For the purpose of regulating the pilot program of investment by fund management companies and securities companies approved as Renminbi Qualified Foreign Institutional Investors (hereinafter referred to as the “RQFII”) by fund management companies and securities companies (hereinafter referred to as the “pilot institution”), a notice is hereby released on matters relating to implementation of the Measures for the Pilot Program of Investment by Fund Management Companies and Securities Companies Approved as Renminbi Qualified Foreign Institutional Investors (RQFII) in Domestic Market (promulgated via China Securities Regulatory Commission, PBC, State Administration of Foreign Exchange Decree No. 76) as follows:
1. Pursuant to the Measures for the Administration of Overseas Institutions’ RMB Settlement Accounts (PBC Document [2010] No. 249) and related provisions, the pilot institution shall open a RQFII basic deposit account (hereinafter referred to as the “BDA”) as well as a RQFII special deposit account (hereinafter referred to as the “SDA”) with a domestic commercial bank eligible to act both as a QFII custodian and a settlement agent in the interbank bond market (hereinafter referred to as the “custodian and settlement agent bank”).
A pilot institution that launches open-ended funds shall open a stand-alone SDA for each open-ended fund.
A pilot institution shall not open general deposit accounts or temporary deposit accounts for ad-hoc institutions unless otherwise stipulated by the PBC.
2. A pilot institution can open three types of SDAs with its custodian and settlement agent bank for fund settlements in transactions on the interbank bond market, the stock exchange bond market, and stock market respectively. Funds transfer among the three types of special deposit accounts opened pursuant to this Notice are allowed while that between an SDA and a BDA is prohibited. Cash withdrawal from a SDA is not allowed.
A pilot institution that opens an SDA for trading on the interbank bond market shall provide the following documents: approval by the PBC for the institution to access the interbank bond market, written approval for investment in the domestic securities market and business license for securities investment issued by the China Securities Regulatory Commission (CSRC) as well as written approval of investment quota from the State Administration of Foreign Exchange (SAFE), written documents authorizing the custodian and settlement agent bank to conduct custody and settlement agency business, and the custody agreement between the pilot institution and the custodian and settlement agent bank.
A pilot institution that opens a SDA for trading on the stock exchange bond market or on the stock market shall provide the following documents: written approval for investment in the domestic securities market and business license for securities investment issued by the CSRC as well as written approval of investment quota by the SAFE, written documents authorizing the custodian and settlement agent bank to conduct custody and settlement agency business, and the custody agreement between he pilot institution and the custodian and settlement agent bank.
3. Deposits in a pilot institution’s SDA shall include principals for investment remitted from overseas, proceeds from selling securities, cash dividends, interest income, and other incomes stipulated by the PBC.
Deposits in a pilot institution’s SDA shall be used to purchase securities, to remit principals and investment proceeds overseas, and to make other payments as stipulated by the PBC. With the exception of open-ended funds, a pilot institution shall present audited reports prepared by domestic accounting firms and relevant tax certificates when remitting investment proceeds overseas.
4. The deposit rates of a RMB bank settlement accounts opened by the pilot institution in line with this Notice, are subject to relevant rules and regulations set by the PBC.
5. A custodian and settlement agent bank shall conduct business for the pilot institution including the opening, use, alteration, closing and management of RMB bank settlement account in accordance with the Measures for the Administration of RMB Settlement Account (promulgated via PBC Decree [2003] No, 5), the Measures on for the Administration of Overseas Institutions’ RMB Bank Settlement Accounts , and this Notice.
6. A pilot institution shall submit a written application to the PBC for access to the interbank bond market together with documents listed below:
(1) Basic profile of the institution;
(2) Statement about the source and size of RMB funds;
(3) investment prospectus;
(4) Fact sheet providing basic information about people in charge of bond investment;
(5) Registration files or documents attesting to the approval by regulatory authorities to establish the institution;
(6) Valid identity documents (copies) for the legal representative or designated signatory;
(7) Business license for asset management issued by the Hong Kong securities regulatory authorities;
(8) Written approval and securities investment license issued by the CSRC;
(9) Written approval of investment quota issued by the SAFE;
(10) Statement indicating whether regulatory authorities have imposed any penalties in recent three years;
(11) Audited financial statements in recent three years; and
(12) Other documents as required by the PBC.
A pilot institution shall, when investing in the interbank bond market, entrust bond transactions and settlements with an interbank bond market settlement agent capable of handling international settlements and comply with the relevant regulations set out in the Notice of People’s Bank of China on RMB investment in the Interbank Bond Market by Overseas RMB Clearing Banks and Other Two Types of Institutions (promulgated via PBC Document [2010] No. 217).
7. A pilot institution investing RMB funds raised in Hong Kong in domestic securities market shall meet the following requirements in its asset allocation: within the approved investment quota, investment in stocks and equity funds shall not exceed 20 percent of the total RMB funds raised while that in fixed-returned securities, including all types of bonds and fixed-returned funds, shall take up at least 80 percent.
The above proportion of investment is subject to adjustment by the PBC and the CSRC based on the principles of prudential regulation.
The custodian and settlement agent bank oversees a pilot institution’s compliance with rules set by the PBC and the CSRC regarding the product for and proportion of investment in domestic securities market.
8. A Custodian and settlement agent bank shall, within one business day from after a transaction is done, provide information to the Cross-Border RMB Receipts and Payments Information Management System (RCPMIS), including the opening and closing of RMB bank settlement accounts by the pilot institution, approved investment quota, amount of funds raised, information on cross-border fund transfers, and overview of asset allocation by the pilot institution in domestic market.
The custodian and settlement agent bank shall, within eight business days after the end of each month, submit to the PBC a statement consolidating aforementioned information.
9. The PBC and its branch offices shall supervise and regulate a pilot institution as well as a custodian and settlement agent bank with regard to account management, inward/outward remittance, proportion of investment, information reporting and so forth.
10. A custodian and settlement agent bank shall, when conducting settlements for a pilot institution, fulfill its obligations in terms of anti-money laundering and counter terrorism financing by observing the Law of the People’s Republic of China on Anti-Money Laundering and relevant regulations set by the PBC so as to prevent illegal and criminal activities that take advantage of a pilot institution, such as money laundering and terrorism financing.
