Measures for the Administration of the Securities Investment Fund Custody Business (2020)

Measures for the Administration of the Securities Investment Fund Custody Business (2020) Order of the China Securities Regulatory Commission (Order No. 172) The Measures for the Administration of the Securities Investment Fund Custody Business, as deliberated and adopted at the sixth executive meeting of the China Securities Regulatory Commission for 2020 on July 7, 2020, are hereby issued and shall come into force on the date of issuance. Chairman of the China Securities Regulatory Commission: Yi Huiman Chairman of the China Banking and Insurance Regulatory Commission: Guo Shuqing July 10, 2020 Annex 1: Measures for the Administration of the Securities Investment Fund Custody Business Annex 2: Notes on Drafting the Measures for the Administration of the Securities Investment Fund Custody Business Measures for the Administration of the Securities Investment Fund Custody Business Chapter I General Provisions Article 1 For the purposes of regulating the securities investment fund custody business, maintaining the competition order of the securities investment fund custody business, protecting the lawful rights and interests of fund share holders and relevant parties, and promoting the sound development of securities investment funds, these Measures are developed in accordance with the Securities Law, the Securities Investment Fund Law, the Banking Supervision Law, and other relevant laws and administrative regulations. Article 2 For the purposes of these Measures, custody of securities investment funds (hereinafter referred to as “funds”) means the acts that a commercial bank or another financial institution that is lawfully formed and has obtained the qualifications for fund custody performs such duties as safekeeping fund property, handling clearing and settlement, rechecking and reviewing information on net value, conducting investment supervision and convening general meetings of fund share holders as the custodian according to the provisions of the laws and regulations and the agreement of the fund contracts. Article 3 To engage in the fund custody business, commercial banks and other financial institutions shall obtain approval of the China Securities Regulatory Commission (“CSRC”) and have lawfully obtained the qualifications for fund custody. An institution without the qualifications for fund custody shall not engage in the fund custody business. Article 4 Fund custodians shall comply with the provisions of laws and regulations as well as the agreement of the fund contracts and fund custody agreements, observe the professional ethics and code of conduct, act in good faith with prudence and diligence, and perform the fund custody duties in the interests of fund share holders. Article 5 Senior executives and other practitioners of the fund custody department of a fund custodian shall perform duties faithfully and diligently, and shall not carry out securities transactions or any other activities that impair the fund property and the interests of fund share holders. Article 6 The CSRC and the China Banking and Insurance Regulatory Commission (“CBIRC”) shall, according to the laws and regulations and under the principle of prudential regulation, supervise and administer fund custodians and their fund custody business activities. Article 7 The Asset Management Association of China (“AMAC”) shall, according to the laws and regulations and the self-regulation rules, conduct self-regulatory management of fund custodians and their fund custody business activities. Chapter II Fund Custody Institutions Article 8 A commercial bank or another financial institution that applies for the qualifications for fund custody (hereinafter referred to as “applicant”) shall meet the following conditions: (1) It has net assets not less than 20 billion yuan and its risk control indicators comply with the relevant provisions of the regulatory authority. (2) It has set up a special fund custody department, whose setting can ensure the integrity and independence of the custody business operation. (3) The senior executives appointed for the fund custody department meet the statutory conditions, and employees having obtained the fund practicing qualifications account for not less than half of the total number of employees of the department; and there are not less than eight practitioners who intend to engage in fund clearing, accounting, investment supervision, information disclosure, internal audit and monitoring, and other business, and who have fund practicing qualifications, among which, employees holding such core business positions as accounting and supervision shall have two or more years of experience in custody business. (4) It has the conditions for safekeeping fund property and ensuring the integrity and independence of fund property. (5) It has a safe and efficient clearing and settlement system. (6) The fund custody department has fixed premises required for business operation and is equipped with an independent security monitoring system. (7) The fund custody department is equipped with independent technical systems for custody business, including network system, application system, security protection system and data backup system. (8) It has sound internal audit and monitoring system and risk control system. (9) It has no record of major violation of laws or regulations in the most recent three years. (10) It meets other conditions prescribed by laws and administrative regulations and prescribed by the CSRC with approval of the State Council. Where a branch of a foreign bank applies for the qualifications for fund custody, its net assets and other financial indicators may be calculated as per those of its overseas head office. Its overseas head office shall have a sound internal control mechanism, boast sound international reputation and satisfying business performance, and have scale, income, profit, market share and other indicators of the fund custody business ranking in the forefront in the world in the most recent three years, and high-level long-term credit standing in the most recent three years. The country or region where it is located has sound laws and regulatory systems on securities, and the relevant financial regulatory authority has concluded a memorandum of understanding on securities regulation cooperation and maintained an effective relationship of regulation cooperation with the CSRC or an institution recognized by the CSRC. Article 9 An applicant shall have sound clearing and settlement rules, and a clearing and settlement system that complies with the following provisions: (1) The securities trading and settlement funds in the system are remitted and arrive in a timely manner. (2) It safely receives trading and settlement data from the exchanges, the securities depository and clearing institutions, and other relevant institutions. (3) It is safely connected with the systems of fund managers, fund registration institutions, securities depository and clearing institutions, and other relevant business institutions. (4) It lawfully implements the investment instructions of fund managers, and handles clearing and settlement matters in a timely manner. Article 10 An applicant's fund custody business premises and security protection facilities as well as other facilities and relevant systems concerning the fund custody business shall comply with the following provisions: (1) The business premises of the fund custody department is relatively independent and equipped with an access control system. (2) Employees holding business positions with access to fund transaction data have separate office premises where irrelevant personnel are not allowed to enter without permission. (3) There is a sound confidentiality system for fund transaction data. (4) There is a secure fund custody business data backup system. (5) There is an emergency response plan for the fund custody business and emergency response capacity. Article 11 An applicant shall file the following application materials with the CSRC: (1) An application form. (2) An audit report issued by an accounting firm in compliance with the provisions of the Securities Law, and an explanation on the on-going compliance of its risk control indicators with relevant provisions of the regulatory department in the most recent year. (3) The supporting documents on the establishment of a special fund custody department, and the explanation and commitment on ensuring the integrity and independence of the department in business operation. (4) The provisions on internal institution setting and job responsibilities. (5) The office-taking materials of the proposed senior executives of the fund custody department. (6) A report on relevant conditions for safekeeping the fund property. (7) Relevant business rules and regulations, including the rules and regulations on business management, operating procedures, fund accounting, fund clearing, information disclosure, internal audit and monitoring, internal control and risk management, information system management, management of practitioners, confidentiality and file management, reporting of major suspicious circumstances, and emergency response, as well as others required for the performance of the duties and functions of fund custodians. (8) A business plan for launching the fund custody business. (9) Other materials prescribed by the CSRC. An applicant that is a branch of a foreign bank shall file the following materials of its head office: (1) The supporting documents on its......