On March 14, 2013, the China Securities Regulation Commission (the “CSRC”) published the draft amended Interim Measures for the Administration of Overseas Securities Investment by Qualified Domestic Institutional Investors, and the draft Regulations on Matters Concerning the Implementation of the Interim Measures for the Administration of Overseas Securities Investment by Qualified Domestic Institutional Investors (collectively, the “Draft Regulations”).The deadline for public comments on the Draft Regulations is April 13, 2013.The Draft Regulations (if adopted) will supersede the existing regulations issued by the CSRC in 2007 (the “Current Regulations”).
There are currently several qualified domestic institutional investor (“QDII”) programs regulated by different regulators, i.e. the securities-company-and-fund-management-company QDIIs regulated by CSRC, the bank-and-trust-company QDIIs regulated by the People’s Bank of China and the China Banking Regulatory Commission, and the insurance-company QDIIs regulated by the China Insurance Regulatory Commission. The Draft Regulations and the Current Regulations issued by the CSRC apply only to securities-company-and-fund-management-company QDIIs, and references to “QDIIs” in this Alert are so limited, unless the context indicates otherwise.
To date, the securities-company-and-fund-management-company QDIIs have been granted QDII investment quota of RMB 45.7 billion (approximately USD 7.25 billion), accounting for more than one-half of the total issued quota under all the QDII programs.
As widely expected by the market, the Draft Regulations (if adopted) significantly expand the scope of securities companies and fund management companies permitted to participate in the QDII program.
1. Expansion of Eligible QDII Institutions
The current Regulations require: (i) with respect to a fund-management-company QDII applicant, a minimum net capital of RMB 200 million, at least two years’ experience in managing securities investment fund businesses, and assets under management of RMB 20 billion or more in the last quarter; and (ii) with respect to a securities-company QDII applicant, risk control tests, a minimum net capital of RMB 80 million, a ratio of net capital to net assets of 70% or more, at least one year of experience in managing collective asset management scheme1 businesses, and assets under management of RMB 2 billion or more in the last quarter. The Draft Regulations eliminate these requirements, thereby significantly expanding the ranks of eligible QDII institutions, and opening the QDII program to medium-and-small sized securities companies and fund management companies.
2. Expansion of Permitted Investments
Under the Draft Regulations, QDII funds raised under a specific quota asset management scheme2 may for the first time be invested in privately placed funds registered with securities regulators in jurisdictions that have signed memoranda of understanding regarding bilateral regulatory cooperation with the CSRC. The Draft Regulations also: remove various limits on investments by QDII funds raised under a specific quota asset management scheme; slightly expand the scope of financial derivative products available to QDIIs by removing the requirement that the exchange where the financial derivative products are traded must be an exchange recognized by the CSRC under a list of approved exchanges previously published by CSRC; and provide that funds raised under the QDII program can be invested in forward contracts, swaps, warrants, options, futures and other financial derivatives traded on overseas exchanges in jurisdictions that have signed memoranda of understanding regarding bilateral regulatory cooperation with the CSRC.
3. Other Major Changes
i. Filing with the CSRC by Securities-Company QDIIs
Under the Draft Regulations, a securities-company QDII is no longer required to obtain approval from the CSRC to establish a collective asset management scheme for the purpose of raising fund under the QDII program. Instead, a filing by the securities-company QDII with the CSRC is sufficient.
ii. Overseas Investment Consultant of a Fund-Management-Company QDII
Although, theoretically, a fund-management-company QDII is allowed to engage any eligible offshore enterprise (including its offshore subsidiary) as its overseas investment consultant, in practice it has to engage an international investment consultant because its overseas investment consult is required under the Current Regulations to have at least five years’ experience in investment management businesses and securities assets under management of USD 10 billion or more in the last year. The Draft Regulations eliminate this requirement when a fund-management-company QDII engages its offshore subsidiary as its overseas investment consult.
iii. QDII Quota
QDII quota is granted to a QDII (as opposed to a QDII product). The Draft Regulations make this clearer by removing language that had led to confusion about this aspect of the rules.
Although the Draft Regulations do not fundamentally improve the QDII program, the Draft Regulations will help strengthen the competitiveness of securities-company-and-fund-management-company QDIIs and boost outbound securities investments by the Chinese investors.
目前，中国推行了几类合格境内机构投资者（“QDII ” ）业务试点，它们分别受不同的监管部门监管，即：受证监会监管的证券公司和基金管理公司QDII业务，受中国人民银行和中国银行业监督管理委员会监管的银行和信托公司QDII业务，以及受中国保险监督管理委员会监管的保险公司DQII业务。证监会颁布的上述法规草案和现行法规都仅适用于证券公司和基金管理公司QDII业务。本文所称QDII同样受此限制，除非上下文另有所指。
在法规草案中，QDII通过限额特定资产管理计划 募集的资金可首次投资于经与证监会签署双边监管合作谅解备忘录的国家或地区证券监管当局注册的私募基金。此外，法规草案还取消了对限额特定资产管理计划募集资金投资范围的限制，并取消了有关QDII投资金融衍生品的市场范围必须是 “证监会认可的境外交易所”（即证监会之前发布的一系列允许投资的境外交易所名单中的交易所）的规定，从而小幅扩大了QDII基金投资金融衍生产品的范围。同时，允许QDII募集的资金投资于远期合约、互换及已与证监会签署双边监管合作谅解备忘录的国家或地区交易所上市交易的权证、期权、期货和其他金融衍生产品。
1 A securities company is allowed to engage in collective asset management businesses by establishing a collective asset management scheme pursuant to the Implementing Rules for the Collective Asset Management Business of Securities Companies.
2 A specific quota asset management scheme refers to a type of collective asset management scheme satisfying certain strict requirements (e.g. the minimum amount invested by a single investor is no less than RMB 1 million.)