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In order to satisfy the rational demand of foreign exchange in external financial investment and asset management by individual residents and organizations within the territory of China, and regulate the foreign exchange administration in overseas securities investment by fund management companies, we hereby notify the relevant issues according to the spirit of Announcement No. 5 (2006) of the People's Bank of China: 1. Where a fund management company plans to engage in any overseas securities investment, it shall first obtain an approval from the local branch or sub-branch or foreign exchange management department of the State Administration of Foreign Exchange (SAFE) (hereinafter referred to as the Bureau) for the qualification of foreign exchange operation as well as the quota of overseas securities investment. A fund management company may apply for the qualification of foreign exchange operation at the same time when it applies for a quota of overseas securities investment. 2. A fund management company may engage in all of or part of the following foreign exchange operations: (1) Management of foreign exchange assets; (2) Investment of foreign exchange capital; (3) Inter-bank borrowing of foreign exchange; (4) Investigation into creditworthiness as well as consulting services; and (5) Any other operation as approved by the SAFE. Where a fund management company engages in the foreign exchange asset management as well as foreign exchange capital investment, it shall satisfy the relevant provisions of China Securities Regulatory Commission (hereinafter referred as the CSRC). 3. Where a fund management company applies for the qualification of foreign exchange operation, it shall apply with the Bureau upon the strength of the following documents: (1) A written application, including such contents as: a basic introduction to the company, its internal organizational structure, resumes of its senior managers in charge of foreign exchange operation as well as the relevant qualification certification thereof, feasibility analysis of foreign exchange operation as well as the conditions of business operation, etc.; (2) Photocopy of the original of the License for Legal Person of a Fund Management Company as issued by the CSRC; (3) The internal management system of foreign exchange operation as well as the measures for risk prevention; (4) Its corporate financial statements of the previous year that have been audited by an accounting firm. Where a year has not yet elapsed since a new company is established, an asset verification report as produced by an accounting firm shall be submitted as well; and (5) Any other material as required by the Bureau. The local Bureau shall, within 20 workdays as of the day when any complete application materials are received, set forth its preliminary opinions according to the Operational Rules for the Examination on the Market Access to Foreign Exchange Operation for a Fund Management Company (refer to Attachment 1) and report them to the SAFE according to the relevant procedures. The SAFE shall, within 20 workdays as of the day when the complete application materials are received, make a decision on whether to approve the application. In the case of approval, a License for Foreign Exchange Operation of Securities shall be issued. 4. Where a fund management company applies for the quota of overseas securities investment, it shall apply with the local Bureau upon the strength of the following documents: (1) An application, including such contents as: a basic introduction to the applicant, its desired quota of investment under application, its desired category of funds to be established (open-end or close-end), the fund shares to be issued, the source of capital as well as an investment plan, with the model text for the written agreement it has concluded with relevant investors attached; (2) A Business License for Foreign Exchange Operation of Securities or the application materials as prescribed in Article 3 of the present Circular; (3) The approval documents or relevant certification materials on overseas securities investment as issued by the CSRC; (4) Its corporate financial statements of the previous year that have been audited by an accounting firm; and (5) Any other material as required by the Bureau. The local Bureau shall, within 20 workdays as of the day when any complete application materials are received, set forth its preliminary opinions according to the Operational Rules for Foreign Exchange Operation of Overseas Securities Investment by a Fund Management Company (refer to Attachment 2) and report them to the SAFE according to the relevant procedures. The SAFE shall, within 20 workdays as of the day when the complete application materials are received, make a decision on whether to approve the application. In the case of approval, the relevant investment quota and fund shares shall be clarified at the same time. 5. A fund management company shall, upon the strength of the relevant approval documents issued by the Bureau, open a capital account of self-owned foreign exchange in a designated foreign exchange bank so as to deposit its foreign exchange capital and proceeds thereinto and shall report it to the local Bureau for archival filing within 5 workdays as of the day when an account is opened. The scope of incomes into the self-owned capital account of a fund management company shall be: the foreign exchange capital as remitted inwards, proceeds as generated from foreign exchange operation as well as other foreign exchange proceeds as approved by the Bureau. The scope of expenditures shall be: foreign exchange settlement, expenditures under the current item as well as under the capital item. 6. A fund management company shall, upon the strength of the approval documents of investment quota as issued by the Bureau, open a foreign exchange account for overseas securities investment in a designated foreign exchange bank so as to deposit the raised funds as well as the foreign exchange capital for subscription, redemption and dividends. A fund management company shall report it to its local Bureau for archival filing within 5 workdays as of the day when an account is opened. The scope of incomes into the foreign exchange account of overseas securities investment of a fund management company shall be: the capital as raised from individual residents or institutions within the territory of China, the capital as transferred from a domestic custodian account, the remitted fund from subscription by a domestic individual resident or institution and other foreign exchange proceeds as approved by the Bureau. The scope of expenditures shall be: the capital as transferred to a domestic custodian account, the dividends paid to investors, the capital of redemption, as well as the other foreign exchange expenditures as approved by the Bureau. 7. A fund management company shall, after obtaining its investment quota as approved by the Bureau, conclude an agreement on custody with a domestic custodian, open a domestic custodian account so as to put all its assets for overseas securities investment under custody. A domestic custodian shall meet the relevant requirements as prescribed by China Banking Regulatory Commission (hereinafter referred to as the CBRC). A fund management company shall, within 5 workdays as of the day when an account is opened, report its opening of account as well as its agreement on custody to the local Bureau. The scope of incomes into a domestic custodian account shall be: the capital as transferred into the foreign exchange account of overseas securities investment of a fund management company, the capital as transferred from an overseas settlement account as well as other incomes as approved by the Bureau. The scope of expenditures shall be: the capital as transferred to an overseas settlement account, the capital as transferred to the foreign exchange account of overseas securities investment of a fund management company, the dividends paid to investors, the capital of redemption, payment of custodian fees, management fees, all expenses for formalities as well as other expenditures as approved by the Bureau. 8. A domestic custodian shall open an overseas settlement account for a fund management company in the place of its overseas custodian agent for its capital settlement with overseas securities deposit & clearing institutions. A domestic custodian shall, within 5 workdays as of the day when an account is opened, report its opening of account to the SAFE for archival filing. The scope of incomes into an overseas settlement account shall be: the capital as transferred from a domestic custodian account, proceeds as generated from the sale of all kinds of overseas financial assets, stock dividends, interest incomes as well as other incomes as approved by the Bureau. The scope of expenditures shall be: the capital as transferred to a domestic custodian account, the capital to purchase all kinds of overseas financial assets, payment of the relevant expenses as well as the other expenditures as approved by the Bureau. 9. A fund management company may, through its domestic custodian account, remit outwards and inwards a balance upon subscription and redemption of an open-end fund. The accumulated net amount as remitted outwards by a fund management company shall not exceed the investment scale as worked out in light of its investment quota that has been approved by the Bureau. 10. Where any domestic individual resident or organization subscribes or purchases any fund, he/it shall conclude a written agreement with a fund management company and handle it through a bank. Where an individual subscribes or purchases any fund, he shall not directly apply any foreign exchange cash and may only use his foreign exchange deposit in a domestic bank. A domestic institution shall not subscribe or purchase any fund by means of foreign exchange liabilities. 11. As to the foreign exchange capital that any domestic individual resident or organization acquires from fund redemption or fund dividend, it shall be transferred by a bank according to the instructions on payment rendered by the relevant fund management company. The foreign exchange capital that an individual acquires from fund redemption or fund dividend shall be transferred by a bank to his foreign exchange deposit account. No individual may directly withdraw any cash or make settlement through its foreign exchange account of overseas securities investment. The foreign exchange capital that a domestic institution acquires from fund redemption or fund dividend shall be transferred by a bank to its original foreign exchange account. 12. A domestic custodian shall report the relevant data to the SAFE within 7 workdays at the end of each month in light of the prescribed formats (refer to Attachments 3, 4 and 5) and make an international declaration of incomes and expenditures according to the relevant provisions. 13. The Bureau at the locality of relevant fund management companies shall summarize the opening and withdrawal of self-owned foreign exchange accounts, foreign exchange accounts of overseas securities investment and domestic custodian accounts of the fund management companies within its jurisdiction and report the summary to the SAFE. 14. Where any fund management company or bank violates the provisions of the present Circular, the Bureau shall, according to the Regulation of the People's Republic of China on Foreign Exchange Administration and the relevant regulations on foreign exchange administration, give a punishment thereto. As to any domestic custodian with serious circumstances, the Bureau may order the relevant fund management company to alter its domestic custodian. As to any fund management company with serious circumstances, the Bureau may withdraw its investment quota or suspend its License for Foreign Exchange Operation of Securities. 15. The present Circular shall be implemented as of the day of promulgation. All the branches and foreign exchange management departments of the SAFE shall, after receiving this Circular, forward it to the central sub-branches within their jurisdictions as well as forward this Circular and the attachments thereof to the relevant fund management companies and designated foreign exchange banks in a timely manner. Where any problem arises in the process of implementation, the said organ shall report it to the SAFE in a timely manner. Attachment: 1. Operational Rules for the Examination of Market Access to Foreign Exchange Operation for Fund Management Companies (Omitted) 2. Operational Rules for Foreign Exchange Operation of Overseas Securities Investment by Fund Management Companies (Omitted) 3. Monthly Statement of Overseas Securities Investment by Qualified Domestic Institutional Investors (1) (Omitted) 4. Monthly Statement of Overseas Securities Investment by Qualified Domestic Institutional Investors (2) (Omitted) 5. Detailed Statement of the Outward and Inward Remittance of Capital by Qualified Domestic Institutional Investors (Omitted) |
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