Comments on the measures for managers of public funds and its supporting rules: promoting diversified opening and promoting high-quality development

Matters:

On May 20, 2022, the CSRC revised the measures for the administration of securities investment fund management companies (hereinafter referred to as the company measures), renamed the measures for the supervision and administration of managers of publicly offered securities investment funds (hereinafter referred to as the managers measures), and officially issued the managers measures and its supporting rules.

The release of the measures for managers and its supporting rules will promote the public fund industry to form a more diversified and dynamic industrial ecological pattern in accordance with the direction of marketization and specialization, through the survival of the fittest and benign competition, and help to cultivate first-class wealth management institutions and attract and retain middle-aged and long-term investors

Phase I funds to promote the high-quality development of the industry.

Main contents:

The measures for managers and its supporting rules improve the regulatory requirements of public fund managers from the whole chain of "access - internal control - operation - Governance - Exit - supervision", highlighting the combination of release and management, mainly including the following five aspects:

First, strengthen the equity management of fund management companies and effectively control the entrance

The measures for managers adjusted the access conditions for shareholders of fund management companies, continued to implement differentiated access requirements for shareholders of fund management companies, improved the negative list for shareholders holding less than 5%, and strengthened the financial robustness requirements for non major shareholders holding more than 5%. Putting forward higher requirements for shareholders will help to further improve corporate governance. At the same time, the measures for managers have moderately improved the qualification conditions of natural person shareholders, put more emphasis on the promoter's ethics, professional reputation and professional competence, and reasonably restrict the equity transfer of major natural person shareholders. In addition, the measures for managers improve the access conditions for overseas shareholders, encourage the use of overseas advanced asset management experience and beneficial business models, and actively introduce high-quality overseas institutions, which will further promote the high-level opening of the industry.

Second, optimize the license access system of public fund managers and expand the team of public fund managers

The measures for managers support qualified professional asset management institutions to apply for public offering fund management qualification, unify the access standards, and moderately relax the restrictions on the number of public offering licenses on the premise of continuing to adhere to the "one participation and one control" policy of fund management companies, allowing professional asset management institutions such as securities asset management companies, insurance asset management companies and bank financial management subsidiaries under the same group to apply for public offering licenses. Moderately relaxing the license access of public funds will promote the emergence of more high-quality fund managers in the industry and promote the formation of an open and orderly competition pattern in the industry.

Third, strive to improve the compliance and risk control ability of institutional entities and consolidate the foundation for high-quality development of the industry

The measures for managers require public fund managers to establish and improve investment management systems and processes, strictly manage the stock in and stock out of securities, reasonably set the authority of investment managers, and establish pre-control, in-process monitoring, post analysis and review mechanisms for transaction instructions. Strengthen the centralized and unified management of fund management companies; At the same time, fund management companies are required to establish a full coverage risk control, compliance management and audit system, and strengthen the management of subsidiaries and branches. Putting forward comprehensive requirements for the compliance and risk control ability of fund companies will help maintain the image and brand of the fund industry and strengthen customer trust, which is the basis for the sustainable development of the public fund industry.

Fourth, strive to improve the governance mechanism of fund management companies and highlight long-term assessment and incentive

The measures for managers requires shareholders holding more than 5% of shares to promise a certain equity lock-in period, which helps to maintain the long-term stability of the equity structure of fund management companies, regulate equity pledge and consolidate the management responsibility of equity affairs. In addition, the measures for managers require the board of directors to conduct a long-term assessment of the management for more than three years. The fund management company should take the long-term investment performance and compliance risk control as an important basis for the assessment of key positions, implement the salary deferral, recourse deduction and bonus follow-up investment system, and prohibit short-term assessment and excessive incentive. The construction of long-term incentive and restraint mechanism will avoid the problems caused by chasing short-term scale benefits and help to promote the formation of market long-term investment concept.

Fifth, support fund management companies to achieve differentiated development on the basis of optimizing and strengthening the main business of public funds

The measures for managers support fund management companies with prominent public offering main business, stable compliance operation and appropriate professional ability to set up professional subsidiaries to specialize in public offering REITs, private equity investment fund management, fund investment consulting, pension financial services and other businesses, which will promote the professional development of industry segments. At the same time, the measures for managers allow public fund managers to implement operation outsourcing, which will support small and medium-sized fund management companies to reduce costs and increase efficiency, and focus on improving the level of investment and research.

Sixth, establish a market-oriented exit mechanism for public fund managers and standardize the risk disposal process

The measures for managers allow fund management companies that fail to operate to voluntarily apply for cancellation of public fund management qualification or realize market-oriented exit through mergers, acquisitions and other means, clarify the types and implementation procedures of risk disposal measures, strengthen the whole process control and responsibilities of all parties, clarify the cooperation obligations of the disposed public fund managers and their shareholders, directors, supervisors and key personnel, and compact the responsibilities of all parties.

Comments:

In recent years, the reform of the capital market has been continuously deepened, the public fund industry has shown a good development trend, the scale of the industry has increased rapidly, the wealth effect has gradually appeared, and the strength of the industry has been significantly enhanced. As an important institutional investor, public funds are playing an increasingly important role in the reform, development and stability of the capital market. From 2011 to 2021, the number of fund companies increased from 66 to 137, the net value of public funds increased from 2.19 trillion yuan to 2.566 billion yuan, and the internal and external environment of the public offering industry also changed greatly. This time, the CSRC further revised and improved the company measures, and issued the manager measures and its supporting rules, which better meet the needs of high-quality development of the industry.

First, the release of the measures for managers and supporting rules is conducive to promoting the differentiated development of the industry as a whole. The measures for managers support fund management companies to achieve differentiated development on the basis of optimizing and strengthening the main business of public funds. From the development history of the public fund industry, whether a fund company becomes a comprehensive large-scale company or a characteristic company is the result of the influence of resource endowment, historical opportunities, corporate strategy and other factors in the environment of full market competition. In the long run, the measures for managers will promote industry institutions to promote the survival of the fittest in the direction of marketization and specialization, form a more diversified, dynamic and resilient industry ecological pattern, and provide investors with more diversified and differentiated products and services.

Second, the release of the measures for managers and supporting rules will help cultivate first-class wealth management institutions. From the perspective of the development process of overseas mature markets, fund companies have walked out of a distinctive development path based on their own talents. After more than ten years of exploration, Chinese fund companies are also developing steadily. The measures for managers improve the conditions for the establishment of fund management companies and shareholders, strive to improve the governance of fund management companies and improve the compliance and risk control ability of public fund managers, which will accelerate the pace of fund companies to become one of the most popular in the world and play a positive leading, demonstration and driving role in the development of the industry.

Third, the release of the measures for managers and supporting rules is committed to improving the medium and long-term capital service level. The measures for managers put forward that long-term investment and rational investment should be adhered to; The board of directors shall pay attention to the long-term investment performance of the fund when assessing the management; Fund management companies should improve the governance structure of subsidiaries and promote the long-term development of subsidiaries. Medium and long-term funds are the booster of the development of the public fund industry and are of great significance to the sustainable and healthy development of the industry. By comprehensively establishing a long-term incentive and restraint mechanism, the measures for managers will attract and retain medium and long-term funds and promote the steady development of the capital market.

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