CHINA Law and Practice Contributed by: Alan Du and Yiwei Shi, King & Wood Mallesons
3.2.2 Legal Structures Used by Fund Managers
• the quarterly reports, semi-annual reports and annual fund reports; • interim reports; • the resolutions of the fund unit-holders’ meet - ing; • major personnel changes of the fund custo - dian or manager; • legal proceedings or arbitration related to fund assets, the fund management or the fund custody; and • other information to be disclosed as required by the CSRC. False records, misleading statements or mate - rial omissions, predictions of investment per - formance and promises regarding income are strictly prohibited. 3.2 Fund Investment 3.2.1 Types of Investors in Retail Funds Subject to fund marketing rules, including the Appropriateness Measures, public funds may be offered to the general public. Based on their investment scope (as further explained in 3.3.1 Regulatory Regime ), public
Based on the list of public fund managers pub - licised by the AMAC, public fund managers are all structured as limited companies in the PRC. 3.2.3 Restrictions on Investors The Appropriateness Measures also apply to public funds. As previously mentioned, investors are split into general investors and professional investors, and general investors can be further classified into five types (C1 to C5), based on their risk tolerances. Fundraisers may not mar - ket a fund to any investor whose risk tolerance is lower than the risk level of the fund without solicitation of the investor. Investors of the low - est risk-tolerance category shall not be accepted to invest in any fund with a risk rating above their risk tolerance unless a special risk warning in writing has been provided. 3.3 Regulatory Environment 3.3.1 Regulatory Regime The Securities Investment Fund Law is the basic law regarding the regulation of retail funds. The CSRC, as the regulator of the public fund indus - try, has accordingly promulgated a series of reg - ulations in relation to the establishment of a fund management company, fund registration, and the operation and management of public funds. A public fund may only invest in listed securities, futures and derivatives, depending on the type of the fund. Except for hybrid funds (ie, funds that can invest in shares, bonds or other funds), the limitations on different types of public funds are as follows: • for share investment funds, 80% or more of the fund assets must be invested in stocks; • for bond funds, 80% or more of the assets must be invested in bonds;
funds can be classified as: • share investment funds; • bond funds; • money market funds; • hybrid funds; and • funds of funds.
Except for low-risk money market funds (which are the most popular for both individual and insti - tutional investors), institutional investors gener - ally prefer bond funds, while individual investors generally prefer hybrid funds (ie, funds that can invest in shares, bonds or other funds) and share investment funds.
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