, to carry out industry self-regulation, coordinate industry relations, provide industry services and promote the development of the industry.

Article 11: The State Council's securities regulator shall regulate Fund activities in accordance with the law and its agencies shall perform their duties as authorised.

Part Two: Fund Managers

Article 12: A Fund manager shall be a lawfully established company or partnership.

The manager of a Public Fund shall be a Fund management company or other organisation approved by the State Council's securities regulator in accordance with provisions.

Article 13: To establish a Fund management company to manage Public Funds, the following conditions shall be satisfied and the same shall be subject to the approval of the State Council's securities regulator:

(1) having articles of association compliant with this Law and the PRC Company Law;

(2) having registered capital of not less than Rmb100 million, which must be paid-in monetary capital;

(3) its major shareholders having good business performance in operating financial business or managing financial institutions, having a good financial standing and public reputation, asset size meeting the criteria specified by the State Council and no record of violation of the law during the most recent three years;

(4) having the statutory number of personnel with Fund business qualifications;

(5) having directors, supervisors and senior management personnel satisfying the conditions for their respective positions;

(6) having a place of business, security precaution facilities and other Fund management business related facilities that satisfy requirements;

(7) having a sound internal governance structure, internal audit and monitoring system and risk control system; and

(8) satisfying other conditions as specified in laws and administrative regulations and by the State Council's securities regulator and approved by the State Council.

Article 14: The State Council's securities regulator shall conduct its review of an application for the establishment of a Fund management company in accordance with the conditions set forth in Article 13 hereof and prudential regulation principles, render its decision on whether to grant approval or not and notify the applicant thereof within six months of the date of acceptance of the application. If it withholds its approval, it shall give its reasons therefor.

In the event of a change in a shareholder of a Fund management company holding at least 5% of its equity, a change in the de facto controller of the company or a change in another material particular, the same shall be reported to the State Council's securities regulator for approval. The State Council's securities regulator shall render its decision on whether to grant approval or not and notify the applicant thereof within 60 days of the date of acceptance of the application. If it withholds its approval, it shall give its reasons therefor.

Article 15: A person may not serve as a director, supervisor, senior management member or other Fund business employee of a Fund manager of a Public Fund if:

(1) he/she has been sentenced for the crime of corruption, bribery, malfeasance or infringing property, or the crime of disrupting the order of the socialist market economy;

(2) he/she was a director, supervisor, factory manager or senior management member who bears personal liability for the bankruptcy and liquidation of his/her company or enterprise due to mismanagement or the revocation of its business licence for a violation of the law, where not more than five years have elapsed since the date of completion of the bankruptcy liquidation or the revocation of the business licence;

(3) he/she bears a comparatively large personal debt that has fallen due but has not been settled;

(4) he/she was a business employee of a Fund manager, Fund custodian, stock exchange, securities company, securities depository and clearing firm, futures exchange, futures company or other organisation or a member of the working personnel of a state authority who was dismissed for a violation of the law;

(5) he/she was a lawyer, certified public accountant, business employee of an asset appraisal firm or verification firm, or a person involved in the investment consulting business who has had his/her practice licence or qualifications revoked for a violation of the law; or

(6) he/she is another person whom laws or administrative regulations specify is ineligible to engage in the Fund business.

Article 16: A director, supervisor or senior management member of a Fund manager of a Public Fund shall be familiar with securities investment related laws and administrative regulations and have at least three years of experience of work related to the position in which he/she is serving; a senior management member shall additionally have Fund business qualifications.

Article 17: If a director, supervisor, senior management member or other Fund business employee of a Fund manager of a Public Fund himself/herself or his/her spouse or a materially interested person wishes to invest in securities, he/she shall report the same to the Fund manager in advance and he/she shall avoid any conflict of interest with the Fund unit holders.

A Fund manager of a Public Fund shall establish management systems for the persons specified in the preceding paragraph to carry out securities investment reporting, registration, review and disposal, and the same shall be reported to the State Council's securities regulator for the record.

Article 18: A director, supervisor, senior management member or other Fund business employee of a Fund manager of a Public Fund may not serve in any position with a Fund custodian or other Fund manager, and may not engage in any securities trading or other activities that prejudice Fund property or the interests of Fund unit holders.

Article 19: The Fund manager of a Public Fund shall perform the following duties:

(1) raising funds in accordance with the law and handling matters relating to the sale and registration of Fund units;

(2) carrying out Fund record filing procedures;

(3) in carrying out securities investment, separately managing and separately accounting for the property of different Funds under its management;

(4) determining the distribution plan for Fund returns in accordance with the Fund contract and distributing the returns to the Fund unit holders in a timely manner;

(5) carrying out Fund accounting and preparing the Fund's financial accounting statements;

(6) preparing interim and annual Fund reports;

(7) calculating and announcing the net value of Fund assets, and determining the prices for the purchase and redemption of Fund units;

(8) carrying out information disclosure matters relating to Fund property management business activities;

(9) convening Fund unit holders' general meetings in accordance with provisions;

(10) keeping records, books, statements and other related materials of Fund property management business activities;

(11) exercising the right of litigation or the right to other legal acts in its own name for the benefit of the Fund unit holders; and

(12) performing other duties as specified by the State Council's securities regulator.

Article 20: A Fund manager of a Public Fund and its directors, supervisors, senior management personnel and other Fund business employees may not:

(1) mix its own property or that of another with Fund property to carry out securities investment;

(2) treat the property of different Funds under its management in an unfair manner;

(3) utilise Fund property or the advantages of its/their position to seek gains for persons other than the Fund unit holders;

(4) promise returns to, or bear losses for, Fund unit holders in violation of the law;

(5) appropriate or divert Fund property;

(6) divulge non-public information obtained as a result of their position, or utilise such information to engage in or expressly or implicitly instruct another to engage in relevant trading activities;

(7) be derelict in their duties or fail to perform their duties in accordance with provisions; or

(8) commit another act as prohibited in laws or administrative regulations or by the State Council's securities regulator.

Article 21: The Fund manager of a Public Fund shall establish a sound internal governance structure and expressly specify the duties and authority of the shareholders' meeting, board of directors, supervisory board and senior management personnel so as to ensure the independent operation of the Fund manager.

The Fund manager of a Public Fund may implement a shareholding scheme for professionals to establish a long-term incentive and restraint mechanism.

The shareholders, directors, supervisors and senior management personnel of a Fund manager of a Public Fund shall comply with the principle of primacy of the interests of the Fund unit holders when exercising their rights or performing their duties.

Article 22: The Fund manager of a Public Fund shall make allocations to a risk reserve from the remuneration from the Funds it manages.

If a Fund manager of a Public Fund causes a loss to Fund property or to the lawful rights and interests of the Fund unit holders due to a violation of the law or regulations, breach of the Fund contract or other such reason, and is therefore liable for compensation, it may first use the risk reserve to pay such compensation.

Article 23: The shareholders and de facto controller(s) of a Fund manager of a Public Fund shall perform their obligation to report material events in a timely manner in accordance with the provisions of the State Council's securities regulator and may not:

(1) make fraudulent capital contributions or illegally withdraw their capital contributions;

(2) interfere in the Fund operation activities of the Fund manager without a lawful resolution from the shareholders' meeting or board of directors;

(3) request that the Fund manager utilise Fund property to seek gains for itself or another, thereby prejudicing the interests of the Fund unit holders; or

(4) commit another act as prohibited by the State Council's securities regulator.

If a shareholder or the de facto controller(s) of a Fund manager of a Public Fund commits any of the acts set forth in the preceding paragraph or if a shareholder ceases to satisfy the statutory conditions, the State Council's securities regulator shall order it to rectify the matter within a specified period of time and may, depending on the circumstances, order it to transfer the equity it holds or controls in the Fund manager.

Until a shareholder or the de facto controller(s) described in the preceding paragraph rectifies/rectify the violation as required and transfer(s) the equity held or controlled in the Fund manager, the State Council's securities regulator may restrict the relevant shareholder in its exercise of its shareholder rights.

Article 24: If a Fund manager of a Public Fund commits a violation of the law or regulations, or its internal governance structure, auditing and monitoring or risk control and management does not comply with provisions, the State Council's securities regulator shall order it to rectify the matter within a specified period of time. If it fails to do so, or its act seriously jeopardises the stable operation of the Fund manager or prejudices the lawful rights and interests of the Fund unit holders, the State Council's securities regulator may, depending on the circumstances, take the following measures against it:

(1) restrict its business activities, or order it to suspend part or all of its business;

(2) restrict its distribution of dividends, or restrict its payment of remuneration and/or provision of benefits to its directors, supervisors and senior management personnel;

(3) restrict it from transferring its property or encumbering its property with third party rights;

(4) order it to replace directors, supervisors and/or senior management personnel or restrict their rights; or

(5) order relevant shareholders to transfer their equity or restrict the relevant shareholders in exercising their shareholder rights.

After carrying out rectification, the Fund manager of the Public Fund shall submit a report to the State Council's securities regulator. If, after checking and accepting the rectification, the State Council's securities regulator determines that the Fund manager complies with relevant requirements, it shall lift the relevant measures taken against the Fund manager within three days of the date of completion of the check and acceptance procedures.

Article 25: If a director, supervisor or senior management member of a Fund manager of a Public Fund fails to act with due diligence, thereby causing the Fund manager to commit a major violation of the law or regulations or to be exposed to a material risk, the State Council's securities regulator may order that he/she be replaced.

Article 26: If a Fund manager of a Public Fund operates illegally or is exposed to a material risk, seriously jeopardising securities market order or prejudicing the interests of Fund unit holders, the State Council's securities regulator may take regulatory measures against such Fund manager such as ordering it to suspend operations and undergo rectification, appointing a trustee or receiver, revoking its fund management qualifications or closing it down.

Article 27: When a Fund manager of a Public Fund has been ordered to suspend operations and undergo rectification, has had a trustee or receiver appointed in accordance with the law, is being liquidated or is exposed to a material risk, the following measures may, subject to the approval of the State Council's securities regulator, be taken against the directors, supervisors and senior management personnel of the Fund manager who are directly responsible and other directly responsible persons:

(1) notifying the exit control authorities to block them from leaving the country in accordance with the law; and/or

(2) applying to the judicial authorities to prohibit them from transferring, assigning or otherwise disposing of property or encumbering such property with third party rights.

Article 28: The duties of a Fund manager of a Public Fund shall terminate if:

(1) it has its fund management qualifications revoked in accordance with the law;

(2) it is dismissed by the Fund unit holders' general meeting;

(3) it is dissolved in accordance with the law, closed down in accordance with the law or declared bankrupt in accordance with the law; or

(4) another circumstance as specified in the Fund contract arises.

Article 29: When the duties of a Fund manager of a Public Fund are terminated, the Fund unit holders' general meeting shall appoint a new Fund manager within six months; until the new Fund manager is chosen, the State Council's securities regulator shall appoint an interim Fund manager.

When the duties of a Fund manager of a Public Fund are terminated, it shall duly keep the information on the fund management business, carry out the procedures for the handover of the fund management business in a timely manner and the new Fund manager or interim Fund manager shall also accept the same in a timely manner.

Article 30: When the duties of a Fund manager of a Public Fund are terminated, an accounting firm shall be engaged in accordance with provisions to audit the Fund property and announce the audit results, and additionally submit the same to the State Council's securities regulator for the record.

Article 31: The specific measures for regulating Fund managers of Private Funds shall be formulated by the State Council's financial regulator in accordance with the principles set forth in this Part.

Part Three: Fund Custodians

Article 32: A Fund custodian shall be a lawfully established commercial bank or other financial institution.

If a commercial bank is to serve as a Fund custodian, the same shall be subject to the approval of the State Council's securities regulator in concert with the State Council's banking regulator. Where another financial institution is to serve as Fund custodian, the same shall be subject to the approval of the State Council's securities regulator.

Article 33: To serve as a Fund custodian, the following conditions shall be satisfied:

(1) having net assets and risk control indicators complying with relevant provisions;

(2) having a dedicated Fund custody department;

(3) having the statutory number of specialised personnel with Fund business qualifications;

(4) having the resources to securely keep Fund property;

(5) having a secure and effective clearance and delivery system;

(6) having a place of business, security precaution facilities and other Fund custody business related facilities that satisfy requirements;

(7) having a sound internal audit and monitoring system and risk control system; and

(8) satisfying other conditions as specified in laws and administrative regulations and by the State Council's securities regulator or the State Council's banking regulator and approved by the State Council.

Article 34: Articles 15, 18 and 19 hereof shall apply to the senior management personnel and other business employees of the dedicated Fund custody department of Fund custodians.

Article 16 hereof shall apply to the senior management personnel of the dedicated Fund custody department of Fund custodians.

Article 35: A Fund manager and Fund custodian may not be the same institution, and may not have cross capital contributions or shareholdings.

Article 36: A Fund custodian shall perform the following duties:

(1) securely keeping Fund property;

(2) opening a monetary account and securities account for Fund property in accordance with provisions;

(3) establishing separate accounts for the property of different Funds in its custody and ensuring the integrity and separateness of Fund property;

(4) keeping records, books, statements and other related materials of Fund custody business activities;

(5) handling clearance and delivery matters in a timely manner in accordance with the Fund contract and pursuant to the investment instructions of the Fund manager;

(6) carrying out information disclosure matters relating to Fund custody business activities;

(7) issuing opinions on financial accounting reports of Funds and on interim and annual Fund reports;

(8) reviewing and examining the net value of Fund assets and the prices for the purchase and redemption of Fund units calculated by the Fund manager;

(9) convening Fund unit holders' general meetings in accordance with provisions;

(10) monitoring the investment operations of the Fund manager in accordance with provisions; and

(11) performing other duties as specified by the State Council's securities regulator.

Article 37: If the Fund custodian discovers that an investment instruction from the Fund manager violates a law, a set of administrative regulations or other relevant set of provisions, or breaches the Fund contract, it shall refuse to execute the same, notify the Fund manager forthwith and report the same to the State Council's securities regulator in a timely manner.

If the Fund custodian discovers that an investment instruction from the Fund manager that has entered into effect pursuant to the trading procedure violates a law, a set of administrative regulations or other relevant set of provisions, or breaches the Fund contract, it shall notify the Fund manager forthwith and report the same to the State Council's securities regulator in a timely manner.

Article 38: Articles 21 and 23 hereof shall apply to Fund custodians.

Article 39: If a Fund custodian ceases to satisfy the conditions set forth herein, or fails to act with due diligence, committing a major error in performing its duties specified herein, the State Council's securities regulator and the State Council's banking regulator shall order it to rectify the matter. If it fails to rectify the matter within the specified period of time or its act materially affects the stable operation of the Funds in its custody, prejudicing the interests of the Fund unit holders, the State Council's securities regulator and the State Council's banking regulator may, depending on the circumstances, take the following measures against it:

(1) restricting its business activities, or ordering it to suspend handling of new Fund custody business; and/or

(2) ordering it to replace the senior management member of its dedicated Fund custody department who is responsible.

After carrying out rectification, the Fund custodian shall submit a report to the State Council's securities regulator and the State Council's banking regulator. If, after checking and accepting the rectification, the Fund custodian is found to comply with relevant requirements, the State Council's securities regulator and the State Council's banking regulator shall lift the relevant measures taken against it within three days of the date of completion of the check and acceptance procedures.

Article 40: The State Council's securities regulator and the State Council's banking regulator may revoke a Fund custodian's Fund custody qualifications if:

(1) it has not engaged in Fund custody business for three years in succession;

(2) it has violated this Law and the circumstances thereof are serious; or

(3) another circumstance as specified in laws or administrative regulations applies to it.

Article 41: The duties of a Fund custodian shall terminate if:

(1) it has its Fund custody qualifications revoked in accordance with the law;

(2) it is dismissed by the Fund unit holders' general meeting;

(3) it is dissolved in accordance with the law, closed down in accordance with the law or declared bankrupt in accordance with the law; or

(4) another circumstance as specified in the Fund contract arises.

Article 42: When the duties of a Fund custodian are terminated, the Fund unit holders' general meeting shall appoint a new Fund custodian within six months. Until the new Fund custodian is chosen, the State Council's securities regulator shall appoint an interim Fund custodian.

When the duties of a Fund custodian are terminated, the Fund custodian shall duly keep the Fund property and the information on the Fund custody business, and carry out the procedures for handover of the Fund property and the Fund custody business in a timely manner. The new Fund custodian or interim Fund custodian shall accept the same in a timely manner.

Article 43: When the duties of a Fund custodian are terminated, an accounting firm shall be engaged in accordance with provisions to audit the Fund property and announce the audit results, and additionally submit the same to the State Council's securities regulator for the record.

Part Four: Fund Operation Methods and Organisation

Article 44: The Fund contract shall specify the fund operation method.

Article 45: A Fund may operate in a closed manner, open-ended manner or otherwise.

The term “Fund operating in a closed manner” (Closed-end Fund) means a Fund the total number of Fund units of which remains fixed and unchanged during the term of the Fund contract and the Fund unit holders of which may not apply for redemption; the term “Fund operating in an open-ended manner” (Open-ended Fund) means a Fund the total number of Fund units of which is not fixed and the Fund units of which may be purchased or redeemed at the times and places specified in the Fund contract.

The measures for the selling, trading, purchasing and redeeming of Fund units of a Fund operating in another manner shall be specified separately by the State Council's securities regulator.

Article 46: A Fund unit holder shall have the following rights:

(1) sharing the returns on the Fund property;

(2) participating in the distribution of the remaining Fund property after liquidation;

(3) transferring or applying to redeem in accordance with the law the Fund units he/she holds;

(4) requesting that a Fund unit holders' general meeting be called or convening a Fund unit holders' general meeting in accordance with provisions;

(5) exercising his/her voting right on matters considered at Fund unit holders' general meetings;

(6) instituting legal actions in accordance with the law in respect of acts by the Fund manager, Fund custodian or a Fund service firm that prejudice his/her lawful rights and interests; and

(7) other rights as specified in the Fund contract.

Holders of units in a Public Fund shall have the right to review and take copies of publicly disclosed Fund information and materials; holders of units in Private Funds shall have the right, in respect of circumstances involving their personal interests, to review the Fund's financial accounting books and other such financial materials.

Article 47: The Fund unit holders' general meeting comprises all of the Fund unit holders and shall exercise the following functions and powers:

(1) deciding on increasing the offering of Fund units or renewing the term of the Fund contract;

(2) deciding to amend material provisions of the Fund contract or to terminate the Fund contract early;

(3) deciding to replace the Fund manager or the Fund custodian;

(4) deciding to revise the rate of remuneration of the Fund manager or Fund custodian; and

(5) other functions and powers as specified in the Fund contract.

Article 48: Pursuant to the Fund contract, the Fund unit holders' general meeting may establish an office for handling routine matters, which shall exercise the following functions and powers:

(1) convening Fund unit holders' general meetings;

(2) proposing the replacement of the Fund manager or Fund custodian;

(3) monitoring the investment operations of the Fund manager and the custodial activities of the Fund custodian;

(4) proposing the revision of the rate of remuneration of the Fund manager or the Fund custodian; and

(5) other functions and powers as specified in the Fund contract.

The office for handling routine matters described in the preceding paragraph shall comprise persons elected by the Fund unit holders' general meeting. Its rules of procedure shall be specified by the Fund contract.

Article 49: The Fund unit holders' general meeting and the office for handling routine matters may not directly participate or interfere in the Fund's investment management activities.

Part Five: Public Funds

Article 50: A Public Fund shall be registered with the State Council's securities regulator. Without registration, a Fund may not be publicly offered or publicly offered in a disguised manner.

For the purposes of the preceding paragraph, the term “Public Fund” includes the raising of funds from non-specific targets, the raising of funds from specific targets exceeding 200 in number in aggregate and other forms as specified in laws and administrative regulations.

A Public Fund shall be managed by the Fund manager and kept in the custody of the Fund custodian.

Article 51: To register a Public Fund, the proposed Fund manager shall submit the following documents to the State Council's securities regulator:

(1) an application;

(2) a draft of the Fund contract;

(3) a draft of the Fund custody agreement;

(4) a draft of the prospectus;

(5) a legal opinion issued by a law firm; and

(6) other documents that the State Council's securities regulator specifies be submitted.

Article 52: The Fund contract for a Public Fund shall contain the following:

(1) the objective of offering the Fund and the Fund name;

(2) the names and domiciles of the Fund manager and the Fund custodian;

(3) the method of operation of the Fund;

(4) the total number of Fund units and Fund contract term, for a Closed-end Fund, or the minimum total number of units to be offered, for an Open-ended Fund;

(5) the principles for determining the date, price and charges for selling the Fund units;

(6) the rights and obligations of the Fund unit holders, Fund manager and Fund custodian;

(7) the procedures and rules for convening, deliberating on matters at and voting at a Fund unit holders' general meeting;

(8) the procedures, times, places and method of calculating charges for selling, trading, purchasing and redeeming Fund units, and the times and methods of paying redemption proceeds;

(9) the principles for and the manner of carrying out the distribution of Fund returns;

(10) the methods of allocating and paying the remuneration of the Fund manager and Fund custodian and the percentages thereof;

(11) the methods of allocating and paying other charges relating to the management and application of the Fund property;

(12) the investment orientation of, and investment restrictions on, the Fund property;

(13) the methods of calculating and announcing the net value of the Fund assets:

(14) the method of handling in the event the Fund offering fails to meet the statutory requirement;

(15) the grounds and procedures for terminating or ending the Fund contract and the method of liquidating the Fund property;

(16) the dispute resolution method; and

(17) other matters as specified by the parties.

Article 53: The prospectus for a Public Fund shall contain the following:

(1) the title of the document granting registration for the Fund offering application and the registration date;

(2) the basic particulars of the Fund manager and Fund custodian;

(3) a summary of the provisions of the Fund contract and Fund custody agreement;

(4) the date, price, charges and duration of the sale of Fund units;

(5) the method of sale of the Fund units and the names of the institutions selling and registering the Fund units;

(6) the names and domiciles of the law firm that issued the legal opinion and the accounting firm that audited the Fund property;

(7) the methods of allocating and paying the remuneration of the Fund manager and Fund custodian and other relevant charges, and the percentages thereof;

(8) a risk warning; and

(9) other information as specified by the State Council's securities regulator.

Article 54: The State Council's securities regulator shall review the application for registration of a Public Fund offering in accordance with laws, administrative regulations and the provisions of the State Council's securities regulator, render its decision on whether to grant registration and notify the applicant thereof within six months from the date of acceptance of such application. If it withholds registration, it shall give the reasons therefor.

Article 55: Fund units may be sold only after the Fund offering application has been registered.

The sale of Fund units shall be handled by the Fund manager or the Fund sales institution appointed by it.

Article 56: The Fund manager shall publish the prospectus, Fund contract and other relevant documents three days prior to the sale of the Fund units.

The documents specified in the preceding paragraph shall be true, accurate and complete.

The publicity activities carried out for the Fund offering shall be in compliance with relevant laws and administrative regulations, and none of the acts set forth in Article 78 hereof may be carried out.

Article 57: The Fund manager shall carry out the Fund offering within six months from the date of receipt of the document granting registration. If more than six months have elapsed before commencement of the offering but no material change in the originally registered particulars has occurred, record filing shall be carried out with the State Council's securities regulator. If a material change has occurred, a new registration application shall be submitted to the State Council's securities regulator.

The Fund offering may not exceed the Fund offering period registered by the State Council's securities regulator. The Fund offering period shall count from the date of sale of the Fund units.

Article 58: If, upon expiration of the offering period, at least 80% of the registered size of the total number of Fund units has been reached in a Closed-end Fund offering, or the total number of Fund units sold exceeds the registered minimum total units offered in an Open-ended Fund offering, and the number of Fund unit holders complies with the provisions of the State Council's securities regulator, the Fund manager shall, within 10 days from the date of expiration of the offering period, engage a statutory capital verification firm to conduct capital verification and, within 10 days from the date of receipt of the capital verification report, submit the capital verification report and carry out Fund record filing procedures with the State Council's securities regulator and announce the same.

Article 59: The proceeds collected during the Fund offering period shall be deposited into an account for that purpose, and no one may make use of such proceeds before the conclusion of the Fund offering.

Article 60: Once the investors have paid the moneys for the Fund units subscribed for by them, the Fund contract is formed; and once the Fund manager carries out the Fund record filing procedures with the State Council's securities regulator in accordance with Article 59 hereof, the Fund contract enters into effect.

If, at the expiration of the Fund offering period, the conditions set forth in Article 59 hereof are not satisfied, the Fund manager shall bear liability as follows:

(1) bearing, from its own property, the debts and charges incurred in connection with the offering; and

(2) refunding the moneys paid by the investors with interest at the rate for bank deposits of the same period within 30 days after the expiration of the Fund offering period.

Part Six: Trading, Purchase and Redemption of Fund Units of a Public Fund

Article 61: When applying for the listing and trading of Fund units, the Fund manager shall submit an application to the stock exchange, and if the stock exchange gives its consent after a review of the application in accordance with the law, the parties shall execute a listing agreement.

Article 62: To be listed and traded, Fund units shall satisfy the following conditions:

(1) the offering of the Fund complying herewith;

(2) the term of the Fund contract being at least five years;

(3) the proceeds from the Fund offering being not less than Rmb200 million;

(4) the Fund unit holders numbering not less than 1,000 persons; and

(5) satisfying other conditions as specified in the rules for the listing and trading of Fund units.

Article 63: The rules for the listing and trading of Fund units shall be formulated by the stock exchange and submitted to the State Council's securities regulator for approval.

Article 64: The stock exchange shall terminate the listing and trading of Fund units and report the same to the State Council's securities regulator for the record if, after listing and trading:

(1) the Fund units cease to satisfy the conditions for listing and trading set forth in Article 63 hereof;

(2) the term of the Fund contract expires;

(3) the Fund unit holders' general meeting decides to terminate the listing and trading early; or

(4) another circumstance requiring termination of the listing and trading as specified in the Fund contract or in the rules for the listing and trading of Fund units arises.

Article 65: The purchase, redemption and registration of Fund units of an Open-ended Fund shall be handled by the Fund manager or the Fund service firm appointed by it.

Article 66: The Fund manager shall handle the purchase and redemption of Fund units every working day. If the Fund contract provides otherwise, such provisions shall apply.

Once the investor pays the purchase moneys, the purchase shall be concluded; and once the Fund unit registration institution confirms the Fund units, the purchase shall enter into effect.

Once a Fund unit holder submits the redemption application, the redemption shall be concluded; and once the Fund unit registration institution confirms the redemption, the redemption shall enter into effect.

Article 67: The Fund manager shall punctually pay the redemption proceeds, except in the following circumstances:

(1) the Fund manager is unable to pay the redemption proceeds due to force majeure;

(2) the stock exchange decides in accordance with the law to suspend trading, making it impossible for the Fund manager to calculate the net value of the Fund assets on the day in question; or

(3) another special circumstance as specified in the Fund contract arises.

In the event any of the foregoing circumstances arises, the Fund manager shall, on the day in question, report the same to the State Council's securities regulator for the record.

Once the circumstance specified in the first paragraph of this Article is extinguished, the Fund manager shall pay the redemption proceeds in a timely manner.

Article 68: An Open-ended Fund shall maintain sufficient cash or government bonds to pay redemption proceeds to Fund unit holders. The specific percentage of cash or government bonds to be maintained in the Fund property shall be specified by the State Council's securities regulator.

Article 69: The price for the purchase or redemption of Fund units shall be calculated based on the net value of the Fund units on the date of purchase or redemption, plus or minus the relevant charges.

Article 70: In the event of an error in the calculation of the net value of Fund units, the Fund manager shall immediately correct the same, and shall take reasonable measures to prevent the losses from spreading. If a calculation error is as much as 0.5% of the net value of the Fund units, the manager shall publicly announce the same and report the same to the State Council's securities regulator for the record.

If an error in the calculation of the net value of the Fund units causes a Fund unit holder to incur a loss, the Fund unit holder shall have the right to demand that the Fund manager and Fund custodian pay compensation.

Part Seven: Investment and Information Disclosure by Public Funds

Article 71: When a Fund manager utilises Fund property to invest in securities, it shall do so in the form of an asset portfolio unless otherwise provided by the State Council's securities regulator.

The specific method and investment percentages of an asset portfolio shall be specified in the Fund contract in accordance with this Law and the provisions of the State Council's securities regulator.

Article 72: Fund property shall be used for investment in:

(1) listed and traded stocks and bonds; and

(2) other securities as specified by the State Council's securities regulator and the derivatives thereof.

Article 73: Fund property may not be used for the following investments or in the following activities:

(1) underwriting of securities;

(2) making loans to or providing security for others in violation of provisions;

(3) engaging in investments with unlimited liability;

(4) trading of other Fund units, unless otherwise provided by the State Council's securities regulator;

(5) making capital contributions to the Fund manager or Fund custodian;

(6) engaging in insider trading, manipulation of securities trading prices or other improper securities trading activities; or

(7) other activities prohibited in laws or administrative regulations or by the State Council's securities regulator.

Use of Fund property to trade in securities offered by, or, during the underwriting period, securities underwritten by, the Fund manager, Fund custodian, their controlling shareholder, their de facto controller(s) or other company with which they have a material interest in, or to engage in other material affiliated-transactions shall comply with the principle of the primacy of the interests of the Fund unit holders, guard against conflicts of interest and comply with the provisions of the State Council's securities regulator, and information disclosure obligations shall be performed therefor.

Article 74: The Fund manager, Fund custodian and other parties with an obligation to disclose Fund information shall disclose Fund information in accordance with the law and ensure the truthfulness, accuracy and completeness of information disclosed.

Article 75: Parties with an obligation to disclose Fund information shall ensure that they disclose Fund information required to be disclosed by the times specified by the State Council's securities regulator, and ensure that investors can review or take copies of publicly disclosed information and materials at the times and by the methods specified in the Fund contract.

Article 76: Publicly disclosed Fund information shall include:

(1) the fund prospectus, Fund contract and the Fund custody agreement;

(2) details of the Fund offering;

(3) announcement of the listing and trading of the Fund units;

(4) the net value of the Fund assets and of the Fund units;

(5) the Fund unit purchase and redemption prices;

(6) the quarterly reports, financial accounting reports and interim and annual Fund reports of the asset portfolios of Fund property;

(7) ad hoc reports;

(8) resolutions of the Fund unit holders' general meeting;

(9) material personnel changes in the Fund manager or the dedicated Fund custody department of the Fund custodian;

(10) litigation or arbitration involving the Fund property, Fund management business or Fund custody business; and

(11) other information the State Council's securities regulator specifies be disclosed.

Article 77: When publicly disclosing Fund information, there may not be:

(1) false records, misleading statements or material omissions;

(2) predictions of securities investment performance;

(3) promises of returns or bearing of losses in violation of regulations;

(4) defamation of other Fund managers, Fund custodians or Fund sales institutions; or

(5) other acts prohibited in laws or administrative regulations or by the State Council's securities regulator.

Part Eight: Amendment and Termination of the Fund Contract for a Public Fund and Liquidation of Fund property

Article 78: Pursuant to the Fund contract or a resolution of the Fund unit holders' general meeting, the Fund may change its operational method or merge with other Funds.

Article 79: To offer more Fund units of, or renew the term of the Fund contract for, a Closed-end Fund, the following conditions shall be satisfied and the same shall be reported to the State Council's securities regulator for the record:

(1) good Fund operation and performance;

(2) the Fund manager not having been subjected to administrative penalties or criminal sentences for a violation of the law or regulations during the most recent two years;

(3) adoption of a resolution to that effect by the Fund unit holders' general meeting; and

(4) other conditions specified herein.

Article 80: The Fund contract shall terminate if:

(1) the term of the Fund contract expires and is not renewed;

(2) the Fund unit holders' general meeting decides to terminate it;

(3) the duties of the Fund manager or Fund custodian are terminated and no new Fund manager or Fund custodian succeeds it within six months; or

(4) another circumstance as specified in the Fund contract arises.

Article 81: When the Fund contract terminates, the Fund manager shall assemble a liquidation committee to liquidate the Fund property.

The liquidation committee shall comprise the Fund manager, the Fund custodian and relevant intermediary service firms.

Once the liquidation report prepared by the liquidation committee is audited by an accounting firm and a legal opinion is issued in respect thereof by a law firm, it shall be submitted to the State Council's securities regulator for the record and publicly announced.

Article 82: Fund property remaining after liquidation shall be distributed to the Fund unit holders in proportion to their Fund unit holdings.

Part Nine: Exercise of Rights by Holders of Fund Units in a Public Fund

Article 83: The Fund unit holders' general meeting shall be convened by the Fund manager. If the Fund unit holders' general meeting has established an office for handling routine matters, the Fund unit holders' general meeting shall be convened by such office. If the office fails to convene a meeting, the Fund manager shall convene it. If the Fund manager fails to convene a meeting in accordance with provisions or cannot hold a meeting, it shall be convened by the Fund custodian.

If Fund unit holders representing at least 10% of the Fund units request to convene a Fund unit holders' general meeting in respect of the same matter, and the office for handling routine matters of the Fund unit holders' general meeting, the Fund manager and the Fund custodian fail to convene the meeting, the Fund unit holders representing at least 10% of the Fund units shall have the right to convene the meeting themselves, and shall report the same to the State Council's securities regulator for the record.

Article 84: When convening a Fund unit holders' general meeting, the convener shall announce the date of the Fund unit holders' general meeting, the way the meeting is to be held, the matters to be considered, the rules of procedure, the voting method and other matters at least 30 days in advance.

The Fund unit holders' general meeting may not vote on matters that were not publicly announced;

Article 85: A Fund unit holders' general meeting may be held in person or by a means of communication, etc.

Each Fund unit shall have one vote, and Fund unit holders may appoint a proxy to attend a Fund unit holders' general meeting and exercise their voting rights on their behalf.

Article 86: A Fund unit holders' general meeting may be held only if holders representing at least one half of the Fund units are present.

If the Fund units of the holders present at the Fund unit holders' general meeting represent less than the percentage specified in the preceding paragraph, the convener may convene a new Fund unit holders' general meeting in respect of the original matters to be considered three months after and within six months of the originally announced date for holding the Fund unit holders' general meeting. The newly convened Fund unit holders' general meeting may be held only if holders representing at least one-third of the Fund units are present.

A decision taken on a matter considered at a Fund unit holders' general meeting shall require more than one half of the votes held by the Fund unit holders in attendance for adoption. However, changing the method of operation of the fund, replacement of the Fund manager or Fund custodian, early termination of the Fund contract or merger with other funds shall require at least two-thirds of the votes held by the Fund unit holders in attendance for adoption.

Matters decided on by the Fund unit holders' general meeting shall be reported to the State Council's securities regulator for the record in accordance with the law and publicly announced.

Part Ten: Private Funds

Article 87: Private Funds shall be offered to qualified investors, and there may not be more than 200 qualified investors in total.

For the purposes of the preceding paragraph, the term “qualified investor” means an entity or individual that has the specified asset size or income level, has the appropriate risk identification capabilities and risk bearing capacity, and the amount of Fund units subscribed for by it/him/her being not less than the specified limit.

The specific criteria for qualified investors shall be specified by the State Council's securities regulator.

Article 88: Unless otherwise specified in the Fund contract, a Private Fund shall be kept in the custody of the Fund custodian.

Article 89: The manager of a Private Fund shall carry out the registration procedures with, and submit the basic particulars to, the Fund Industry Association in accordance with provisions.

Article 90: Without registration, no entity or individual may use words such as “fund” or “fund management” or a similar name to carry out securities investment activities, unless otherwise provided in laws or administrative regulations.

Article 91: Private Funds may not be offered to entities and individuals other than qualified investors and may not be publicised to non-specific targets through mass media such as newspapers, periodicals, radio, television or the internet, or by means such as lectures, press conferences or seminars.

Article 92: For a Private Fund, a Fund contract shall be formulated and executed. The Fund contract shall contain the following:

(1) the rights and obligations of the Fund unit holders, Fund manager and Fund custodian;

(2) the operational method of the Fund;

(3) the method of contributing capital to the Fund, the amount to be contributed and the subscription deadline;

(4) the Fund's scope of investment, investment strategy and investment restrictions;

(5) the principles for and the manner of carrying out the distribution of Fund returns;

(6) the relevant charges borne by the Fund;

(7) the content and method of provision of Fund information;

(8) the procedures and methods for purchasing, redeeming and transferring Fund units;

(9) the grounds and procedures for amending, terminating and ending the Fund contract;

(10) the method of liquidating the Fund property; and

(11) other matters as specified by the parties.

The transfer of Fund units by a Fund unit holder shall comply with Articles 88 and 92 hereof.

Article 93: Pursuant to the Fund contract, certain holders of units in the Private Fund may be responsible for the investment management activities of the Fund as Fund managers, in which case, if the Fund property is insufficient to discharge its debts, the Fund managers shall bear unlimited joint and several liability therefor.

The contract for a Private Fund as described in the preceding paragraph shall additionally specify:

(1) the names and domiciles of the Fund unit holders that bear unlimited joint and several liability, and of the other Fund unit holders;

(2) the conditions for removing and the procedure for replacing the Fund unit holders that bear unlimited joint and several liability;

(3) the conditions and procedures for adding and the withdrawal of Fund unit holders and relevant liabilities; and

(4) the procedure for the transformation between Fund unit holders that bear unlimited joint and several liability and other Fund unit holders.

Article 94: When the offering of a Private Fund is completed, the Fund manager shall carry out record filing procedures with the Fund Industry Association. The Fund Industry Association shall report to the State Council's securities regulator a Fund whose total proceeds or number of Fund unit holders meet(s) the specified criteria.

The investment of the property of a Private Fund in securities shall include the trading of the stocks, bonds and Fund units publicly offered by companies limited by shares, as well as other securities specified by the State Council's securities regulator and their derivatives.

Article 95: The Fund manager and Fund custodian shall provide Fund information to the Fund unit holders in accordance with the Fund contract.

Article 96: If the shareholders, senior management personnel, term of operation, fund asset size under management, etc. of a Fund manager that exclusively engages in the management of Private Funds satisfy the prescribed conditions, it may, subject to the approval of the State Council's securities regulator, engage in the management of Public Funds.

Part Eleven: Fund Service Firms

Article 97: Organisations that engage in Fund service business such as Public Fund sales, sale payment, unit registration, appraisal, investment consulting, assessment and information technology system services shall carry out registration or record filing in accordance with the provisions of the State Council's securities regulator.

Article 98: Fund sales institutions shall fully disclose the investment risks to investors and sell Fund products of different risk grades depending on the risk bearing capacities of the investors.

Article 99: Fund sale payment institutions shall handle the payment transfers of Fund sale settlement proceeds and ensure the security and punctual payment transfers of such Fund sale settlement proceeds.

Article 100: Fund sale settlement proceeds and Fund units shall be kept separate from the property of the Fund sales institution, Fund sale payment institution and the Fund unit registration institution. If a Fund sales institution, Fund sale payment institution or Fund unit registration institution goes bankrupt or is liquidated, the Fund sale settlement proceeds and Fund units shall not constitute part of its bankruptcy estate or property subject to liquidation. Fund sale settlement proceeds or Fund units may not be sealed, frozen, seized or be the subject matter of enforcement except in connection with the debts of the investor himself/herself or in another circumstance specified in law.

Fund sales institutions, Fund sale payment institutions and Fund unit registration institutions shall ensure the safety and separateness of Fund sale settlement proceeds and Fund units, and it is forbidden for any entity or individual to divert Fund sale settlement proceeds and Fund units in any manner.

Article 101: A Fund manager may appoint a Fund service firm to handle Fund unit registration, accounting, appraisal, investment consulting, etc. on its behalf and a Fund custodian may appoint a Fund service firm to handle Fund accounting, appraisal, re-examination, etc. on its behalf. However, the liabilities bearable by Fund managers and Fund custodians according to law may not be exempted by such an appointment.

Article 102: The data registered on electronic media by a Fund unit registration institution are the evidence for the vesting of the rights of Fund unit holders. If a Fund unit holder creates a pledge over his/her Fund units, pledge rights shall be established once the Fund unit registration institution carries out registration of the pledge.

A Fund unit registration institution shall duly preserve registration data and shall keep backup of such data as the names of Fund unit holders, information on their identities and details of the Fund units with an organisation recognised by the State Council's securities regulator. Such data shall be preserved for not less than 20 years from the date of closing of the Fund accounts.

A Fund unit registration institution shall ensure the truthfulness, accuracy and integrity of registration data, and it may not conceal, forge, alter or destroy the same.

Article 103: A Fund investment consulting firm and its employees, when providing Fund investment consulting services, shall have reasonable basis therefor, give true statements of their service capabilities and business performance record, may not promise or guarantee investment returns in any manner and may not prejudice the lawful rights and interests of the recipients of their services.

Article 104: A Fund assessment institution and its employees shall conduct their Fund assessment business in an objective and impartial manner, and in accordance with the business regulations formulated in accordance with the law, be prohibited from misleading investors and guard against potential conflicts of interest.

Article 105: The information technology systems of Fund managers, Fund custodians and Fund service firms shall be in compliance with the specified requirements. The State Council's securities regulator may require information technology system service institutions to provide relevant information on the information technology systems in question.

Article 106: Law firms and accounting firms that are engaged by Fund managers and Fund custodians to issue legal opinions, audit reports, internal control assessment reports, etc. in respect of Fund business activities shall act with due diligence and review and verify the truthfulness, accuracy and completeness of the documents and information relied on. If the documents prepared and issued by them contain false records, misleading statements or material omissions, causing the property of another to incur a loss, they shall bear joint and several liability with the client.

Article 107: A Fund service firm shall act with due diligence, duly perform its duties, establish an emergency response, other such risk management systems and a disaster recovery backup system, and may not disclose non-public information concerning Fund unit holders and the investment operations of Funds.

Part Twelve: Fund Industry Associations

Article 108: A Fund Industry Association is a self-regulatory organisation of the Fund industry and an association with legal personality.

Fund managers and Fund custodians shall join Fund Industry Associations and Fund service firms may join Fund Industry Associations.

Article 109: The highest authority of a Fund Industry Association shall be the members' general meeting composed of all the members.

A Fund Industry Association shall have a council. Council members shall be chosen by election in accordance with the charter.

Article 110: The charter of a Fund Industry Association shall be formulated by the members' general meeting and submitted to the State Council's securities regulator for the record.

Article 111: A Fund Industry Association shall perform the following duties:

(1) educating and arranging for members to comply with relevant securities investment laws and administrative regulations and safeguard the lawful rights and interests of investors;

(2) safeguarding the lawful rights and interests of members in accordance with the law and reflecting the proposals and requirements of members;

(3) formulating and implementing industry self-regulation rules, monitoring and inspecting the practice acts of members and their business employees, and imposing disciplinary sanctions in accordance with provisions on those that breach the self-regulation rules or association charter;

(4) formulating industry practice standards and codes of business, arranging the professional examinations, qualification management and vocational training of Fund business employees;

(5) providing member services, organising industry exchanges, promoting industry innovation and carrying out industry publicity and investor education activities;

(6) mediating in Fund business disputes arising between members and between members and their clients;

(7) carrying out the registration and record filing of Private Funds in accordance with the law; and

(8) other duties as specified in the association charter.

Part Thirteen: Regulation

Article 112: The State Council's securities regulator shall perform the following duties in accordance with the law:

(1) formulating regulations and rules for the regulation of Fund activities, and exercising examination and approval, check and approval or registration authority;

(2) carrying out Fund record filing;

(3) regulating the engagement in Fund activities by Fund managers, Fund custodians and other institutions, investigating and dealing with violations of the law and announcing the same;

(4) formulating the qualification criteria and codes of conduct for Fund business employees and monitoring the implementation thereof;

(5) monitoring and inspecting Fund information disclosure;

(6) guiding and monitoring the activities of Fund Industry Associations; and

(7) other duties as specified in laws and administrative regulations.

Article 113: When performing its duties in accordance with the law, the State Council's securities regulator shall have the authority to take the following measures:

(1) conducting onsite inspections of Fund managers, Fund custodians and Fund service firms, and requiring them to submit relevant business materials;

(2) entering premises where a violation of the law is suspected of having been committed to investigate and gather evidence;

(3) questioning parties concerned and entities and individuals connected with the incident being investigated, and requiring them to give accounts of matters relating to the incident being investigated;

(4) reviewing and taking copies of materials such as property rights registrations and communication records relating to the incident being investigated;

(5) reviewing and taking copies of securities transaction records, records of the registration of transfers of title, financial accounting materials and other relevant documents and materials of the parties concerned and of the entities and individuals connected with the incident being investigated;

(6) making inquiries about the monetary accounts, securities accounts and bank accounts of the parties concerned and of the entities and individuals connected with the incident being investigated; and where there is evidence showing that property in question such as illegal funds and securities have been or could be diverted or concealed, or crucial evidence has been or could be concealed, forged or destroyed, freezing the same or sealing the same subject to the approval of the principal person in charge of the State Council's securities regulator; and

(7) when investigating major securities law violations such as manipulation of the securities market and insider trading, subject to the approval of the principal person in charge of the State Council's securities regulator, restricting the securities trading of the parties involved in the incident being investigated, provided, however, that such restriction may not exceed 15 trading days; in a complex case, the restriction may be extended 15 trading days.

Article 114: When working personnel of the State Council's securities regulator are performing their duties in accordance with the law, conducting an investigation or inspection, they may not be less than two in number and shall present their lawful credentials; and they shall bear an obligation of maintaining the confidentiality of the trade secrets that they are privy to in the course of the investigation or inspection.

Article 115: The working personnel of the State Council's securities regulator shall be faithful in the performance of their duties, handle matters in accordance with the law, act in an impartial manner and with integrity, submit themselves to supervision and may not take advantage of their positions to seek personal gain.

Article 116: When the State Council's securities regulator performs its duties in accordance with the law, the entities and individuals being investigated or inspected shall offer their cooperation, provide true relevant documents and information, and may not refuse, obstruct or conceal.

Article 117: If the State Council's securities regulator, in performing its duties in accordance with the law, discovers that an illegal act could constitute a criminal offence, it shall transfer the case to the judicial authority for handling.

Article 118: A member of the working personnel of the State Council's securities regulator may not, while in the employ thereof or for the period of time specified in the PRC Civil Servants Law after leaving the employ thereof, serve in an organisation subject to State Council regulation.

Part Fourteen: Legal Liability

Article 119: If this Law is violated by establishing a Fund management company without approval or engaging in Public Fund management business without approval, the securities regulator shall shut the same down or order rectification, confiscate the illegal income and impose a fine of not less than one time and not more than five times the illegal income. If there is no illegal income or if the illegal income is less than Rmb1 million, it shall impose a fine of not less than Rmb100,000 and not more than Rmb1 million. It shall give a warning to the manager directly in charge and the other directly responsible persons and fine them not less than Rmb30,000 and not more than Rmb300,000.

If a Fund management company violates this Law by changing a shareholder holding at least 5% of its equity, its de facto controller or another material matter without authorisation, it shall be ordered to rectify the matter, its illegal income shall be confiscated and it shall be fined not less than one time and not more than five times the illegal income. If there is no illegal income or the illegal income is less than Rmb500,000, it shall be fined not less than Rmb50,000 and not more than Rmb500,000. The manager directly in charge shall be given a warning and fined not less than Rmb30,000 and not more than Rmb100,000.

Article 120: If a director, supervisor, senior management member or other business employee of a Fund manager or a senior management member or other business employee of the dedicated Fund custody department of a Fund custodian fails to file a report as specified in the first paragraph of Article 18 hereof, he/she shall be ordered to rectify the matter and fined not less than Rmb30,000 and not more than Rmb100,000.

If a Fund manager or Fund custodian violates the second paragraph of Article 18 hereof, it shall be ordered to rectify the matter and fined not less than Rmb100,000 and not more than Rmb1 million. The manager directly in charge and other directly responsible persons shall be given a warning, their Fund business qualifications shall be suspended or revoked and they shall be fined not less than Rmb30,000 and not more than Rmb300,000.

Article 121: If a director, supervisor, senior management member or other business employee of a Fund manager or a senior management member or other business employee of the dedicated Fund custody department of a Fund custodian violates Article 19 hereof, he/she shall be ordered to rectify the matter, his/her illegal income shall be confiscated and he/she shall be fined not less than one time and not more than five times the illegal income. If there is no illegal income or the illegal income is less than Rmb1 million, he/she shall be fined not less than Rmb100,000 and not more than Rmb1 million. If the circumstances are serious, his/her Fund business qualifications shall be revoked.

Article 122: If a Fund manager or Fund custodian violates this Law by failing to separately manage Fund property or keep Fund property in separate accounts, it shall be ordered to rectify the matter and fined not less than Rmb50,000 and not more than Rmb500,000. The manager directly in charge and other directly responsible persons shall be given a warning, their Fund business qualifications shall be suspended or revoked and they shall be fined not less than Rmb30,000 and not more than Rmb300,000.

Article 123: If a Fund manager or Fund custodian or any of its directors, supervisors, senior management personnel or other business employees commits any of the acts set forth in Article 21 hereof, it/he/she shall be ordered to rectify the matter, its/his/her illegal income shall be confiscated and it/he/she shall be fined not less than one time and not more than five times the illegal income. If there is no illegal income or the illegal income is less than Rmb1 million, it/he/she shall be fined not less than Rmb100,000 and not more than Rmb1 million. If a Fund manager or Fund custodian commits any of the aforementioned acts, its manager directly in charge and other directly responsible persons shall additionally be given a warning, their Fund business qualifications shall be suspended or revoked and they shall be fined not less than Rmb30,000 and not more than Rmb300,000.

The property and returns that a Fund manager or Fund custodian or any of its directors, supervisors, senior management personnel or other business employees may derive from the appropriation or diversion of Fund property shall be incorporated into the Fund property, unless otherwise provided in laws or administrative regulations, in which case such provisions shall apply.

Article 124: If a shareholder or de facto controller of a Fund manager violates Article 24 hereof, it shall be ordered to rectify the matter, its illegal income shall be confiscated and it shall be fined not less than one time and not more than five times the illegal income. If there is no illegal income or the illegal income is less than Rmb1 million, it shall be fined not less than Rmb100,000 and not more than Rmb1 million. Its manager directly in charge and other directly responsible persons shall be given a warning, their Fund business qualifications shall be suspended or revoked and they shall be fined not less than Rmb30,000 and not more than Rmb300,000.

Article 125: If Fund custody business is engaged in without approval, an order to cease shall be given, the illegal income confiscated and a fine of not less than one time and not more than five times the illegal income shall be imposed. If there is no illegal income or the illegal income is less than Rmb1 million, a fine of not less than Rmb100,000 and not more than Rmb1 million shall be imposed. The manager directly in charge and other directly responsible persons shall be given a warning and fined not less than Rmb30,000 and not more than Rmb300,000.

Article 126: If a Fund manager and Fund custodian violate this Law by making cross capital contributions or having cross shareholdings, they shall be ordered to rectify the matter and may be fined up to Rmb100,000.

Article 127: If this Law is violated by publicly offering a Fund or by publicly offering a Fund in a disguised manner without authorisation, an order to cease shall be given, the proceeds plus interest at the rate for bank deposits of the same period shall be returned, the illegal income confiscated and a fine of not less than 1% and not more than 5% of the proceeds collected shall be imposed. The manager directly in charge and other directly responsible persons shall be given a warning and fined not less than Rmb50,000 and not more than Rmb500,000.

Article 128: If Article 60 hereof is violated by making use of proceeds, an order to return the same shall be given, the illegal income confiscated and a fine of not less than one time and not more than five times the illegal income shall be imposed. If there is no illegal income or the illegal income is less than Rmb500,000, a fine of not less than Rmb50,000 and not more than Rmb500,000 shall be imposed. The manager directly in charge and other directly responsible persons shall be given a warning and fined not less than Rmb30,000 and not more than Rmb300,000.

Article 129: If a Fund manager or Fund custodian commits any of the acts set forth in Items (1) to (5) or (7) of the first paragraph of Article 74 hereof, or violates the second paragraph of Article 74 hereof, it shall be ordered to rectify the matter and fined not less than Rmb100,000 and not more than Rmb1 million. Its manager directly in charge and other directly responsible persons shall be given a warning, their Fund business qualifications shall be suspended or revoked and they shall be fined not less than Rmb30,000 and not more than Rmb300,000.

If a Fund manager or Fund custodian commits any of the acts specified in the preceding paragraph, the property and returns derived from the application of the Fund property shall be incorporated into the Fund property, unless otherwise provided in laws or administrative regulations, in which case such provisions shall apply.

Article 130: If a Fund manager or Fund custodian commits the act set forth in Item (6) of the first paragraph of Article 74 hereof, in addition to its being penalised in accordance with relevant provisions of the PRC Securities Law, its manager directly in charge and other persons directly responsible shall have their Fund business qualifications suspended or revoked.

Article 131: If a party with an obligation to disclose Fund information fails to disclose such information in accordance with the law or the information disclosed contains false records, misleading statements or material omissions, such party shall be ordered to rectify the matter, its illegal income shall be confiscated and it shall be fined not less than Rmb100,000 and not more than Rmb1 million. Its manager directly in charge and other directly responsible persons shall be given a warning, their Fund business qualifications shall be suspended or revoked and they shall be fined not less than Rmb30,000 and not more than Rmb300,000.

Article 132: If a Fund manager or Fund custodian fails to convene a Fund unit holders' general meeting in accordance with provisions, it shall be ordered to rectify the matter and may be fined up to Rmb50,000. Its manager directly in charge and other directly responsible persons shall be given a warning and their Fund business qualifications shall be suspended or revoked.

Article 133: If this Law is violated by using the words “fund” or “fund management” or a similar name without registration to engage in securities investment activities, the illegal income shall be confiscated and a fine of not less than one time and not more than five times the illegal income shall be imposed. If there is no illegal income or the illegal income is less than Rmb1 million, a fine of not less than Rmb100,000 and not more than Rmb1 million shall be imposed. The manager directly in charge and other directly responsible persons shall be given a warning and fined not less than Rmb30,000 and not more than Rmb300,000.

Article 134: If this Law is violated by a Fund manager failing to carry out record filing after completion of the offering of a Private Fund, it shall be fined not less than Rmb100,000 and not more than Rmb300,000. Its manager directly in charge and other directly responsible persons shall be given a warning and fined not less than Rmb30,000 and not more than Rmb100,000.

Article 135: If this Law is violated by offering a Private Fund or transferring units thereof to an entity or individual other than a qualified investor, the illegal income shall be confiscated and a fine of not less than one time and not more than five times the illegal income shall be imposed. If there is no illegal income or the illegal income is less than Rmb1 million, a fine of not less than Rmb100,000 and not more than Rmb1 million shall be imposed. The manager directly in charge and other directly responsible persons shall be given a warning and fined not less than Rmb30,000 and not more than Rmb300,000.

Article 136: If this Law is violated by engaging in Fund service business for Public Funds without authorisation, an order to rectify the matter shall be given, the illegal income shall be confiscated and a fine of not less than one time and not more than five times the illegal income shall be imposed. If there is no illegal income or the illegal income is less than Rmb300,000, a fine of not less than Rmb100,000 and not more than Rmb300,000 shall be imposed. The manager directly in charge and other directly responsible persons shall be given a warning and fined not less than Rmb30,000 and not more than Rmb100,000.

Article 137: If a Fund sales institution fails to fully disclose the investment risks to an investor, thereby misleading him/her into purchasing a Fund product inconsistent with his/her risk bearing capacity, it shall be fined not less than Rmb100,000 and not more than Rmb300,000. If the circumstances are serious, it shall be ordered to halt its Fund service business. Its manager directly in charge and other directly responsible persons shall be given a warning, their Fund business qualifications shall be revoked and they shall be fined not less than Rmb30,000 and not more than Rmb100,000.

Article 138: If a Fund sale payment institution fails to transfer payment of the Fund sale settlement proceeds in accordance with provisions, it shall be fined not less than Rmb100,000 and not more than Rmb300,000. If the circumstances are serious, it shall be ordered to halt its Fund service business. Its manager directly in charge and other directly responsible persons shall be given a warning, their Fund business qualifications shall be revoked and they shall be fined not less than Rmb30,000 and not more than Rmb100,000.

Article 139: If Fund sale settlement proceeds or Fund units are diverted, an order to rectify the matter shall be given, the illegal income shall be confiscated and a fine of not less than one time and not more than five times the illegal income shall be imposed. If there is no illegal income or if the illegal income is less than Rmb1 million, a fine of not less than Rmb100,000 and not more than Rmb1 million shall be imposed. The manager directly in charge and other directly responsible persons shall be given a warning and fined not less than Rmb30,000 and not more than Rmb300,000.

Article 140: If a Fund unit registration institution fails to duly keep or back up fund unit registration data, it shall be ordered to rectify the matter, given a warning and fined not less than Rmb100,000 and not more than Rmb300,000. If the circumstances are serious, it shall be ordered to halt its Fund service business. Its manager directly in charge and other directly responsible persons shall be given a warning, their Fund business qualifications shall be revoked and they shall be fined not less than Rmb30,000 and not more than Rmb100,000.

If a Fund unit registration institution conceals, forges, alters or destroys fund unit registration data, it shall be ordered to rectify the matter, fined not less than Rmb100,000 and not more than Rmb1 million and ordered to halt its Fund service business. Its manager directly in charge and other directly responsible persons shall be given a warning, their Fund business qualifications shall be revoked and they shall be fined not less than Rmb30,000 and not more than Rmb300,000.

Article 141: If a Fund investment consulting firm or a Fund assessment institution or any of their business employees violate this Law in providing investment advice or Fund assessment services, it/he/she shall be fined not less than Rmb100,000 and not more than Rmb300,000. If the circumstances are serious, it shall be ordered to halt its Fund service business. Its manager directly in charge and other directly responsible persons shall be given a warning, their Fund business qualifications shall be revoked and they shall be fined not less than Rmb30,000 and not more than Rmb100,000.

Article 142: If an information technology system service institution fails to provide relevant information technology system materials to the State Council's securities regulator in accordance with provisions, or provides information technology system materials that are false or contain material omissions, it shall be ordered to rectify the matter and fined not less than Rmb30,000 and not more than Rmb100,000. Its manager directly in charge and other directly responsible persons shall be given a warning and fined not less than Rmb10,000 and not more than Rmb30,000.

Article 143: If an accounting firm or law firm fails to act with due diligence, issuing a document with false records, misleading statements or material omissions, it shall be ordered to rectify the matter, its business revenue confiscated, its relevant business permit suspended or revoked and it shall be fined not less than one time and not more than five times the business revenue. Its manager directly in charge and other directly responsible persons shall be given a warning and fined not less than Rmb30,000 and not more than Rmb100,000.

Article 144: If a Fund service firm fails to establish an emergency response or other such risk management system, or a disaster recovery backup system, or it discloses non-public information concerning Fund unit holders or the investment operations of a Fund, it shall be fined not less than Rmb100,000 and not more than Rmb300,000. If the circumstances are serious, it shall be ordered to halt its Fund service business. Its manager directly in charge and other directly responsible persons shall be given a warning, their Fund business qualifications shall be revoked and they shall fined not less than Rmb30,000 and not more than Rmb100,000.

Article 145: If a violation of this Law causes Fund property, Fund unit holders or investors to incur a loss, liability for compensation shall be borne in accordance with the law.

If a Fund manager and Fund custodian violate this Law or breach the Fund contract in the course of performing their respective duties, thereby causing Fund property or Fund unit holders to incur a loss, they shall each bear liability for compensation in accordance with the law for their respective acts. If Fund property or Fund unit holders incur a loss due to a joint act committed by the Fund manager and Fund custodian, they shall bear joint and several liability for compensation therefor.

Article 146: If a member of the working personnel of a securities regulator is derelict in his/her duties, abuses his/her authority, practises favouritism by committing fraud or takes advantage of his/her position to solicit or accept another's property, administrative sanctions shall be imposed on him/her in accordance with the law.

Article 147: If a securities regulator and its working personnel are refused or obstructed in exercising their monitoring, inspection or investigation functions in accordance with the law without, however, resorting to violence or intimidation, public security penalties shall be imposed in accordance with the law.

Article 148: If a law, a set of administrative regulations or a set of relevant provisions of the State Council's securities regulator is violated, and the circumstances thereof are serious, the State Council's securities regulator may ban the relevant liable persons from the securities market.

Article 149: If a violation of this Law constitutes a criminal offence, criminal liability shall be pursued in accordance with the law.

Article 150: If a violation of this Law is committed and the perpetrator is required to both bear civil liability for compensation and pay a fine, and if his/her property is insufficient to pay both, he/she shall bear the civil liability for compensation first.

Article 151: Where, in accordance with the law, a Fund manager, Fund custodian or Fund service firm is required to bear civil liability for compensation and/or pay a fine, the same shall be paid from its own property.

All fines charged in accordance with the law and confiscated illegal income shall be paid into the national treasury.

Part Fifteen: Supplementary Provisions

Article 152: The offering of funds in the People's Republic of China that invest in offshore securities as well as the investment in securities in the People's Republic of China by qualified foreign institutional investors shall be subject to the approval of the State Council's securities regulator. The specific measures therefor shall be formulated by the State Council's securities regulator together with relevant State Council departments, and submitted to the State Council for approval.

Article 153: Where funds are raised publicly or privately to establish a company or partnership for the purpose of carrying out securities investment activities and the assets thereof are managed by a Fund manager or general partner, this Law shall apply to its securities investment activities.

Article 154: This Law shall be effective as of June 1 2013.