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Provisions on the Administration of Foreign Exchange in Domestic Securities Investments of Qualified Foreign Institutional Investors

By Pamela Payne,2014-02-18 12:53
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Provisions on the Administration of Foreign Exchange in Domestic Securities Investments of Qualified Foreign Institutional Investorson,of,in,the,The

    Provisions on the Administration of Foreign

    Exchange in Domestic Securities

    Investments of Qualified Foreign

    Institutional Investors

    InaccordancewiththeRegulationsontheForeignExchangeAdministrationofthePeople'sRepublicof

    ChinaandtheMeasuresfortheAdministrationofDomesticSecuritiesInvestmentbyQuafifiedForeign

    InstitutionalInvestors,theStateAdministrationofForeignExchangehasformulatedtheProvisionson

    theAdministrationofForelgnExchange|nDomesticSecuritiesInvestmentsofQualifiedForegnInstitu

    tionalInvestors.whichcameintoeffectonthedateofitspromulgation. ProvisionsontheAdministrationofForeignExchange

    InvestmentsofQ

    ??I??——0-

    InUomeStICecurJties

    ualifiedForeignInstitutionalInvestors

    ChapterIGeneralProvisions

    圜匝咖PursuanttotheRegulations

    ontheForeignExchangeAdministration

    ofthePeople'sRepublicofChinaandthe

    MeasuresfortheAdministrationofDo.

    mesticSecuritiesInvestmentbyQualified

    ForeignInstitutionalInvestors(OrderNo.

    36of2006oftheChinaSecuritiesRegula

    toryCommission,thePeople'sBankof ChinaandtheStateAdministrationofFbr_ eignExchange).theProvisionsisenacted toregulatetheadministrationofforeign exchangeofthequalifiedforeigninstitu

    tiona1investors(hereinafterreferredtoas QFIIs)inthedomesticsecuritiesmarketof China.

    圜囝衄AQFIIshallentrustits

    domesticcustodian(hereinafterreferred toascustodian)togothroughal1thepro

    ceduresstipulatedintheProvisionsonits behalf.

    墨囝圆AQFIIanditscustodian

    shallcomplywithrelevantregulationsand rulesonforeignexchangeadministration inChina.

    圈囝咖TheStateAdministration

    ofForeignExchange,itsbranchesandfoI"- eignexchangeadministrationdepartments (hereinafterreferredtoastheSAFE)shall implementaccordingtolawsupervision, administrationandinspectiononquota, fundaccounts,paymentandexchangeof domesticsecuritiesinvestmentbyQFIIs. ChapterIIAdministrationof

    InvestmentQuota

    圜囝躅Thestateimplementsthe

    administrationofquotaondomesticsc

    curitiesinvestmentsbyQFIIs.TheSAFE

    shallapprovetheinvestmentquotaofan individualQFIIandencouragemedium andlong-termforeigninvestment. 墨囝脚AQFII,applyingforin

    s

    vestmentquotaandopeningaforeign exchangeaccountandaspecialRenminbi account.shallprovidetheSAFEwiththe followingdocuments:

    r11AwrittenapplicationofaCUS

    todianandaOFII,includingthebasic conditionoftheQFII,anexplanationof thesourceoffundsandinvestmentplan andacommitmentofnorepatriationofin

    vestmentduringtheapprovalperiod,with RegistrationFormoftheStateAdminis

    trationofForeignExchangeforQualified ForeignInstitutionalInvestorattached(see appendixIforsampleform);

    r21PhotocopiesofSecuritiesInvest- mentBusinessOperationLicenseforQFII issuedbytheChinaSecuritiesRegulatory Commission(hereinafterreferredtoas CSRC,:

    f3,Anotarizedwarrantauthorizeda QFIItoacustodian;and

    r41Otherdocumentsrequiredby

    SAFE

    WhereaOFIIappliesforincrease ofinvestmentquota,itshall,apartfrom

    theabovedocuments,supplytheForeign ExchangeRegistrationforQFII(Here

    inafterreferredtoasForeignExchange Registration)andanexplanationofexist

    inginvestmentquotainChina.including assetsallocationandalteration,profitand lossoninvestments,performanceofcorn

    plianceandaverageturnoverrateinstock deal

    Theinvestmentquota

    appliedforbyaOFIIshallbeworthno lessthanUSD50meachtime.withthe accumulativeinvestmentquotanomore thanUSDlb.TheSAFEmay,basedonthe economicandfinancialsituation,supply anddemandofforeignexchangemarket andtheinternationa1payment.adiustthe aforesaidquota.

    AOFIIshallnotfileanotherappli

    cationfor1ncreaseof1nvestmentquota withinoneyearaftertheapprovalofthe previouslnvestmentquota.

    墨团圆AQFIIshouldremitde

    positwithin6monthsupontheapproval ofinvestmentquota,andoverdueremit

    tanceofdepositshallnotbeallowedwith

    outauthorization.Wherefundepositfails toberemittedintheprescribedtimebut isworthmorethanUSD20m.theactual remitteddepositshal1actasinvestment

quota.

    AQFIIshallrefertothechartofthe conversionrateofcurrenciestoUSdollar onthecurrentmonthofremittancepro

    mulgatedbySAFEtocomputetheremit- tedinvestmentquotaequivalenttodollars invaluewhileremittingnondollarde

    posit.

    曩固圆圈日Thelock-inperiodforde

    positfortheQFIIsofsuchtypesaspen sionfundinsurancefund.commonfund, charityfund,donationfundandgovern. mentandcurrencyadministrationand theopenendedChinesefundestablished byOFIIsshallbe3months;andthatof depositforotherQFIIs1year.

    Thelock-inperiodofdepositfora QFIIshallbecomputedasofthedate whenfuUdepositisremitted;forthatof depositthatfailstobefullyremittedin theprescribedtime.itshal1becomputed 6monthsasofthedatewheninvestment quotaisapproved.

    Theaforesaid"openendedChinese

    fund"referstotheopensecuritiesinvest- mentfundthatisinitiatedandsetup overseasintheformofpublicoffering andatleastmorethan70%ofwhichis investedinChina.AQFIIshouldsubmit theoriginalcopyofthefundprospectuses

    andChinesetranslationofitscorecontent totheSAFEforfiling.

    Theabovementioned"lockinpe

    fileanapplicationtotheforeignexchange bureauwherethecustodianisdomiciled withthefollowingmaterials:

    (11Awrittenapplicationandrelevant certificationdocumentsofprofitsofout

    wardofremittance;

    (2)TheoriginalcopyoftheForeign ExchangeRegistration;

    f31Thespecialauditor'sreportonthe returntoinvestmentissuedbytheChinese Ce~ifiedPublicAccountant;

    f41Taxpaymentcertificateforin

    comes;and

    f51Othermaterialsrequiredbythe SAFE.

    Thecustodianmayhandlethefor_ malitiesofpurchasingforeignexchange andoutwardofremittanceforthe0FII basedonthereplydocumentissuedbythe foreignexchangebureauwherethecusto

    dianisdomiciledafterexaminationand approva1.

    瞳囝髑衄Thecustodianshallac.

    curatelyandtimelyrecordthefundremit

    tanceandPaymentofaQFIIintheForeign ExchangeRegistration.

圜囝匿圃TheSAFEmay,inac.

    cordancewithChineseeconomicand financialsituation.supplyanddemandof foreignexchangemarketandtheinterna

    tionalPayment.adjustthetimeoffund outwardofremittance,amountandthe periodlimitofa0FII.

    ChapterVStatisticsand

    Supervision

    露盟匝圃AQFIIshouldgothrough

    theformalitiesoftheforeignexchange registrationalterationandsubmitawritten reportinandtotheSAFEwithin5work- ingdaysinthefollowingsituations: f11Thealterationofsuchbasiccon

    ditionastitle,responsibleperson,major shareholderoractualcontrollerofaQFII; f2)AOFIIoritsmajorshareholder

    andactuaIcontrollerisseverelypunished byothersupervisionauthorities(including overseasones),whichmaycausesignifi

    cantimpactson1nvestmentoperationof theQFIIoritsrelevantbusinessqualifica

    tionissuspendedorrevoked;

    f31Alterationofthecustodianordo

    mesticentrustedinvestmentagency(agent) oralterationofitsrelevantmaterialinfor- mation;

    r41Alterationofaccounttitleandin

    formationofopeningbank;

    f5,Alterationofopen.endedChinese fundproSl:}ectus;and

    f6)Otherconditionsrequiredbythe SAFE.

    WhereaQFIIchangesacustodian,

    thenewoneshouldalsoprovidethe S

    newlysignedcustodyagreementdraft, thebasicconditionofthenewcustodian andrelevantcontentofassetscustody,and thenewnotarizedandauthorizedletter. andsubmittheofficialcustodvagreement within5workingdaysasofthedatewhen aforeignexchangeaccountandaspecial RMBaccountareopened.

    圜匝衄Thecustodianshalltimely

    andaccuratelysubmittherelevantreport formsofaQFIIfundremittanceanddo

    mesticsecuritiesinvestmentinaccordance withthefollowingprovisions:

    f11FillintheDetailedFormforOFII FundsRemittance(seeAppendixIIfor sampleform)within2workingdaysafter fundsremittanceorsettlementandpor- chaseofforeignexchangebyaQFII; f21ReportandsubmittheMonthly

    ReformForm1and2ofDomesticSecuri

    tiesInvestmentofQFIIs(seeAppendixIII forsampleform)within8workingdays monthly;and

    (3)Reportandsubmitthelastyear's AnnualFinanceReformForm1and2of DomesticSecuritiesInvestmentofQFIIs (seeAppendixIVforsampleform)audited bytheChineseCertifiedPublicAccoun

    tantwithin3monthsafteraaccounting yearisover?

    暖囝幽AQFIIshallbepunished

    bytheSAFEinaccordancewiththeRegu

    lationsonForeignExchangeAdministra

    tionofthePeople'sRepublicofChinaand maybeadjustedtoreducetheinvestment quotauntiIthequotaisrevokedinthefo1. 1owingsituations:

    (1)Illegallyutilizeforeignexchange bytransferringorresellinginvestment quota;

    f2Providefalseinformationormate

    rialsforacustodianortheSAFE; r3,Handlesettlementofpaymentor purchaseofforeignexchangenotaccord

    ingtotheprovisionsherein;

    f41Providetherelevantinformation ormaterialsoffundremittanceanddo

    mesticsecuritiesinvestmentnotaccording totherequirementsoftheSAFE;and f51otheractsinviolationofthead. ministrationofforeignexchange. 躅圃Thecustodianshallbe

    publishedbytheSAFEaccordingtothe

RegulationsonForeignExchangeAdmin

    istral:ionofthePeople'sRepublicofChina; ifthesituationisserious.theSAFEwill revokethequalificationofaOFI1with CSRCinthefollowingconditions: r1,Investmentquotaexceedingthat approvedbytheSAFEorhandlingdeposit inwardofremittanceforaOFIIbeyond thetimelimit;

    r2,Handlingtheformalitiesofde

    positandprofitoutwardofremittancefor aQFIInotaccordingtotheProvisions herein;

    (3)Openingorclosingaforeign

    exchangeaccountandaspecialRMBac

    countforaQFIInotaccordingtothePro

    visionshereinorhandlingtheformalities offundsremittanceandtransfernotac

    cordingtotheprescribedscaleofaccount balance;

    (4)Submittingthereportformand relevantdocumentstotheSAFEorreport- ingrelevantsituationstotheSAFEnot accordingtotheProvisionsherein; f51Conductingstatisticsdeclaration oftheinternationalPaymentnotaccording totheProvisionsherein;and

    f610theractsinviolationofthe

    ProvisionsonAdministrationofForeign Exchange.

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