China: China Plans To Further Open Domestic Private Securities Investment Fund Management Business To Foreign-Owned Managers

On June 30, 2016, the Asset Management Association of China ("AMAC") released the Q&A Regarding Registration and Filing of Private Funds (No. 10) ("Q&A No. 10"), which confirmed that both wholly foreign-owned and Sino-foreign-invested joint venture ("JV") private securities investment fund management companies ("PSFMC") are now permitted to register as private securities investment fund managers ("PSFMs") with AMAC. Q&A No. 10 was endorsed by the China Securities Regulatory Commission ("CSRC") on the same day.


Under the Measures for Registrations of Private Investment Fund Managers and Record Filings of Funds (Trial Implementation), in order to carry out fund raising and investment activities, all PSFMCs and PEFMCs (as defined below) have been required to register with AMAC since early 2014. Prior to the release of Q&A No. 10, certain Sino-foreign-invested JV PSFMCs were permitted to register with AMAC as PSFMs. Q&A No. 10 will allow all PSFMCs, regardless of their ownership structures, to register with AMAC as PSFMs once established.

Q&A No. 10 appears to further open the private domestic securities investment fund management business to foreign asset managers and to allow such foreign asset managers engaging in raising and managing private securities investment funds to raise such funds from qualified Chinese investors through private placement and to invest in China's public market. In China, private equity investment funds and private securities investment funds and their respective mangers are treated differently and subject to different regulations under some circumstances. For example, the establishment of PSFMCs is subject to approval of both the CSRC and the Ministry of Commerce ("MOFCOM"). Meanwhile, the establishment of a foreign-invested private equity investment fund management company ("PEFMC") is only subject to MOFCOM's approval.

Under the Catalogue for the Guidance of Foreign Investment Industries (as amended in 2015) ("2015 Catalogue"), jointly promulgated by the National Development and Reform Commission ("NDRC") and MOFCOM, a foreign investor is permitted to hold up to a 49% equity interest in a Sino-foreign-invested PSFMC. The negative lists ("Negative Lists") applicable within the Free Trade Zones in Shanghai, Guangdong, Tianjin and Fujian ("FTZs") have not liberalized the foreign ownership percentage in PSFMCs incorporated in any of the FTZs. However, the 2015 Catalogue does not impose the restriction on foreign ownership in a PEFMC. As a result, such PEFMCs have been formed as wholly foreign-owned enterprises that, in some circumstances, have been seen as consulting-type entities in China in order to advise China-incorporated private equity investment funds, such as RMB funds, in connection with their investment activities.


A. Who can be registered with AMAC?

In accordance with Q&A No. 10, qualified foreign-invested PSFMCs (including both wholly foreign-owned enterprises and Sino-foreign-invested JVs) duly incorporated in China can only carry out the private securities investment fund management business in the PRC after they are registered with AMAC as PSFMs.

In order to register, a PSFMC must satisfy all of the following requirements:

  1. it must be a company incorporated in China;
  2. the foreign shareholder must be a financial institution approved or licensed in a country or region of its domicile, and the securities regulatory authorities of such country or region must have entered into a memorandum of understanding ("MOU") with the CSRC or a CSRC recognized institution to cooperate with each other; and
  3. the registering entity and its foreign owner must not have been subject to any material penalty by any securities regulator or judicial department in the preceding three years.

If a foreign-invested PSFMC has any foreign de facto controller, such foreign de facto controller must also satisfy the requirements listed under (ii) and (iii) above.

B. What should be submitted for the registration?

Q&A No. 10 also provides that, to complete the registration requirements, a foreign-invested PSFMC is required to submit the following information and documents to AMAC:

  1. a copy of its business license and articles of association; a list of its major shareholders, and basic information of its senior management personnel and other information as may be required by AMAC;
  2. an undertaking letter regarding the registration as a PSFM and filing of private securities investment funds confirming that all submitted information and materials are true, accurate and complete, and contain no false statements, misleading representations or material omissions, and undertaking to comply with PRC laws, regulations and self-regulatory rules in relation to private funds; and
  3. a legal opinion on the registerability of the PSFMC as a PSFM duly issued by a qualified PRC law firm and its relevant attorneys at law of such PRC law firm. The legal opinion is required to cover, among other things, the legality of the incorporation and existence of the PSFMC, its business scope, its corporate equity structure and de facto controller, the satisfaction of the requirements and conditions to its business operation, the qualifications of its senior management, and the completeness of its risk management and internal control regulations.

C. How long will the registration process take?

Q&A No. 10 provides that it takes twenty days for AMAC to complete the registration after AMAC accepts all the required documents. As widely understood, currently it takes a very long time for both PSFMCs and PEFMCs to complete their registrations with AMAC. Pending completion of registration, such PSFMCs and PEFMCs would not be able to commence their contemplated fund-raising activities in China. It is not clear that under Q&A No. 10 AMAC aims not only to allow all qualified foreign-invested PSFMCs to register with AMAC but also to accelerate the registration process.

D. What are other major requirements for PSFMs to operate funds?

  1. In accordance with Q&A No. 10, PSFMCs shall make their investment decisions independently in connection with any securities and future transactions and shall not place trading orders through their overseas institutions or systems. However, it remains unclear in practice what benchmark AMAC would apply to decide whether a particular investment decision is independent or not. Precedents in this area of law are still yet to be developed to guide future operation.
  2. Q&A No. 10 further requires that PSFMCs use the proceeds from capital investments and Renminbi amounts converted from any foreign-currency investments in compliance with the relevant provisions issued by China's foreign exchange authorities.


  1. Q&A No. 10 only allows a PSFMC to register with AMAC provided that its foreign shareholder or de facto controller meets the requirements set forth under (ii) and (iii) discussed in Section A above.

    Note that the CSRC has entered into a MOU with the securities regulatory authorities in more than sixty countries or regions. However, the CSRC has not done so with many tax-attractive countries or regions, such as the Cayman Islands and Bermuda. Any PSFMCs whose foreign shareholders or de facto controller is set up in those countries or regions will not be eligible for the registration with AMAC. In addition, given Q&A No. 10 provided no definitions for the term "de facto," in the event that this term was interpreted broadly, such broad interpretation would cause greater uncertainty in practice.
  1. Under the 2015 Catalogue and the Negative Lists, foreign ownership in a PSFMC currently may not exceed 49%. It appears that Q&A No. 10 may allow PSFMCs with any foreign ownership to be registered with AMAC, which implies that a 100% foreign-owned PSFMC is also permitted. However, given the effectiveness of the 2015 Catalogue, it remains unclear whether a wholly foreign-owned PSFMC is permitted to register solely based on Q&A No. 10.

    It is expected that the relevant Chinese government authorities may discuss and coordinate to address the foreign-ownership-restriction issues. In this conjunction, there is no assurance whether and when this issue can be solved.
  1. In reality, the branches of the State Administration for Industry and Commerce ("SAIC") in a number of cities, such as Beijing, Shanghai and Shenzhen, suspended the registration of PEFMCs and PSFMCs as PSFMs earlier this year in response to an overheating fund-raising market. Such suspension has affected the formation of PSFMs invested by Chinese and foreign investors. With the release of Q&A No. 10, it remains unclear when those SAIC branches will resume the registration of PSFMs in their localities.

Q&A No. 10 may bring positive development in the PSFMC area with a desire to attract more qualified private securities investment fund managers and institutional investors, such as private securities investment funds, for China's A-share market. Foreign-invested PSFMCs would be permitted to register with AMAC to carry out their businesses. On the other hand, PSFMs may still face uncertainty as to whether they can set up a wholly owned PSFMC in the near future and whether they can still adopt their preferred offshore corporate structure in certain tax-attractive jurisdictions. Further, it remains to be seen whether the registration can actually be completed within twenty days after AMAC accepts all the required documents as expressly provided in Q&A No. 10.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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.