China: New Funds Law Promulgated by CSRC

Last Updated: 5 January 2004

Written by Elaine Lo (Partner) and Andy Yip (Solicitor)


On 28 October 2003, the Law on Securities Investment Funds ("LSIF") was promulgated by the China Securities Regulatory Commission ("CSRC") with a view to protecting investors, promoting the development of a funds market in the PRC and strengthening the administration of funds in the PRC.

The LSIF, which will come into effect on 1 June 2004, formally acknowledges the function and role of funds, sets out the market entry requirements and liabilities of fund administrators and fund trustees and specifies the rights of investors.

Full Update

A. Types of Funds

The LSIF permits the establishment of closed-ended and open-ended funds as well as other types of funds.

B. Qualifications of the Fund Administrator

A fund administrator must be a fund management company legally established in the PRC. In order to qualify as a fund administrator, the fund management company is required to undergo an examination and to obtain approval from the CSRC and must fulfil the following requirements:

  1. its Articles of Association must comply with the provisions of the LSIF and the PRC Company Law;
  2. its paid-up registered capital must not be less than RMB 100 million;
  3. its major shareholder(s) must have a good record in securities operation, investment and consultancy services, trust asset management or other financial asset management, enjoy a good reputation without any record of violations of law in the 3 preceding years before its application, and shall have a registered capital of not less than RMB 300 million;
  4. it must have an adequate number of qualified fund management personnel as required by law;
  5. it must have business premises, safety precautionary facilities and other related facilities for operating fund management business that are up to standard;
  6. it must have sound internal audit and supervisory systems and risk management system; and
  7. it must also comply with other laws and regulations and other conditions as may be required by CSRC.

C. Qualifications of the Fund Trustee

A fund trustee must be a commercial bank established in accordance with law which is qualified to engage in fund entrustment business. The commercial bank is required to undergo examination and approval by CSRC and must fulfil the following requirements:

  1. the amount of its net assets and capital adequacy ratio must meet with the requirements stipulated by the relevant regulations;
  2. it must have a special fund entrustment department;
  3. it must have an adequate number of qualified fund management personnel as required by law;
  4. it must be able to safely preserve the fund assets;
  5. it must possess safe and efficient systems to settle accounts and complete business transactions;
  6. it must have business premises, safety precautionary facilities and other related facilities for operating a fund entrustment business that are up to standard;
  7. it must have sound internal audit and supervisory systems and risk management systems; and
  8. it must comply with other laws and regulations and other conditions as may be required by CSRC and the China Banking Regulatory Commission.

D. Investor Rights

Investors have the right to:

  1. share in profits arising from the fund's assets;
  2. (b) participate in the distribution of surplus fund assets once the fund accounts have been settled;
  3. transfer or redeem their share of funds;
  4. request for a meeting of the fund investors to be convened;
  5. exercise voting rights on matters discussed at any meeting of fund investors;
  6. examine or make copies of any publicly disclosed information of the fund;
  7. commence legal proceedings against the fund administrator, fund trustee and the fund offering institutions; and
  8. exercise any other rights stipulated in the fund documentation.

E. Operation of the Fund

Matters such as the rights and obligations of the fund administrators, fund trustees and individual investors, the rules and procedures of meetings and the settlement of funds should all be included in the fund documentation. Detailed requirements for making amendments to, and for the termination of funds contracts are provided in the LSIF. Other matters such as the collection of funds, purchase and redemption of fund units as well as information disclosure requirements are also contained in the LSIF.

F. Penalties for Violations

Detailed provisions on penalties and fines are contained in the LSIF.

Those who misuse client funds or illegally launch investment funds will face both administrative punishment as well as criminal charges.

The original email legal update is copyright Johnson Stokes & Master at the date written first above. All rights reserved. This publication provides information and comments on legal issues and developments of interest to our clients and friends. The foregoing is intended to provide a general guide to the subject matter and is not intended to provide legal advice or a substitute for specific advice concerning individual situations. Readers should seek legal advice before taking any action with respect to the matters discussed herein. Please also read the JSM legal publications Disclaimer.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.