QFII外汇管理重大变革及其影响 | 英文版(下)

(Continued)
Ⅳ、Shortening the Lock-up Period on Investment Principal
The lock-up period on investment principal refers to the period during which the investment principal of a QFII is prohibited from repatriation out of China. Under the Old Rules, pension funds, insurance funds, mutual funds, charity funds, endowment funds, government and monetary authorities as well as for open-ended China funds were subject to three-month lockup period. All other types of QFII assets were subject to a one-year lock-up period. The New Rules no longer distinguish the lock-up period among different types of QFII assets and the new lock-up period for all QFIIs on repatriation of investment principal is 3 months starting from the date on which the cumulative inbound remittance of investment principal by the QFII reaches a total of US$20 million or its equivalent.
Ⅴ、Account Administration
1. Removing the Restrictions on the Number of Accounts
Under the New Rules, a QFII shall open the respective foreign exchange accounts for its proprietary assets, client assets or open-ended funds, and shall open RMB special deposit accounts corresponding to the foreign exchange accounts. Appendix 3 to the New Rules, i.e. the Operating Guidance on Administration of the Domestic Accounts of Qualified Foreign Institutional Investors, further sets out the requirements on the opening and use of the foreign exchange accounts, RMB basic deposit accounts and RMB special deposit accounts.
Following the implementation of the New Rules, previous restrictions on the number of foreign exchange accounts and their corresponding RMB special deposit accounts have been removed. A QFII may, depending on its actual needs, open with its PRC custodian, for each of its open-ended funds and clients, respectively, separate foreign exchange accounts and the corresponding RMB special deposit accounts (including the special deposit accounts for investment in the domestic securities market (the “Special Deposit Accounts for Securities Trading”) and the special deposit accounts for investment in stock index futures (the “Special Deposit Accounts for Futures Trading”), on the premise that the Special Deposit Accounts for Futures Trading shall be one-to-one corresponding to the Special Deposit Account for Securities Trading) for each open-ended fund or each client. It should be noted that, the funds in the accounts for different open-ended funds or for different client assets shall still not be transferred among each other directly.
2. Removing the Minimum Requirement on the Amount Deposited in the RMB Special Deposit Account
Under the Old Rules, a QFII may open no more than 6 RMB special deposit accounts for its client assets for securities trading purpose and the initial amount to be deposited in each account shall be no less than US$20 million or its equivalent. The New Rules not only removed the restriction on the number of accounts to be opened, but also removed the requirement on the minimum initial amount for each RMB special deposit account, to the effect that the initial amount when opening each RMB special deposit account and the balance of such account is allowed to be less than US$20 million.
3. Account Name
The New Rules do not prescribe any mandatory requirement for the naming of QFII accounts. However, pursuant to the CSRC’s Provisions on Issues Relating to the Implementation of the “Administrative Measures for Domestic Securities Investment by Qualified Foreign Institutional Investors”(CSRC Announcement [2012] No.17), where a QFII opens a securities account for its client assets, the account name can be set as “QFII + client", and where a QFII applies for the opening of a securities account for publicly offered funds, insurance funds, pension funds, charity funds, endowment funds, government investment funds and other long-term funds / assets under its management, the account can be in the name of “QFII + fund (or insurance fund, etc.)”. Meanwhile, the detailed rules for implementation of QFII schemes and the guidance on account opening issued by the China Securities Depository and Clearing Corporation Limited require that the name of the securities account shall be consistent with that of the RMB special deposit account. Based on the above requirements, it is suggested that the cash account should be opened in the name of “QFII + Fund” or “QFII + Client”.
It is of vital importance for the independence and effective segregation of the assets of different clients or the assets of different funds to reflect the name of the QFII’s specific client or of the specific open-ended fund managed by the QFII in the name of the corresponding cash accounts and securities accounts. In the event of any legal dispute, the independent accounts opened with clear and definite labeling of a particular fund or client will facilitate the effective identification of the relevant credit and debt of such fund or client, the avoidance of the assets being commingled or the boundary of liabilities becoming blurred, and may possibly also more effectively prevent the assets being encumbered by legal actions (such as seizure and freezing of assets) against the QFII itself or other clients or open-ended funds.
Ⅵ、Facilitating the Administration of Remittance and Foreign Exchange
1. Allowing Daily Remittance and Repatriation for QFII Open-ended Funds
Under the New Rules, inbound and outbound remittances by an open-ended fund may be conducted on a daily basis, as opposed to a weekly basis under the Old Rules. This change greatly increases the flexibility for QFII open-ended funds. QFIIs may adjust the subscription / redemption arrangement accordingly and have this updated in the prospectus or other documents of the open-ended funds.
2. Removing the Requirement for Approval on Principal Repatriation
Under the New Rules, it is no longer required for QFIIs to obtain the SAFE’s prior approval in order to repatriate the investment principal. Rather, QFIIs may directly make an outbound remittance of their investment principal and income with their PRC custodians. QFIIs who intend to repatriate their realized income derived from their non-open-ended funds shall still be required to provide documents such as the special audited financial report, proof of tax payment or tax filing.
The cap on monthly net repatriation (including principal and income) still stands, i.e. a QFII shall not in any month cumulatively repatriate more than 20% of its total onshore assets as at the end of the preceding year. In addition, for an open-ended fund, the cumulative net repatriation in a month shall not exceed 20% of the fund’s total onshore fund assets as at the end of the preceding year.
3. Extending the Preparation Period on Conversion of Foreign Exchange Funds for Investment
Under the New Rules, a QFII may, according to its investment plans, instruct the PRC custodian to convert foreign exchange funds to RMB as required for investment and transfer into the RMB special deposit account 30 business days at most (previously stipulated to be 10 business days under the Old Rules) ahead of the actual investment.
Ⅶ、Reducing the Items that Require Registration of Changes
Pursuant to the New Rules, a QFII shall apply to the SAFE for registration of changes on the following items: (1) changes in material information such as those relating to the name of the QFII or its PRC custodian; (2) changes in product information; and (3) other changes prescribed by the SAFE.
The following changes are no longer required to be registered with the SAFE: (1) changes in the basic information of the responsible person, the major shareholder or the actual controller of the QFII; (2) changes in the QFII’s appointed PRC investment institutions (i.e. brokers) or the relevant material information; (3) changes in the name of accounts or the information relating to the bank with which the accounts are opened; and (4) changes in the prospectus of open-ended China funds.
However, where a QFII or its major shareholder or actual controller has been subject of any major regulatory action by any other regulatory authorities (including overseas regulatory authorities), which may have a material impact on the investment operations of the QFII or may cause relevant business qualifications of the QFII to be suspended or revoked, the QFII’s PRC custodian shall still promptly report the same to the SAFE.
Overall, the significant reform now made to the administration of foreign exchange under the QFII regime has greatly boosted the accessibility and flexibility of QFII operation in China, making the QFII scheme more attractive. The industry generally believes that this is a significant move forward to the prospect of China A-shares becoming included in MSCI’s emerging market indices.