On 31 May 2008, China Securities Regulatory Commission (CSRC) released the Implementing Rules for Directional Asset Management by Securities Companies (Trial) (the “Rules”), which is scheduled to take effect on 1 July 2008.
The Rules stipulate that securities companies must obtain the qualifications for conducting the business of directional asset management. They should also establish systems for risk management and internal control. Investment risks should be undertaken by the customers themselves – securities companies should not make any representations to their customers as to no-loss or minimum return. The range of investments of directional asset management includes shares, bonds, securities investment funds, central bank bills, short-term financing bonds, asset-backed securities, financial derivatives, and other varieties of investments approved by CSRC.
The Rules also requires legal entities or other organisations which participate in the business of directional asset management using capital which has been raised from various sources to provide proof to the securities companies to show that such capital was raised in accordance with the law; otherwise, the securities companies shall not conduct directional asset management for them.
For more information, please refer to CSRC Circular No. 25 of 2008 at http://www.gov.cn/gzdt/2008-05/31/content_1001280.htm