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China – CSRC Issued Opinions On Promoting The Innovation And Development Of The Securities Investment Fund Industry.

18 July, 2014



To implement the requirement of the Opinions of the State Council on Promoting the Healthy Development of the Capital Markets (“New Nine Directives”), the China Securities Regulatory Commission (“CSRC”) recently released the Opinions on Promoting the Innovation and Development of the Securities Investment Fund Industry (“Opinions“). The content of the Opinions includes the general principles, main tasks, and specific measures for pushing forward the innovative development of fund industry. The Options will have significant implications to both public and private fund industry. 

The Opinions is divided into three main parts, eleven articles in total, which are respectively about (i) the asset management institutions, (ii) the innovation of businesses and products, (iii) the supervision and regulation of the industry. Main provisions of the Opinions are summarized as below: 

Main Provisions 

1. Asset Management Institution 

The Opinions support the differentiated development of asset management firms , such as the coexistence of large and comprehensive institutions and specialized, characteristic, small or medium-sized institutions, the co-development of public and private fund businesses, and coexistence of those various asset management subsidiaries specialized in segregated account management, fund distribution, overseas asset management business, etc. The Opinions expressly encourage the mixed ownership reform of fund management firms and the professionals’ equity participation programs. 

The Opinions require a steady promotion of a two-way opening up. A two-way opening up means moderately lowering the entry threshold for both domestic and international markets, specifically, (i) relaxing foreign enterprise shareholding limitation when time is appropriate, (ii) promoting mutual recognition of fund products with Hong Kong and other overseas markets, (iii) cross-listing of fund products between domestic and foreign exchanges, and (iv) enlarging the scope and investment quotas of both QFII and QDII. The Opinions also encourage institutions to actively participate in the construction of China (Shanghai) Pilot Free Trade Zone and utilize channels such as the Shanghai-Hong Kong Stock Connect Scheme to expand their scope of services. Moreover, the Opinions specifically mention the broadening of long term capital resource of public fund, and vigorously support fund management firms’ involvement in pension fund management business.

The Opinions raise the requirements on how to enhance compliance risk control level of fund management firms from four different aspects, (i) establishing accountability mechanism for material violation compliance risk, (ii) bringing compliance and risk control departments’ roles into full play, (iii) promoting the establishment of performance based rewards and punishments measures in relation to compliance risk liability, and (iv) implementing risk control and emergency management plans based on classification of industry risks, and completing monitoring, identification, warning, and disposition mechanism for major risks. 

2. Businesses And Products 

Vigorous support of business innovation is embodied in the Opinions. Qualified institutions are supported to, according to market demand, develop cross-border or cross-market public fund products, products that cover different assets types, and products featuring diversified investment strategies and differentiated fee charging mechanism. In expanding new businesses, the Opinions encourage businesses to explore innovation on business model of tailor-made account management, Manager of Managers fund (MOM). The Opinions propose to relax investment scope of self-owned capital of fund management companies, expand their financing channels, and support their issuance of corporate bonds, sub-prime bonds, and various bonds to be issued on interbank market. 

The Opinions specifically mention that commercial banks, securities companies, and other institutions are supported to issue wealth management products with public fund as the main investment subject. In terms of the cooperation with Internet firms, fund management companies are encouraged to carry out diversified forms of business cooperation, with the aid of new channels and modern technologies to optimize and develop traditional public fund products and explore Internet-based business innovations of fund management companies’ subsidiaries. 

The Opinions pointed out the need to push pledge-financing of fund units, and to expand the financing tools available in response to the redemption request of open-ended funds. The Opinions also emphasize the importance of the construction of investor protection systems, such as the investor suitability system, information disclosure system for public funds, compensation mechanism for breach of fiduciary duties, etc. 

3. Supervision And Regulation 

The Opinions introduce the concept of “negative list” to asset management industry, and advocate further streamlining of administrative procedures. The Opinions also mention the need to strengthen the risk monitoring to systematically important institutions and products.

In market access, it is noteworthy that the entry threshold of public fund will be further lowered. On one hand, the Opinions encourage various eligible entities to apply for the public fund management license, to transform pilot program of commercial banks setting up fund management companies into routine practices, and to steadily promote the pilot program of insurance companies setting up fund management companies. On the other hand, the Opinions encourage eligible private fund managers to apply for the qualification for public fund management businesses. 

In fund services, the Opinions propose a diversified fund distribution covering both exchange trading and OTC trading, both direct distribution and indirect agency distribution, as well as both on-line and off-line distribution. As to advisory services of fund investment, the Opinions support the establishments of professional investment advisory institutions. 

Our Observation 

We consider that the Opinions, which serve as a high-level guidance, will guide the development offund industry for a relatively long period of time in the foreseeable future. We look forward to the releasing of specific implementation measures of the Opinions.


Jun He 4


For further information, please contact:
Qing Xie, Partner, Jun He

[email protected] 


Jianwei Zhang, Partner, Jun He

[email protected]

Xiong Ming, Jun He

[email protected]


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