New Changes regarding the Securities Investment Fund Law (SIF Law) in China
1. Q: What’s the background to issue the new rules?
A: In July 2012, the Standing Committee of the National People’s Congress (NPCSC) published discussion papers, namely Draft Amendment on the SIF Law for public comment. And half yeas later, on 28th December 2012,NPCSC finally issued 2012 Amendment to the PRC SIF Law and the 2012 Amendment will take effect on 1 June 2013.
2. Q: Are there any changes in the new amendment regarding non-publicly raised fund compared with the former SIF Law?
A: There are several new rules regarding non-publicly raised fund. Firstly, A non-publicly raised fund may only raise funds from no more than 200 qualified investors. Secondly, any promotion activities through public media (such as newspapers, radio, television stations or internet), lectures, seminars or debriefing meetings with respect to the introduction of certain non-publicly raised fund to non-specific targets are prohibited. Thirdly, the profit distribution and risk bearing of non-publicly raised funds can be contractually agreed by the fund contracts.
3. Q: What are the important changes for the personnel who are relevant with the fund in the new amendment compared with the former rule?
A: Compared with the old rules, directors, supervisors or senior management personnel (or their relatives or interested parties) of a fund manager who manages publicly raised funds will be permitted to make securities investments but shall be subject to restrictions such as reporting and conflict of interests. Additionally, Any change of shareholders holding 5 per cent or more of the equity interest in a fund management company, change of ultimate controller or any other material matters requires the China Securities Regulatory Commission approval.
4. Q: Does the 2012 Amendment keep all the changes compared with the Draft Amendment on the SIF Law?
A: The 2012 Amendment kept most of the changes in the Draft Amendment except for the following points: a) The fund manager of privately raised funds (i.e. non-publicly raised funds) must be registered with the fund industry association upon the completion of the fundraising. It is not necessary for the fund manager to register with the China Securities Regulatory Commission (CSRC) which was required by the Draft Amendment. b) In the Draft Amendment, two new forms of securities investment funds (i.e. funds in unlimited liability form and funds in committee form) were introduced. However, both forms were deleted from the 2012 Amendment as the prevailing opinion considered these forms as falling into the existing contractual form.