NFRA Issues Interim Measures for the Supervision and Regulation of Local Asset Management Companies

Recently, the National Financial Regulatory Administration (NFRA) has formulated and issued the Interim Measures for the Supervision and Regulation of Local Asset Management Companies (the "Measures"), with effect on the date of issuance.

Key points of the Measures are as follows: (1) regulating the business conduct of local asset management companies; (2) strengthening risk management; and (3) further clarifying the division of regulatory responsibilities. Specifically, the Measures set out regulatory requirements for concentration risk, stipulating that the balance of equity and debt investments or financing provided by a local asset management company into a single client or clients in a group must not exceed 10% and 15% of its net assets, respectively. For liquidity risk, local asset management companies are required to hold high-quality liquid assets that meet relevant requirements in an amount not less than their projected net cash outflows over the next 30 days. Regarding related-party transactions, the total balance of claims on all related parties shall not exceed 50% of the company's net assets as of the end of the previous quarter. In addition, the Measures regulate external financing, stipulating that the balance of funds raised by a local asset management company shall not exceed three times its net assets, in order to prevent risk spillover.



(Source: https://www.nfra.gov.cn/cn/view/pages/governmentDetail.html?docId=1217553&itemId=878&generaltype=1)

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