· Area of Law： Securities

· Level of Authority： Industry Regulations

· Date issued：10-16-2015

· Effective Date：10-16-2015

· Status： Effective

· Issuing Authority： National Equities Exchange and Quotations Co. Ltd

Questions and Answers on the Business of the National Equities Exchange and Quotations (I)—Issues on the Investment of Asset Management Plans and Contractual Privately Offered Funds in the Equities of To-Be-Quoted Companies
(October 16, 2015)
I. Whether the asset management plans of fund subsidiaries, asset management plans of securities companies and contractual privately offered funds can invest in the equities of the companies to be quoted on the National Equities Exchange and Quotations (NEEQ)? Whether they need to be restored to actual controllers when quotation examination is conducted?
In accordance with Article 9 of the Pilot Measures for Fund Management Companies' Asset Management Services for Specific Clients, the assets under the asset management plan of a fund subsidiary shall be used for the following investments: “......(2) equities, claims and other property rights that are not transferred through the stock exchange. (3) Other assets recognized by the CSRC. Specific asset management plans that invest in the assets prescribed in items (2) and (3) of the preceding paragraph are referred to as special asset management plans.” Fund subsidiaries may invest in the equities of companies to be quoted on the NEEQ through establishing special asset management plans.
In accordance with Article 25 of the Detailed Rules for the Implementation of the Client-Specific Asset Management Business of Securities Companies, “the investment scope of the client-specific asset management business shall be agreed upon by the securities company and clients in the contract, shall not violate any law, administrative regulation or the prohibitive provision of the CSRC, and shall match clients' risk recognition and tolerance, and the securities company's investment experience, management capability and risk control……” In accordance with Article 14 of the Measures for the Administration of Clients' Asset Management Business of Securities Companies, “The securities company that handles the special asset management business for particular purposes for clients shall enter into a special asset management contract, set particular investment objectives in light of the particular requirements for clients and the specific circumstances of underlying assets, and provide asset management services to clients through special accounts.......Securities companies may handle the special asset management business through establishing comprehensive collective asset management plans.” Therefore, for the client-specific and special asset management plans of securities companies, broker-dealers and clients may agree on to invest in the equities of companies to be quoted on the NEEQ.
In accordance with Article 2 of the Interim Measures for the Supervision and Administration of Privately Offered Investment Funds, the investment of privately offered fund assets covers the trading in stocks, equities, bonds, futures, options, fund shares and other subject matter of investment agreed upon in the investment contract. The investment scope of privately offered funds (including contractual privately offered funds) covers the equities of companies to be quoted on the NEEQ.
In accordance with the Guidelines No. 4 for the Supervision of Unlisted Public Companies – Guidelines for the Examination of Issues relating to Administrative Licensing Applications of Unlisted Joint Stock Companies with Over 200 Shareholders (Announcement No. 54 [2013], CSRC), “Where any shares are held by a private offered equity fund, an asset management plan, or any other financial plan, if such a financial plan is established in accordance with the relevant laws and regulations, has operated in a standard manner, and has been regulated by the securities regulatory authority, the company is not required to conduct share restoration or change into direct shareholding.” Therefore, share restoration is not required when the equities of to-be-quoted companies invested by the asset management plans of fund subsidiaries, asset management plans of securities companies, and contractual privately offered funds that have been registered and granted recordation by the Asset Management Association of China and are subject to the supervision of securities regulatory authorities are subject to quotation examination, but the relevant information shall be disclosed in an effective manner.
II. When the asset management plan of the aforesaid fund subsidiary or the securities company (hereinafter referred to as the “asset management plan”) or the company invested by the contractual privately offered fund applies for quotation on the NEEQ, whether shares can be directly registered as product names?
Yes. The specific points for operation are as follows:
(1) When a company invested by an asset management plan or contractual privately offered fund applies for quotation, the sponsoring broker-dealer shall, in the Public Transfer Statements, list the asset management plan or contractual privately offered fund as the shareholder, and sufficiently disclose in the Public Transfer Statements the relationship between the asset management plan or contractual privately offered fund with its management institution or other products under the name of the management institution. At the same time, the sponsoring broker-dealer shall examine the following matters and give specific opinions: first, whether the asset management plan or contractual privately offered fund is formed in accordance with the law, has standard operation and has performed the relevant recordation or approval formalities. Second, the source of funds for the asset management plan or contractual privately offered fund and its legality. Third, whether the investment scope complies with the agreement of the contract, and the regulatory compliance of the investment. Fourth, whether the equity holder of the asset management plan or contractual privately offered fund is the controlling shareholder, actual controller, or director, supervisor or senior executive of the to-be-quoted company.
(2) When the company invested by the asset management plan or the contractual privately offered fund has passed the quotation recordation and examination and handles initial registration of shares, the quotation business department shall be responsible for examining the consistency of the information on shareholders involved in the Application Form for the Initial Registration of Stocks and the information disclosed in the Public Transfer Statements.
(3) The issuer business department of the China Securities Depository and Clearing Co., Ltd. shall, after verifying the consistency of share registration information and disclosed information, directly register shares under the name of asset management plans or contractual privately offered funds.