On 25 December 2019, BEA Union Investment Management (Shenzhen) Limited ("BUIM"),which is located in the Qianhai SZ-HK Fund Town, completed its registration with the Asset Management Association of China ("AMAC")as a wholly foreign owned enterprise ("WFOE")registered as a private securities investment fund manager ("WFOEPFM"), the first case of its kind in Shenzhen. Apart from the "China (Shanghai)Pilot Free Trade Zone", with the case of BUIM set as a precedent, it makes Qianhai the second free trade zone in China in which foreign asset management institutions will be able to establish their wholly owned subsidiaries onshore.
受限于深圳此前对涉及"投资管理"的公司的注册限制，截止目前东亚联丰是华南首家且唯一WFOEPFM，其他22家WFOEPFM均注册在上海。笔者从相关主管部门工作人员处了解到，鉴于2019年 7月 20日国务院金融稳定发展委员会办公室《关于进一步扩大金融业对外开放的有关举措》确定将原定于2021年取消证券公司、基金管理公司和期货公司外资股比限制的时点提前到2020年，后中国证券监督管理委员会（简称"证监会"）在2019年 10月 11日新闻发布会上宣布自2020年4月1日起在全国范围内取消基金管理公司外资股比限制，自2020年12月1日起在全国范围内取消证券公司外资股比限制；为响应国务院和证监会的要求，深圳市即将出台WFOEPFM落地深圳的政策，且在遵循证监会和基金业协会有关规定的前提下，或将不设置额外外资准入门槛，仅要求就限期完成在基金业协会的登记并开展业务作出承诺。如此，则WFOEPFM落地深圳将十分便捷。
Given the restrictions relating to the establishment of "investment management company" in Shenzhen, BUIM is the first and the only WFOE PFM established in south China region to date, whereas all the other 22 WFOE PFMs are all established and registered in Shanghai. According to the"Measures for Further Opening Up the Financial Sector" issue don 20 July 2019 by the "State Council's Office of Financial Stability and Development Committee", the timeline for up lifting the foreign capital ratio restrictions in securities houses, fund management companies and futures companies originally scheduled in2021 is amended and moved forward to 2020. Later on 11 October 2019,China Securities Regulatory Commission ("CSRC")announced in a press release that foreignDecember 2020. With capital ratio restrictions for fund management companies would be removed nationwide since 1April 2020, and foreign capital ratio restrictions for securities houses would be removed nationwide since 1 December 2020. With the above backdrop and based on the author's understanding from certain officers of the relevant governing authorities, in response to the measures promulgated by the State Council and CSRC, new policies will be adopted and implemented in Shenzhen relating to the establishment of WFOE PFM such that conditional upon compliance with the requirements of CSRC and AMAC, the only requirement would be an undertaking from the applicant(s) to complete registration with AMAC and commence business within a stipulated timeframe and apart from these, there is no other criteria or additional thresholds to be satisfied. In this regard, setting up WFOE PFM in Shenzhen will be just an easy and swift task.
As for Shenzhen, given the quantum of assets managed by the fund industry in Shenzhen is next to that of Beijing and Shanghai, coupled with other factors such as in possession of a leading sense of innovation, located in a world class and first rated bay area with certain unique geographical advantages of its own, as well as supports from numerous policies in parallel from the government, it is anticipated that Shenzhen will become anew window and highland for WFOE PFM to make their investments in China.
Based on the "Law on Securities Investment Funds",the "Interim Measures for the Supervision and Administration of Private Investment Funds",the "Measures for the Registration of Private Investment Fund Managers and the Record-filing of Funds (for Trial Implementation)"issued by AMAC, the "Q&As Relating to Registration and Filing of Private Investment Funds (X)("Q&As X")"issued by AMAC, the "Statement on Registration of WFOE and JV PFM as Private Investment Funds Manager" ("Statement of WFOE PFM Registration")issued by AMAC, this article will introduce some of the current rules and regulations in respect of WFOE PFM at national level, and we will also pay attention to future WFOE PFM policies in Shenzhen.
Definition of WFOE PFM
According to the "Law on Securities Investment Funds" and the "Q&As X",WFOE PFM refers to those funds managers carrying on the business of private securities funds management including trading of securities in secondary market in China, whereby their registration with AMAC are either in the form of WFOEs or foreign joint venture corporations and they will establish onshore funds through non-public offering or subscription of equity. It should be noted that according to "Q&As X", WFOE PFM should be incorporated in the form of a corporation and any application to constitute the same in the form of partnership, like those adopted by other private equity fund managers, is not allowed.
Shareholder(s) of WFOE PFM
According to the "Q&As X" and the"Statement of WFOEPFM Registration",overseas shareholder(s) and overseas ultimate beneficial owner(s) of WFOE PFM shall meet the following conditions:
being a financial institution approved or authorized by the financial regulatory authorities of its residing country or region;
a memorandum of cooperation and understanding in relation to securities regulations and enforcements("MOU")having been entered into between such financial regulatory authorities with CSRC or other institutions accepted by CSRC;
no material penalties having been made against it/them by the applicable regulatory authorities or justice department for the past three years.
2019年12月，证监会已经与64个国家或地区的金融监管部门签署了合作谅解备忘录 2，即意味着WFOEPFM的境外股东可以来自该等国家或地区。除香港特别行政区、台湾地区外，还包括此前广受关注的开曼群岛，此外还包括英国、美国、加拿大、东盟多国、欧盟多国，覆盖当今世界主要经济体 3。但截至目前，百慕大群岛、英属维尔京群岛尚未能和证监会达成相关谅解备忘录。
As at December 2019, it is noted that CSRC has already signed such MOUs with different financial regulatory authorities in 64 countries or regions. As a result of which, overseas shareholder(s) of WFOE PFM may be coming from these64 countries or regions which include major economic hubs and regions such as Hong Kong, Taiwan, Cayman Islands, United Kingdom, United States, Canada, and a number of countries from the ASEAN and the European Union. However, no MOU has yet been signed between CSRC and the authorities of Bermuda or British Virgin Islands up to date.
Establishment of WFOE PFM with the Administration for Market Regulation
For WFOE PFM should be a WFOE or a foreign joint venture corporation, in addition to the pre-approval requirements in relation to its establishment in Shenzhen (which will be subject to further policy clarifications), certain application steps, process and important points-to-note are summarized below:
apply for pre-approval of name :for corporate name with wordings and descriptions of "investment management" and "fund management", it is a requirement to make application for the use of "special corporate name" and obtain pre-approval of name;
submit incorporation materials online through the website of Guangdong administrative services;
submit incorporation materials through
collect business license(s);
5.通过企业登记系统 4以及企业信用信息公示系统 5向商务主管部门报送外商投资信息。
report the inbound or foreign direct investment information to the governing departments of commerce through the use of "Corporate Record-filing System" and"Enterprise Credit Information Publicity System".
Following its incorporation and registration with the relevant governing departments, the next step would be for WFOE PFM to complete its registration as "private fund manager" with AMAC. It is therefore necessary to make sure that those senior management (including legal representative / executive partner (designated representative), general manager, deputy general manager, compliance / risk controller) of WFOE PFM are duly qualified and have professional ethics and integrity as well as necessary skills and competence to carry out fund related business. Separately, foreign senior management and investment managers of WFOE PFM may apply for the practitioners' examinations arranged and organized by AMAC in English in order to obtain relevant qualifications for carrying out fund business onshore.
Registration and/orRecord-Filing of WFOE PFM
The required registration process and procedure of WFOE PFM with AMAC after its incorporation are summarized as follows:
engage a PRC law firm to conduct legal due diligence against WFOE PFM and issue a PRC legal opinion with respect to its registration in accordance with PRC law and the requirements of AMAC;
through the "Asset Management Business Electronic Registration System"("AMBERS")operated by AMAC, submit information and materials in accordance with the requirements and instructions as directed by the system, and upload materials including the PRC legal opinion and undertaking letter;
3.完成在基金业协会的私募基金管理人登记后，于 10 个工作日内主动与所属证监局取得联系（深圳市证监局指定的信息填报网址是https://pf.szama.org）；
after successful registration of WFOE PFM with AMAC, contact the regulatory authorities governing securities ("Shenzhen Securities Regulatory Bureau", and the designated address for information submission ishttps://pf.szama.org) within 10 business days;
arrange record-filing of the first fund product within 6 months of registration of WFOE PFM(non-compliance of this might result in cancellation of fund manager qualification), and submit record-filing application for fund related products to AMAC through the AMBERS within 20 business days following completion of any fund raising activity; and
perform and discharge the duties relating to the quarterly reporting, annual reporting and material information reporting on the part of WFOE PFM through the AMBERS and the "Private Fund Information Disclosure and Backup System".
Permissible Scope of Investments of WFOE PFM
For private securities investment funds established or managed by WFOE PFM, the permissible scope of investments mainly include stocks, bonds, future contracts, option contracts, equity of securities funds and other instruments recognized by CSRC such as:
private securities funds: mainly invest in public trading stocks of public listed companies (including Hong Kong Stock Connect), bonds, futures, options, fund units and other securities and derivatives as directed by CSRC;
private securities FOF: mainly invest in private funds focusing on securities, trusts, asset management plans offered by securities houses, discretionary managed funds and other asset management instruments;
In addition, WFOE PFM is allowed to engage in the following businesses:
act as investment advisor to the asset management plans offered by securities and futures institutions;
manage charitable assets entrusted by charitable organizations;
participate in "China Interbank Bond Market" with authorization from AMAC in accordance with the "Letter of No Objection to Participate in China Interbank Bond Market" issued by AMAC.
For WFOE PFM which involves foreign investments, the business of WFOE PFM shall satisfy additional requirements as follows:
the renminbi reserves of WFOE PFM from its capital and foreign exchange shall be used in accordance with rules of the "State Administration of Foreign Exchange";
unless otherwise directed by CSRC, all investments decisions in relation to onshore securities or futures transactions shall be given in China and no transaction instructions shall be made by or received from any offshore institution or through any offshore system.
Permission for WFOE PFM to change its nature of business
Following registration as a private securities fund manager, WFOE PFM may apply for a change of its business according to its business needs:
（1）根据基金业协会《私募基金登记备案相关问题解答（十五）》 10，WFOE PFM满足"实际控制人"、"股权稳定性"及"高级管理人员"特殊要求的，还可申请变更登记为私募资产配置基金管理人，或者亦可由其股东或实际控制人另外新设一家公司并登记为私募资产配置基金管理人(投资业务可涵盖未上市股权投资、证券投资等)。
according to the "Q&As Relating to Registration and Filing of Private Investment Funds (XV)"issued by AMAC, conditional upon satisfaction of certain requirements in relation to "de factor controller", "shareholding or ownership stability" and "senior management", WFOE PFM may apply for a change of its business to private asset-allocation fund manager; or separately, the shareholder(s) or de facto controller(s)of WFOE PFM may set up another separate entity to make application for registration as a private asset-allocation fund manager (for which, the investment scope may cover pre-listing securities and other securities investments); and
subject to compliance with applicable laws and regulations, WFOE PFM may apply to commence public equity fund management business to cope with its business expansion and needs in China.
It is widely expected to see Shenzhen will act in a proactive manner in response to the measures promulgated by the State Council and CSRC, and implement policies to facilitate local establishment and future business of WFOE PFM in Shenzhen, with the ultimate aims of further opening up, diversifying and enhancing the competitiveness of the financial market of Shenzhen.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.