CHINA Law and Practice Contributed by: Alan Du and Yiwei Shi, King & Wood Mallesons
3.3.9 Post-Marketing Ongoing Requirements Public fund managers who have marketed and closed a public fund must perform the following duties: • information disclosure (see 3.1.4 Disclosure Requirements ); • conducting separate management and sepa - rate accounting for different fund assets; • distributing earnings to fund unit-holders promptly; • convening fund unit-holders’ general meet - ings according to the fund contract; and • conducting accounting for the fund and preparing the financial accounting reports, the half-yearly and annual fund reports for the fund, etc. Public funds are subject to stricter reporting requirements than private funds. Public fund managers must publicise quarterly reports, semi-annual reports and annual reports of public funds. In addition, fund managers must publicise the net asset value of the fund and the fund units at least once a week. 3.3.11 Approach of the Regulator The CSRC accepts both telephone and email enquiries from the general public. Face-to-face meetings are generally not available. 3.4 Operational Requirements Restrictions on the Types of Investments for Public Funds Public funds may only invest in listed securities, and investment scope is also restricted based on the type of public fund (see 3.3.1 Regulatory Regime ). 3.3.10 Investor Protection Rules Statutory Reporting Requirements
Asset Protection Each public fund must appoint a bank custo - dian to hold the fund assets. Commercial banks and other financial institutions, including securi - ties companies that have been approved by the CSRC, may serve as the custodian of a public fund. Other Specific Operational Requirements Liquidity risk control Fund managers of open-ended public funds are required to establish and improve an internal liquidity risk-control system, including: • a sophisticated management mechanism; • a standardised business operations process; • an independent and strict supervision system; and • flexible emergency response plans. Specific restrictions include that total investment in liquidity-restricted assets must not exceed 15% of the net asset value of an open-ended public fund. In addition, in 2020 the CSRC issued guidelines for the side pocket mechanism of public funds, for liquidity risk-management purposes; a spe - cial account must be established for assets with high uncertainty in valuation. Borrowing restrictions While borrowing for making an investment is permitted, public funds are subject to certain borrowing restrictions as discussed in 3.5 Fund Finance . Valuation and pricing of assets of public funds The CSRC has published a guiding opinion on public valuation, under which the basic principle is that public fund managers must determine the
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