2 March, 2013
Legal News & Analysis – Asia Pacific – China – Investment Funds
On December 28, 2012, the 30th session of the Standing Committee of the 11th National People’s Congress adopted the amended Securities Investment Fund Law of the People’s Republic of China (the “Amended Law“), which was released on the same day. It will become effective on June 1, 2013. The Amended Law has expanded the scope of its regulation to cover non-publicly-raised funds.
The Amended Law covers the raising, operation and management of non-publicly-raised funds. It requires that non-publicly-raised funds shall be raised from qualified investors and the accumulative number of such investors shall not be over two-hundred. In addition, non-publicly-raised funds shall be under the custody of fund custodians, unless otherwise agreed in the fund contracts. Meanwhile, the proposed fund manager of a non-publicly-raised fund must be registered with the securities regulatory authority or, if exempted from registering with the securities regulatory authority, with the fund industry association. The Amended Law prohibits any entity or individual from using the word “fund”; or “fund management” or similar names for conducting security investment activities without registration, unless otherwise provided by laws or regulations. It also provides that a non-publicly-raised fund shall formulate and execute a fund contract, which should specify the following: 1) the rights and obligations of the holders of fund units, the fund manager and the fund custodian; 2) the operational method of the fund; 3) the forms, amount and payment terms of capital contribution to the fund; 4) the investment scope, investment strategies, and investment restrictions of the fund; 5) the principles for distribution of the fund returns, and the implementation method; 6) relevant fees to be borne by the fund; 7) the contents and manners provided by fund information; 8) the procedures and methods for the subscription, redemption or transfer of fund units; 9) the causes and procedures for the modification, revocation and termination of the fund contract; 10) the methods for fund assets liquidation; and 11) other issues agreed upon by the parties.
The Amended Law also specifies the nature and responsibilities of the fund industry association and requires fund managers and fund custodians to be members of the fund industry association.
The full Chinese text of the Law is available here.
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