Administrative Measures for Domestic Securities Investments by Qualified Foreign Institutional Investors

Administrative Measures for Domestic Securities Investments by Qualified Foreign Institutional Investors

Administrative Measures for Domestic Securities Investments by Qualified Foreign Institutional Investors

Order of the China Securities Regulatory Commission, the People's Bank of China and the State Administration of Foreign Exchange [2006] No. 36

August 24, 2006

The Administrative Measures for Domestic Securities Investments by Qualified Foreign Institutional Investors has been deliberated and adopted by the China Securities Regulatory Commission at its 170th Chairman Meeting, by the People's Bank of China at its 4th Governor Meeting and by the State Administration of Foreign Exchange at its 5th Director Meeting, which is hereby promulgated and shall become effective as of September 1, 2006.

Shang Fulin, Chairman of the China Securities Regulatory Commission
Zhou Xiaochuan, Governor of the People's Bank of China
Hu Xiaolian, Director of the State Administration of Foreign Exchange

Attachment: Administrative Measures for Domestic Securities Investments by Qualified Foreign Institutional Investors

Chapter 1 General Provisions

Article 1 For the purposes of regulating the investments activities in China's securities market by the qualified foreign institutional investors and promoting the development of China's securities market, these Measures are formulated in accordance with the relevant laws and administrative rules and regulations.

Article 2 The term "qualified foreign institutional investor" herein (hereinafter referred to as the "QFII") means any overseas fund management institution, insurance company, securities firm or any other assets management institution that has been approved by the China Securities Regulatory Commission (hereinafter referred to as the "CSRC") to invest in China's securities market and that has obtained investments quota from the State Administration of Foreign Exchange (hereinafter referred to as the "SAFE").

Article 3 A QFII shall appoint a domestic commercial bank as its custodian to manage its assets, and entrust a domestic securities firm to conduct its domestic securities exchange activities.

Article 4 Any and all QFIIs shall comply with the law, rules and regulations of China.

Article 5 The CSRC and the SAFE shall, in accordance with the law, supervisory administration on the domestic securities investing activities undertaken by QFIIs, and the SAFE shall be responsible for the administration of investments quota, remittance of fund to or from China and others according to law.

Chapter 2 Qualifications and Procedures for Approval

Article 6 A QFII applicant shall meet the following conditions:
(1) The applicant is in sound financial conditions and good credit standing, and meets the requirements provided by the CSRC on assets size and other conditions, while its risk control indexes meet the provisions of the law of the country or region and the requirements provided by the securities regulatory authority where it is located;
(2) Any and all employees of the applicant meet the relevant requirements on professional qualifications provided by the country or region;
(3) The applicant has sound governance structure and perfect internal control system with any and all business activities being rule-compliant, and has not been imposed with any substantial penalty by the regulatory authorities of the country or region where it is located over the last three years prior to the application;
(4) The country or region where the applicant is located has perfect legal and regulatory system, and its securities regulatory authority has signed the MOU with the CSRC and is maintaining the relationship of efficient regulation and cooperation; and
(5) Other conditions as may be provided by the CSRC according to the principle of prudential regulation.

Article 7 In applying for the qualification as a QFII, an applicant may submit the relevant documents to the CSRC and the SAFE respectively through its custodian.

Article 8 The CSRC shall, within 20 working days from the date of its receipt of the full set of application documents, determine whether to grant approval or not after having examined the application materials and consulted with the SAFE.
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