Fund subsidiaires might face capital control
Fund subsidiaries are likely to face regulations on their net capital level after the China Securities Regulatory Commission called for a meeting with representatives of these companies.
Previously, there were no capital restrictions on fund subsidiaries because authorities wanted to promote product innovation. The restrictions, already imposed on trusts and the asset management units of brokers, will be linked to the amount of risky assets.
Fund subsidiaries have no limits in terms of type of investments and therefore have experienced strong growth. Assets under management surged 1.3 times last year to RMB 8.57trn.
Caixin, April 22
Fund of funds in demand
More independent financial adviser companies are keen to launch fund of funds to meet the demand for low risk and flexible allocation products. Also FoFs have a lower entry requirement, usually around RMB 10,000, as compared to RMB 1m for private equity funds.
About 600 FoFs were set up in 2015 through trusts or private equity companies. They had a total of RMB 43bn in assets under management. To compare, the US has nearly 1,400 FOFs with $1.72trn of AUM.
China Securities Journal, April 22
Crackdown on registration of financial firms
China suspended all new registrations of companies with finance-related names and businesses as part of its efforts to rein in unregulated fintech businesses.
Applicants with finance-related names or businesses, including all sorts of companies from exchange, finance, asset management, wealth management, fund, invesment management, equity fund, internet finance, P2P, equity crowd funding, internet insurance or payments, can no longer simply register with local offices of the State Administration for Industry & Commerce. Instead, the firms have to get approval from the financial regulators.
The internet finance crackdown campaign will continue until January 2017.
Caixin, April 21
New Third Board screens for fake qualified investors
Entry requirements to invest in China's National Equities Exchange and Quotations or New Third Board, were tightented while brokers were urged by the China Securities Regulatory Commission to screen the existing investors.
The new measures aim to get rid of fake qualified investors to maintain market stability and protect small investors. To meet the new standards, individual investors need to have RMB 5m of securities assets, excluding over-the-counter products, private equity products and wealth management products, and at least two years of investement experience.
Institutional investors would require proof of RMB 5m of capital for investments, instead of a registered capital of RMB 5m.
There were 199,000 registered qualified individual investors and 23,000 institutional investors in the NEEQ at the end of 2015.
The NEEQ is an exchange that focuses on new economy sectors, such as technology and consumption-related themes, which are often startups.
Caixin, April 21
Investors demand guaranteed return products
Guaranteed funds are gaining popularity amid volatile stock markets in onshore China. Among the 179 new mutual funds set up in the first quarter of this year, 17.3%, or 31 funds are guaranteed-type products. In the full year 2015, only 44 guaranteed funds were set up.
The 31 new guaranteed funds raised RMB 76.0bn ($11.7bn) of capital in total, which accounted for 46% of money raised by the new products. Guaranteed products usually have an investment period between two-to-three years. Cumulatively, they have fetched a 5.4% return for the year ended April 12, and 33.15% for the trailing three-year period.
Daily Business, April 21
CSRC punishes four fund houses
The China Securities Regulatory Commission said it would impose a three-month administrative regulation measure to stop any fund registration from Shenzhen-based mutual fund manager Baoying Fund Management.
It also imposed a corresponding administrative regulation measure on three fund subsidiaries, including Minsheng Royal Asset Management, to stop them from working on specific asset management projects for three months.
The measures followed the inspection of 25 companies last year, when the CSRC spotted some issues on compliance, know-your-customer requirements, misleading advisory statements, and sales people and products failing to meet the regulatory standards.
Securities Times, April 16