Guiding Opinions of the People's Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission and the State Administration of Foreign Exchange on Regulating the Asset Management Business of Financial Institutions
Guiding Opinions of the People's Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission and the State Administration of Foreign Exchange on Regulating the Asset Management Business of Financial Institutions
Guiding Opinions of the People's Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission and the State Administration of Foreign Exchange on Regulating the Asset Management Business of Financial Institutions
Yin Fa [2018] No.106
April 27, 2018
In recent years, the rapid development of China's asset management business has played a positive role in satisfying the demands of residents and enterprises in investment and financing and improving the social financing structure. However, there are some cases in which the development of some business faces unstandardized situations and other issues with respect to multi-level nesting, rigid redemption and evasion of financial supervision and macro-control. In accordance with the decisions of the Central Committee of the Communist Party of China and the State Council, the following opinions are hereby proposed upon approval of the State Council, with a view to regularizing the asset management business of financial institutions, unifying the regulatory criteria for the similar categories of asset management products, effectively preventing and controlling financial risks, guiding social capital into the real economy, and better supporting economic restructuring and upgrading.
I. The following principles shall be observed when regulating the asset management business of financial institutions:
1. Adhere to the bottom-line approach to strictly controlling risks. Give prevention and resolution of asset management business risks more priority, reduce existing risks and prevent incremental risks.
2. Adhere to the fundamental goal of serving the real economy. Not only give full play to the functions of asset management business to effectively serve demand in investment and financing for the real economy, but also regulate business and provide guidance in a strenuous manner, for the purpose of avoiding the self-recycling of funds within the financial system and the over-complexity of products, and the rampant transfer of risks across different industries, markets and regions.
3. Persist in the regulatory philosophy of combining macro-prudential administration with micro-prudential regulation and combining the supervision of institutions with the supervision of functions. Make it possible to comprehensively and uniformly cover various asset management business conducted by different institutions, adopt effective regulatory approaches, and better safeguard financial consumers" rights and interests.
4. Remain problem-oriented with clear objectives. Work out unified standards and regulations for particular issues relating to asset management business, such as multi-level nesting, unclear leverage, serious arbitrage and frequent speculation, and, meanwhile, advocate positive financial innovation but reject negative financial innovation to provide sufficient room to innovate financial development.
5. Persist in promoting asset management business in a positive, stable and prudent way. Properly handle the relationship between reform, development, and stability, and adhere to the idea of combining risk prevention and orderly regulation, and, while being committed to dealing with risks, give full consideration to the market tolerance, and set a reasonable transition period, effectively maintain the order, pace and intensity of work, strengthen market communication and effectively guide the market to have proper expectations.
II. Asset management business refers to financial services offered by financial institutions, such as banks, trusts, securities, funds, futures and insurance asset management institutions, and financial asset investment companies, as entrusted by investors, to make investment with and manage investors" entrusted property. Financial institutions shall be obligated to exercise good faith, diligence and responsibility for the sake of trustors" interests and charge corresponding management fees, while trustors shall bear risks themselves and receive returns if any. Financial institutions may agree with trustors in advance in the contracts on the charge of merit fees which are counted into the management fees and shall be calculated and correspond to each product item by item; management fees for different products shall not overlap each other.
Asset management business is the off-balance-sheet activities of financial institutions, and financial institutions are not allowed to guarantee the principal and the expected returns of a certain amount while conducting asset management business. In the case of difficulty in regard to redemption, financial institutions shall not redeem asset management products in any form with their advance funds. Financial institutions must not conduct on-balance-sheet asset management business.
Private equity investment funds shall be governed by particular laws and administrative regulations for private equity investment funds. However, if no explicit provisions are available in the said particular laws and administrative regulations for private equity investment funds for certain issues, such issues shall be governed by these Opinions. Relevant rules for venture capital funds and government-funded industry investment funds will be formulated separately.
III. Asset management products include but are not limited to non-capital-preservation wealth management products in CNY or foreign currency, capital trusts, and asset management products offered by securities companies, subsidiaries of securities companies, fund management companies, subsidiaries of fund management companies, futures companies, subsidiaries of futures companies, insurance asset management institutions and financial asset investment companies. These Opinions do not apply to asset-backed securitization business carried out under the rules promulgated by financial regulators, and pension products issued under the rules promulgated by departments of human resources and social security.
IV. Asset management products are divided into publicly offered products and privately offered products, depending on how funds are raised. Publicly offered products are offered in a public manner to non-specific targets. The criteria for identifying public offerings shall be subject to the provisions of the Securities Law of the People"s Republic of China. Privately offered products are offered in a non-public manner merely among qualified investors.
Asset management products are classified into fixed-income products, equity products, commodities and financial derivative products and hybrid products, depending on the different nature of investment. The proportion of fixed-income products invested in credit assets, such as deposits and bonds, shall not be less than 80%, and the proportion of equity products invested in equity assets, such as the stocks and stock rights of unlisted companies, shall not be less than 80%. The proportion of commodities and financial derivative products invested in commodities and financial derivatives shall not be less than 80%. Hybrid products are used to invest in credit assets, equity assets, commodities and financial derivatives, and the proportion of investment in each category shall not reach the threshold of any of the abovesaid three products. In the event that the above-mentioned ratio limitation is surpassed not due to subjective factors attributable to financial institutions, they shall adjust the ratio within 15 trading days of when the liquidity-limited assets can be sold or transferred or their trading is resumed, to meet the above-given requirements.
When offering asset management products, financial institutions shall expressly indicate what types the asset management products are before investors, in accordance with the above classification, make investment in line with the determined product nature. The type of products shall not be changed without approval, after the constitution of products till the maturity date. The proportion range of investment in credit assets, equity assets, commodities and financial derivatives, made by hybrid products, shall be made clear when products are offered and be expressly indicated before investors, and such range, once determined, shall not be changed during the period after the products are established till the maturity date. The actual objects in which products" investment shall not contravene the stipulations set out in the contracts; in the case of any changes, the written consent of the investors shall be obtained in advance, and formalities for registration and record filing and other procedures requested under laws and regulations or by financial regulators shall be handled, unless products of the high-risk type are invested in assets with relatively low risks at a ratio higher than the given range.
V. Investors of asset management products are divided into two categories, namely non-specific people and qualified investors. Qualified investors are natural persons and legal persons or other organizations that have the necessary ability to identify and bear risks and invest in a single asset management product with a value no less than a designated figure and meet the following criteria.
1. Having been experienced in investment for over 2 years and meeting any of the following conditions: household net financial assets are worth no less than CNY3 million, household financial assets are worth no less than CNY5 million, or his or her average annual income is no less than CNY400,000 in the past three years.
2. An entity with legal personality that owns net assets of no less than CNY10 million at the end of the previous year.
3. Others that are considered by financial regulators as qualified investors.
The amount invested by each qualified investor shall be at least CNY300,000 in a single fixed-income product, at least CNY400,000 in each hybrid product, and no less than CNY1 million in every single equity product, or commodity and financial derivative product.
Investors are prohibited from using non-self-owned funds, such as loans and funds raised through offering bonds, to invest in asset management products.
VI. When issuing and selling asset management products, financial institutions shall remain committed to the business philosophy of "understanding both products and customers", strengthen the investor suitability management, and supply asset management products that are compatible with investors" capability to identify and bear risks. They are prohibited from deceiving investors into purchasing or misleading them to purchase asset management products that do not match their risk tolerance.
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