Law of the People's Republic of China on Securities Investment Funds
Law of the People's Republic of China on Securities Investment Funds
Law of the People's Republic of China on Securities Investment Funds
Order of the President of the People's Republic of China [2003] No. 9
October 28, 2003
The Law of the People's Republic of China on Securities Investment Funds, which was adopted at the Fifth Session of the Standing Committee of the Tenth National People's Congress on October 28, 2003, is hereby promulgated and shall take effect as of June 1, 2004.
Hu Jintao, the President of the People's Republic of China
Annex: Law of the People's Republic of China on Securities Investment Funds
Contents
Chapter I General Provisions
Chapter II Fund Managers
Chapter III Fund Trustees
Chapter IV Raising of Funds
Chapter V Trading of Fund Shares
Chapter VI Subscription to and Redemption of Fund Shares
Chapter VII Operation and Information Disclosure of Funds
Chapter VIII Alteration and Termination of Fund Contracts and Liquidation of Fund Property
Chapter IX Rights of Fund Share Holders and the Exercise thereof
Chapter X Supervision and Administration
Chapter XI Legal Liability
Chapter XII Supplementary Provisions
Chapter I General Provisions
Article 1 This Law is enacted with a view to regulating the activities concerning securities investment funds, protecting the legitimate rights and interests of the investors and other relevant parties, and promoting the healthy development of securities investment funds and securities market.
Article 2 This Law shall apply to the securities investment activities conducted through the method of portfolio and through public offering of fund shares to raise securities investment funds (hereinafter referred to as fund), which is managed by fund managers and entrusted to fund trustees for the benefits of the fund share holders; the matters not covered by this Law shall be governed by the Trust Law of the People's Republic of China, the Securities Law of the People's Republic of China, and other relevant laws and administrative regulations.
Article 3 The rights and obligations of fund managers, fund trustees and fund share holders shall be stipulated in the fund contracts in accordance with this Law.
Fund managers and fund trustees shall perform the trustee's duties in accordance with this Law and the stipulations of the fund contracts. A holder of fund shares shall enjoy the benefits and bear the risks to the extent of the fund shares it holds.
Article 4 Those engaging in the activities involving securities investment funds shall adhere to the principles of free will, fairness and good faith, and may not impair the interests of the state and public interests.
Article 5 A fund contract shall stipulate the operation method of the fund. A fund can be operated in a closed, open, or any other way.
A fund operated in a closed way (hereinafter referred to as closed fund) refers to the fund of which the ratified total fund shares remains fixed during the valid term of the fund contract and of which the fund shares can be traded on the securities exchanges established according to law, but may not be redeemed by fund share holders through application.
A fund operated in an open way (hereinafter referred to as open fund) refers to the fund of which the total fund shares are unfixed and of which the fund shares may be subscribed to or redeemed at the time and place stipulated in the fund contract.
The measures for the offering, trading, subscription and redemption of the fund shares of the funds operated through other ways are separately formulated by the State Council.
Article 6 Fund property shall be independent from the property owned by the fund manager or fund trustee. The fund manager or fund trustee may not include the fund property into their own property.
The property and benefits obtained by the fund manager or fund trustee as a result of the management, utilization or any other use of the fund shall be included into the fund property.
Where the fund manager or fund trustee goes into liquidation as a result of dissolution, cancellation, or declared bankruptcy according to law, the fund property shall not be taken as their liquidation property.
Article 7 The creditor's right of fund property may not be set off against the debts of the property owned by the fund manager or fund trustee; and the creditor's rights and debts of different fund properties may not be set off against each other.
Article 8 The debts not arising out of the fund property may not be enforced against such fund property.
Article 9 Fund managers and fund trustees shall, in managing and utilizing the fund property, devote themselves to their duties and perform the obligations of prudence and diligence and in good faith.
Fund practitioners shall have obtained the qualifications for practice relating to funds, and shall abide by the laws, administrative regulations, professional ethics, and code of conduct.
Article 10 Fund managers, fund trustees and fund share offering institutions may establish trade associations to strengthen self-regulation, coordinate trade relationship, provide trade services, and promote the development of the trade.
Article 11 The securities regulatory department under the State Council shall supervise and regulate the activities concerning securities investment funds according to law.
Chapter II Fund Managers
Article 12 Fund managers shall be assumed by the fund management companies established according to law.
To be a fund manager, the ratification of the securities regulatory department under the State Council is required.
Article 13 The establishment of a fund management company shall meet the following conditions and be subject to the approval of the securities regulatory department under the State Council:
1. Having the
Articles of association which are in conformity with this Law and the Company Law of the People's Republic of China;
2. Having a registered capital of not less than CNY100 million and all of the capital being paid-in monetary capital;
3. Its principal shareholders have better business performance and good public reputation in the securities business, securities investment consultation, trust assets management or other financial assets management, have no record of violation of law within the last 3 years, and have a registered capital of not less than CNY300 million;
4. The number of persons with fund practice qualification making a quorum;
5. Having business sites, security facilities and other facilities relating to fund management business that comply with the requirements;
6. Having sound internal auditing and monitoring system and risk control system; and
7. Other conditions provided for by laws and administrative regulations and those provided for by the securities regulatory department under the State Council upon approval by the State Council.
Article 14 The securities regulatory department under the State Council shall, within 6 months from accepting the application for establishment of a fund management company, conduct examination pursuant to the conditions specified in Article 13 hereof and the principle of prudential regulation, make a decision on whether to grant the approval or not, and notify the applicant of the result, and shall explain the reasons if no approval is granted.
Where a fund management company is to establish any branch, modify its
Articles of association, or alter any other major matters, it shall apply to the securities regulatory department under the State Council for approval. The securities regulatory department under the State Council shall, within 60 days from the day of accepting the application, make a decision on whether to grant approval or not, and notify the applicant of the result, and shall explain the reasons if no approval is granted.
Article 15 None of the following personnel may work as a securities practitioner of a fund manager:
1. Those being given criminal penalties for committing the crime of bribery, embezzlement, malfeasance, encroachment of property, or undermining the socialist market economic order;
2. The directors, supervisors, factory directors, mangers and other senior managerial personnel who are personally liable for the bankruptcy and liquidation due to poor management or the revocation of business license due to violation of law of the companies and enterprises in which they hold office, provided that it is less than 5 years since the day of the bankruptcy liquidation or of the revocation of business license;
3. Individuals with large amount of outstanding personal debts;
4. The practitioners of fund managers, fund trustees, securities exchanges, securities companies, securities registration and settlement institutions, futures exchanges, futures brokerage companies and other institutions, and the state functionaries that have been dismissed due to violations of law;
5. The lawyers, certified accountants, practitioners of assets evaluation institutions and assets verification institutions, and practitioners of investment consultation institutions whose practice licenses have been revoked or who have been disqualified due to violations of law; and
6. Other personnel that may not engage in the fund business as provided for by any law or administrative regulation.
Article 16 The managers and other senior managerial personnel of a fund manager shall be familiar with the laws and administrative regulations concerning securities investment, have the qualification for fund practice, and have worked in the field relevant to the position they hold for more than 3 years.
Article 17 The selection or change of the managers and other senior managerial personnel of a fund manager shall be submitted to the securities regulatory department under the State Council for examination in accordance with the conditions for holding such positions provided for by this Law and other relevant laws and administrative regulations.
Article 18 The directors, supervisors, managers and other practitioners of a fund manager may not hold any position in the fund trustee or other fund managers, and may not conduct any securities transactions and other activities that may impair the fund property and the interests of the fund share holders.
Article 19 A fund manager shall perform the following duties:
1.
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