CSRC and CBIRC Jointly Promulgate Administrative Measures on Custodian Business for Securities Investment Funds

CSRC and CBIRC jointly promulgated the Administrative Measures on Custodian Business for Securities Investment Funds

2020-07-11

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China Securities Regulatory Commission (the CSRC) and China Bank and Insurance Regulatory Commission (the CBIRC) jointly revised and promulgated the Administrative Measures on Custodian Business for Securities Investment Funds (the Administrative Measures).

Concurrent with the public consultation on the Administrative Measures between May 9, 2020 and June 23, 2020, the CSRC and the CBIRC also extensively heeded comments from relevant government agencies and market entities through panel discussions and video conferencing. These consultations showed that the market was widely in support of the Administrative Measures and called for its adoption at an early date. With in-depth studies of feedback from all parties, the CSRC and the CBIRC further improved the to Administrative Measures to address key market concerns.

The current revision of the Administrative Measures mainly covers following aspects. First, to permit the China branches of foreign banks to apply for custodian licenses for securities investment funds (the fund custodian licenses). Financial indicators, such as net assets, can be calculated according to those of their foreign headquarters. Specific provisions are also laid out to clarify the responsibilities of the foreign bank headquarters and strengthen the risk control arrangements. During implementation, the China subsidiaries of foreign banks apply the same rule with those of branches. Second, to improve supervisory requirements over fund custodian business and adjust the criterion on net assets for market access based on regulatory practice. More diversified administrative regulatory measures are instituted to enhance continuous compliance of fund custodians. Third, to optimize the application and approval process by reducing the application paperwork requirements for fund custodian licenses and allowing application and approval prior to physical establishment. Fourth, to harmonize the criteria for market access and regulatory requirements for commercial banks and other financial institutions by integrating the regulation of fund custodian business of non-bank financial institutions into the Administrative Measures.

After the promulgation and adoption of the Administrative Measures, the CSRC will update the guideline of administrative licensing for fund custodian business accordingly. Qualified financial institutions, including the branches of foreign banks can submit their applications according to relevant laws and regulations. Meanwhile, the CSRC, jointly with the CBIRC will enhance ongoing supervision on fund custodians and fund custodian business, carry on with strengthened law enforcement, and crack down on violations and illegal acts to protect the legitimate rights of investors.

The promulgation of the Administrative Measures marks important progress in the China’s efforts to further open up the securities and futures service sector, following the complete removal of foreign equity ownership limits in securities, futures and fund management companies earlier this year. Against the challenges posted by the pandemic on the global economy and financial markets, the CSRC is even more strongly committed to implementing reform and opening up measures in order to achieve quality development of China’s financial services and capital markets.

[CSRC Decree No.172] Administrative Measures on Custodian Business for Securities Investment Funds