Xinhu Futures

Measures for the Pilot Program on Asset Management Service of Futures Company

Chapter I General Provisions 

  
Article 1 To methodically carry out the pilot program on the asset management service of futures companies (hereinafter referred to as the “asset management service”), regulate the provision of the asset management service during the period of the pilot program, and protect the lawful rights and interests of investors, these Measures are formulated in accordance with the relevant provisions of the Regulation on the Administration of Futures Trading. 

  
Article 2 The asset management service means that a futures company, after accepting a written authorization from a single client or several specific clients, makes investments with assets entrusted to it by the client or clients, in accordance with these Measures and contracts, and collect charges or remuneration as agreed on under contracts. 

  
Article 3 Futures companies providing the asset management service shall adhere to the principles of fairness, impartiality, honesty and compliance, scrupulously perform their duties, be prudential and diligent, protect the lawful rights and interests of clients, fairly treat all clients, prevent conflicts of interest, forbid any form of tunneling, and maintain the normal order of the futures market. 

Clients shall independently assume investment risks and may not cause damage to the national interest, public interest, and lawful rights and interests of others. 

  
Article 4 The China Securities Regulatory Commission (“CSRC”) and the local CSRC offices shall conduct supervision and administration of the asset management service in accordance with law. 

  
Article 5 The China Futures Association (“CFA”) shall, within its functions, conduct the self-disciplinary management of the asset management service and relevant senior managers and operation personnel in accordance with law. 

Futures exchanges shall, within their functions, conduct the self-disciplinary management of the asset management service in accordance with law. 

The China Futures Margin Monitoring Center (“CFMMC”) shall conduct the monitoring and control of the asset management service in accordance with law. 

  
Chapter II Qualification for Participation in the Pilot Program 

  
Article 6 A futures company which meets all of the following conditions may apply for a qualification for participation in the pilot program on asset management service: 

(1) Its net capital is not less than 500 million yuan. 

(2) Its risk regulation indicators have met the regulatory requirements for six consecutive months before the date of application. 

(3) It is not lower than Grade B of Category II in the last two ratings for categorized supervision. 

(4) It has not received any administrative or criminal punishment in the last three years for any violation of law or regulation in business operations and is not under investigation by competent authorities for any suspicious violation of law or regulation. 

(5) It has not been subject to any regulatory measure taken by the regulatory authority under circumstances as mentioned in Article 59(2) or 60 of the Regulation on the Administration of Futures Trading in the last year. 

(6) It has a feasible implementation plan for the asset management service. 

(7) It has, at a minimum, one senior manager who has five or more years of experience in the futures, securities or fund sector and holds a professional qualification for the futures investment consulting service or the securities investment consulting, securities investment fund or other securities service and has, at a minimum, five operation personnel who have three or more years of experience in futures operations or three or more years of experience in securities, fund and other investment management and hold a professional qualification for the futures investment consulting business, and none of the above-mentioned senior managers and operation personnel has any bad credit record or has received any administrative or criminal punishment in the last three years or is under investigation by competent authorities for any suspicious violation of law or regulation. 

(8) It has independent business premises and facilities meeting the needs for business development. 

(9) It has adequate and effective management rules for the asset management service. 

(10) It meets other conditions as set forth by the CSRC under the principle of prudential supervision. 

  
Article 7 To apply for a qualification for participation in the pilot program on asset management service, a futures company shall submit the following materials: 
(1) A written application for participation in the pilot program on asset management service. 

(2) An implementation plan for the asset management service, which shall cover the orientation of the target markets and target customers, major investment strategies, business development planning, and rules or arrangements for preventing conflicts of interest. 

(3) A resolution of the shareholders’ meeting on the futures company’s application for the qualification for participation in the pilot program on asset management service. 

(4) A photocopy of the Business License for an Enterprise as a Legal Person and a photocopy of the Futures Business Operation Permit, to which the official seal of the company has been affixed. 

(5) The risk regulation statements of the futures company for the six months before the date of application. 

(6) An explanation regarding the futures company’s regulatory compliance in business operations in the last three years. 

(7) The text of the management rules for the asset management service, which shall cover service management, personnel management, business operations, risk control, transaction monitoring, prevention of conflicts of interest, regulatory compliance inspection, and so on. 

(8) A list of senior managers and operation personnel to be engaged in the asset management service, their resumes, relevant office qualifications and professional qualifications, and the credit compliance certificates issued by the company. 

(9) A statement on the relevant business premises and facilities. 

(10) The financial report of the previous year audited by an accounting firm qualified for the relevant securities or futures business; and the audited financial report of the first half of the current year, if the date of application is in the second half of the current year. 

(11) A legal opinion issued by a law firm regarding whether the futures company meets the conditions as set forth in Article 6(4) and (7) of these Measures and whether the resolution of the shareholders’ meeting is lawful. 

(12) Other materials as set forth by the CSRC. 

  
Article 8 Within two months after accepting a futures company’s application for a qualification for participation in the pilot program on asset management service, the CSRC shall make a decision on approval or disapproval. 

Without obtaining a qualification for participation in the pilot program on asset management service, a futures company may not provide any asset management service. 

  
Chapter III Business Rules 

  
Article 9 Clients of the asset management service shall have a relatively strong financial strength and risk tolerance. The initial assets entrusted by a single client may not be less than 1 million yuan. Futures companies may raise the initial entrusted assets requirement. 

  
Article 10 Directors, supervisors, senior managers, and operation personnel of a futures company, as well as their spouses, may not be the clients of the asset management service of the company. 

When a shareholder, the actual controller or an affiliate of a futures company or a parent or child of any of the directors, supervisors, senior managers and operation personnel of the company becomes a client of the asset management service of the company, the company shall, within five working days after entering into an asset management contract with the client, file a relevant report with the local CSRC office and disclose their affiliation or family relationship on the company’s website. 

  
Article 11 Futures companies shall enter into written asset management contracts with clients and, according to such contracts, provide asset management service for clients and assume the fiduciary duties and responsibility for asset management. 

Futures companies shall formulate and execute asset management investment strategies for clients diligently, professionally and in compliance with laws and regulations, manage entrusted assets as agreed on under contracts, and control investment risks. 

  
Article 12 The scope of investment for the asset management service shall include: 

(1) futures, options and other financial derivatives; 

(2) stocks, bonds, securities investment funds, collective asset management plans, central bank bills, short-term financing bills, asset-backed securities, and so on; and 

(3) other investment products recognized by the CSRC. 

The scope of investment for the asset management service shall comply with the provisions of a contract, not exceed the scope in the preceding paragraph, and match a client’s risk perception and tolerance. 

  
Article 13 Futures companies shall maintain the independence of their self-owned assets and the assets entrusted by clients from each other and create separate accounts of assets entrusted by different clients for separate accounting and management. 

To invest in futures products in providing the asset management service, futures companies and clients shall manage, deposit and withdraw entrusted assets according to the relevant provisions on the safe custody of futures margins. 

Where a futures company is involved in any debt dispute with a third party or a futures company is declared bankrupt or is in liquidation, the assets entrusted by clients may not be used to repay the debts of the company and are not the company’s bankruptcy property or liquidation property. 

  
Article 14 Futures companies shall not promote or publicize their asset management service to the general public or solicit clients through television, newspapers, periodicals, radio broadcasting and other public media. 

Futures companies shall not publicize the expected earnings of asset management service or defraud clients by exaggerating their asset management performances and other means. 

  
Article 15 Clients shall, in their real identities, authorize futures companies to conduct asset management, and the sources and purposes of entrusted assets shall comply with laws and regulations. Raising funds from the public in violation of relevant legal provisions shall be prohibited. 

Each client shall issue a written commitment regarding the legality of the sources and purposes of entrusted assets. 

  
Article 16 Futures companies shall fully disclose the risks involved in the asset management service to their clients, introduce and explain the relevant asset management investment strategies and contract terms and conditions, and deliver a risk disclosure letter to clients, who shall personally sign or seal the letter for confirmation. 

  
Article 17 Clients shall have an appropriate understanding of markets and product risks, take the initiate to learn information on the risk-return characteristics of the relevant asset management investment strategies, and conduct self-evaluations in consideration of their respective risk tolerances. 

Futures companies shall prudentially evaluate the eligibility of clients. 

  
Article 18 An asset management contract shall expressly provide that a client shall independently assume investment risks. 

Futures companies shall not promise or guarantee any minimum proceeds from or sharing of losses to entrusted assets to their clients. 

The texts of the commitment letters of clients, risk disclosure letters, and asset management contracts used by futures companies shall include the essential contract clauses developed by the CFA and be filed with the local CSRC offices in a timely manner. 

  
Article 19 To invest in futures products in providing the asset management service, futures companies shall, according to the rules on opening accounts in the futures market, open or cancel the accounts managed for clients (hereinafter referred to as the “futures asset management accounts”), apply for or cancel trading codes, and conduct separate marking and management of futures asset management accounts and their trading codes. 

To invest in non-futures products in providing the asset management service, futures companies shall open or cancel joint accounts or other accounts used for asset management according to the rules on opening accounts in the relevant markets. Within five working days after opening an account, a futures company shall file a relevant report with the CFMMC. 

Before filing a report on an account opened, a futures company may not conduct any asset management transactions for that account. 

  
Article 20 In the asset management contracts, futures companies shall expressly agree with their clients upon matters such as the term of authorization and the manner and time of adding or withdrawing entrusted assets. 

  
Article 21 Futures companies shall provide gain or loss and net value information on clients’ assets to the CFMMC Inquiry System for Investors on a daily basis. 

Futures companies and the CFMMC shall ensure that clients are able to inquire about the gain or loss and net value information on their entrusted assets in a timely manner.  

  
Article 22 Futures companies may agree with clients upon the collection of management fees at a certain percentage and the collection of corresponding remuneration on the basis of asset management performance. 
  
  
Article 23 Futures companies shall expressly agree with clients on a risk alert mechanism, and futures companies shall alert clients to the relevant risks in a timely manner according to the gain or loss status of entrusted assets. 

Futures companies shall expressly agree with clients that when the loss to the entrusted assets reaches a certain percentage of the initial entrusted assets during the term of authorization, futures companies shall inform clients in the manner and time as agreed upon under contracts and clients shall be entitled to an early termination of asset management authorization. 

  
Article 24 Where any material event that may affect the rights and interests of clients, such as a change of investment manager, occurs to a futures company providing the asset management service, the company shall inform clients in the manner and time as agreed upon under contracts, and clients shall be entitled to an early termination of asset management authorization. 

  
Article 25 Where any material event that may affect the normal operation of the asset management service, such as a change of ownership, occurs to the entrusted assets of a client, a futures company shall be entitled to an early termination of asset management authorization as agreed upon under the contract. 

  
Article 26 In the asset management contracts, futures companies shall expressly agree with clients upon the specific causes of termination of asset management authorization, the handling of subsequent matters, the assumption of liability, and other relevant matters. 

In case of termination of any asset management authorization, a futures company shall undergo the following formalities as agreed upon under the contract: 

(1) Settling the relevant expenses and returning the remaining entrusted assets to a client in a timely manner. 

(2) Canceling the futures asset management account in a timely manner. 

(3) Canceling the non-futures investment account in a timely manner. 

  
Chapter IV Rules for Business Management and Risk Control 

  
Article 27 Futures companies shall establish, improve and effectively implement the management rules for the asset management service, strengthen the monitoring of asset management service transactions, prevent business risks, and ensure fair trading. 

  
Article 28 Futures companies shall conduct centralized management of the asset management service, maintain the independence of the personnel, operations and premises of the asset management service from those of other business departments, and establish a Chinese wall system. 

  
Article 29 Futures companies shall effectively implement the rules for the management of asset management operation personnel and for service operations, take effective measures to strengthen the internal supervision, restraint, reward and punishment mechanisms, reinforce the professional ethics of investment managers and relevant asset management personnel, and prevent conflicts of interest and moral risks. 

  
Article 30 Positions such as investment manager, transaction execution and risk control in the asset management service must be independent from each other and held by full-time professionals and may not be concurrently held. 

Futures companies shall file a report on personnel at positions such as investment manager, transaction execution and risk control in the asset management service and their changes with the local CSRC offices within five working days after such personnel assume positions or change. 

  
Article 31 Futures companies shall effectively implement the risk control rules for the asset management service, conduct risk identification and monitoring of the daily transactions in futures asset management accounts and the non-futures investment accounts, and take risk control measures in a timely manner. 

  
Article 32 Futures companies shall effectively implement the transaction monitoring rules for the asset management service, monitor suspicious transactions or unfair trading between futures asset management accounts, between futures asset management accounts and futures brokerage client accounts and between non-futures investment accounts, monitor asset management investment strategies and their implementation as well as positions and their proportions, and report to the local CSRC offices and the CFMMC within five working days after the end of each month. 

  
Article 33 Futures companies and their asset management personnel shall not conduct any unfair trading in the same account or between different accounts for the purpose of earning commissions or transferring gains or losses, damaging the lawful rights and interests of clients. 

  
Article 34 Futures companies shall monitor and analyze the trading occasions and price variances of obverse transactions that occur on the same day, obverse transactions that occur near trading days and reverse transactions between different futures asset management accounts, between futures asset management accounts and futures brokerage client accounts and between non-futures investment accounts to prevent unfair trading and tunneling. 

Futures companies shall strictly forbid reverse transactions on the same day between different futures asset management accounts, between futures asset management accounts and futures brokerage client account and between non-futures investment accounts that may cause unfair trading and tunneling. 

  
Article 35 Under any of the following circumstances, the asset management department of a futures company shall immediately report it to the general manager and the chief risk officer of the company: 

(1) The company’s asset management service is under investigation or risk control measures taken by an exchange or is under investigation by competent authorities. 

(2) A client exercises an early termination of asset management authorization. 

(3) Any other circumstance that may affect the provision of asset management service or affect the rights and interests of clients. 

  
Article 36 The chief risk officer of a futures company shall oversee the formulation and execution of rules related to the asset management service, conduct regular inspections on the regulatory compliance of the asset management service, and perform obligations of urging rectifications and reporting in accordance with law. 

The quarterly and annual reports submitted by the chief risk officer of a futures company to the local CSRC office shall include the regulatory compliance and related inspections regarding the company’s asset management service. 

  
Article 37 Futures companies shall, in accordance with these Measures and the relevant requirements on information disclosure by futures companies, disclose to the public their qualifications for participation in the pilot program on asset management service, professional personnel, major investment strategies, investment orientation and risk characteristics, and other basic information on the website of the CFA.  

  
Chapter V Account Monitoring and Control 

  
Article 38 Futures companies shall submit data of futures asset management accounts to the CFMMC according to the provisions on the safe custody of futures margins. 

Futures companies shall submit the gain or loss, net value and other data of non-futures investment accounts to the CFMMC on a daily basis.  

  
Article 39 The futures asset management accounts of futures companies shall comply with the risk control management provisions and other relevant requirements of futures exchanges. 

  
Article 40 Futures exchanges shall particularly monitor futures companies’ futures asset management accounts and their trading codes and, if discovering that any futures asset management account is involved in any trading that violates law or regulation, immediately handle it and report it to the CSRC according to their functions. 

  
Article 41 The CFMMC shall particularly monitor and control of futures companies’ futures asset management accounts and their trading codes and, if discovering any significant abnormity of any futures asset management account, immediately report it to the CSRC and the local CSRC office according to its functions. 

  
Article 42 Where a local office of the CSRC discovers any violation of law or regulation or any significant abnormity in a futures company’s asset management service, it shall inspect the futures company or take corresponding regulatory measures and report the inspection results or regulatory measures to the CSRC in a timely manner. 

  
Chapter VI Supervision, Administration and Legal Liability 

  
Article 43 Futures companies providing the asset management service shall ensure that their net capital continuously meets the CSRC provisions and requirements on the risk regulatory indicators of futures companies.  

  
Article 44 A futures company shall, according to the prescribed content and format requirements, submit its monthly asset management service reports to the CSRC and the local CSRC office within seven working days after the end of each month. 

A futures company shall submit its annual asset management service report of the previous year to the CSRC and the local CSRC office within three months after the end of each year. 

Periodical reports as mentioned in the preceding two paragraphs shall be signed by the person in charge of asset management service, chief risk officer and general manager of a futures company. 

  
Article 45 Futures companies shall, according to the period of years and requirements as set forth in the Measures for the Administration of Futures Companies, properly preserve the implementation plans, investment strategies, commitment letters of clients, risk disclosure letters, contracts, financial records, transaction records, monitoring records, and other business documentation and information regarding the asset management service. 

  
Article 46 Where any asset management service of a futures company is terminated early, is under investigation or risk control measures taken by an exchange or is under investigation by competent authorities, the futures company shall immediately report it to the CSRC and the local CSRC office. 

  
Article 47 The CSRC and the local CSRC offices may, on a regular or irregular basis, conduct inspections on the asset management service of futures companies. 

  
Article 48 Where a futures company and its operation personnel fail to comply with the provisions of these Measures in their asset management service operations, suspected of violating any law or regulation or causing any potential risk or danger, the CSRC and the local CSRC office shall order them to rectify within a certain time limit and may concurrently take regulatory measures such as holding a regulatory talk or ordering replacement of relevant liable persons and record such measures in their integrity files. 

  
Article 49 Where a futures company fails to complete rectification within the prescribed time limit or falls under any of the following circumstances, the CSRC may suspend it from providing any new asset management service: 

(1) Its risk regulation indicators fail to meet the relevant provisions. 

(2) Its senior managers or operation personnel fail to meet the prescribed requirements. 

(3) It is engaged in the asset management service beyond the scope of investment as provided for by these Measures or as agreed on under a contract. 

(4) Any other circumstance which affects the normal provision of the asset management service. 

After eliminating the above-mentioned circumstances and passing the relevant inspection, a futures company may continue to provide new asset management service. 

  
Article 50 Where a futures company or any of its operation personnel commits any of the following conduct in the asset management service operations, if the circumstances are serious, the CSRC may cancel the company’s qualification for participation in the pilot program on asset management service and impose administrative punishment under Article 70 or 71 of the Regulation on the Administration of Futures Trading; and if any crime is involved, the case shall be transferred to the judicial authority in accordance with law: 

(1) Promoting or publicizing any asset management service to the general public or soliciting clients through public media. 

(2) Defrauding clients by exaggerating asset management performances. 

(3) Accepting initial entrusted assets from a single client which are lower than the minimum requirement in these Measures. 

(4) Knowingly that the funds of a client are raised illegally but still accepting authorization from and providing asset management service for the client. 
  
(5) Accepting authorization from and providing asset management service for clients that fail to issue a written commitment on the legality of the sources and purposes of assets. 

(6) Promising or guaranteeing any minimum proceeds from or sharing of losses to the entrusted assets to clients. 

(7) Conducting unfair trading in the same account or between different accounts for the purpose of earning commissions or transferring gains or losses. 

(8) Improperly taking over or misappropriating assets entrusted by clients. 

(9) Participating in the asset management service of the futures company with such personnel’s own assets or by using the names of others in violation of legal provisions. 

(10) Submitting or providing false account information. 

(11) Other acts in violation of these Measures. 

  
Chapter VII Supplementary Provisions 

  
Article 51 The specific provisions governing futures companies’ provision of asset management service as authorized by several specific clients in Article 2 of these Measures shall be formulated separately by the CSRC. 

  
Article 52 Futures companies engaged in the asset management service shall comply with the relevant laws, regulations and regulatory requirements when investing in non-futures products as described in Article 12.1(2) of these Measures. 

  
Article 53 These Measures come into force on September 1, 2012. 

 

Referred from China Securities Regulatory Commission.
 


Contact Us

Headquarter
Address:
Xinhu Futures Co., Ltd. 36 Floor, InterContinental Business Center No. 100 Yutong Road (No. 500 Hengfeng Road) Shanghai, China    200070
Contact Person: Wang Weijie
(International Business Department)
Tel:
+86-21-2215 5663
Fax:
+86-21-2215 5688
Email:
wangweijie@xhqh.net.cn
Contact Person: Yang Fang
(International Business Department)
Tel:
+86 (21)-2215 5636
Fax:
+86 (21)-2215 5559
Email:
yangfang@xhqh.net.cn
Contact Person: Sun Zhi
(International Business Department)
Tel:
+86 (21)-2215 5617
Fax:
+86 (21)-2215 5559
Email:
sunzhi@xhqh.net.cn