CSRC issued new draft and regulations in respect of securities firms and futures companies
1. Foreign shareholding in securities firms is likely to reach 49 per cent
On 24 August 2012, the China Securities Regulatory Commission (CSRC) issued draft Amendments to the Rules on the Establishment of Foreign-invested Securities Firms (the Draft Amendments), aimed at materialising one of the achievements of the 4th US-China Strategic Economic Dialogue held in May 2012.
One significant change proposed by the Draft Amendments is that the maximum limit of foreign shareholding (directly or indirectly) in a securities firm is raised from 33 per cent to 49 per cent, which represents a positive liberalisation of regulatory restrictions on foreign investment in this particular sector.
2. Futures companies may engages in asset management business
CSRC has issued Measures for the Pilot Program on the Asset Management Service of Futures Companies (the Measures) which took effect on 1 September 2012. Pursuant to the Measures qualified futures companies may, in addition to their existing futures brokerage and consultancy services, provide asset management services to investors.
According to the Measures, a qualified futures asset manager may be permitted to invest in (i) derivatives products such as futures and options; (ii) stocks, bonds, securities investment funds, collective asset management schemes, bank notes, short-term commercial papers, asset backed securities; and (iii) any other products that are permitted by CSRC.
A futures company applying for an asset management pilot qualification must satisfy the following requirements, amongst others:
- its net capital is no less than RMB500 million;
- its risk monitoring and control indicators are consistently in line with the regulatory requirements in the past six months;
- its two most recent regulatory ratings are not lower than Level B of Category B;
- it has had a good compliance track record in recent years (with detailed requirements in the Measures);
- it has in place qualified asset management personnel with appropriate experience, necessary business operation facilities and sound asset management business operation systems and a feasible business plan; and
- other prudential requirements of CSRC.
Futures investment consultancy business, asset management business and offshore futures brokerage are regarded as three major innovative businesses of futures companies in China. Following the opening of the futures consultancy business in May last year and the launch of the asset management pilot business now, the market is expecting the official kick-off of the offshore futures brokerage pilot program in the near future (which has been in the preparation stage since September 2011).
For further information, please contact Sun Hong or Tong Ai.
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