Order of the President of the People's Republic of China No.9The Law of the People's Republic of China on Securities InvestmentFund, which was adopted at the fifth meeting of the StandingCommittee of the Tenth National People's Congress on October 28,2003, is hereby promulgated and shall take effect as of June 1,2004.
Chapter I General Provisions
Article 1 The present Law is enacted with a view to regulatingthe activities concerning securities investment fund, to protectthe legitimate rights and interests of the investors and otherrelevant parties, and to promote the healthy development ofsecurities investment fund and securities market.
Article 2 The present Law shall apply to the securitiesinvestment activities conducted through the method of portfolio andthrough public offering of fund shares to raise securitiesinvestment fund (hereinafter referred to as fund), which is managedby fund managers and entrusted to fund trustees for the benefits ofthe fund share holders; the matters not covered by the present Lawshall be governed by the Trust Law of the People's Republic ofChina, the Securities Law of the People's Republic of China, andother relevant laws and administrative regulations.
Article 3 The rights and obligations of the fund managers, fundtrustees and fund share holders shall be stipulated in the fundcontracts in accordance with the present Law.
The fund managers and fund trustees shall perform the duties oftrusteeship in accordance with the present Law and the fundcontract. A holder of fund shares shall enjoy the benefits and bearthe risks to the extent of the fund shares it holds.
Article 4 Those engaging in the activities involving securitiesinvestment fund shall adhere to the principles of free will,fairness and good faith, and may not impair the state and public interests.
Article 5 A fund contract shall stipulate the operation methodof the fund. A fund can be operated in a closed, open, or any otherway.
A fund operated in a closed way (hereinafter referred to asclosed fund) refers to the fund of which the ratified total fundshares remains fixed during the valid term of the fund contract andof which the fund shares can be traded on the securities exchangesestablished according to law, but can not be redeemed by the fundshare holders through application.
A fund operated in an open way (hereinafter referred to as openfund) refers to the fund of which the total fund shares are unfixedand of which the fund shares may be subscribed to or redeemed atthe time and place stipulated in the fund contract.
The methods of offering, trading, subscription and redemption ofthe fund shares of other funds operated through other methods shallbe separately formulated by the State Council.
Article 6 Fund property shall be independent from the propertyowned by the fund manager and fund trustee. The fund manager andfund trustee may not attribute any of the fund property into theirown property.
The property and benefits obtained by the fund manager and fundtrustee as a result of the management, utilization or any other useof the fund shall be included into the fund property.
Where the fund manager or fund trustee goes into liquidation asa result of dissolution, cancellation, or declared bankruptcyaccording to law, the fund property shall not be taken as theirliquidation property.
Article 7 The credit rights of fund property may not be set offagainst the debts of the property owned by the fund manager andfund trustee; and the credit rights and debts of different fundproperties may not be set off against each other.
Article 8 The debts not arising out of the fund property may notbe enforced against such fund property.
Article 9 The fund manager and fund trustee shall, in managingand utilizing the fund property, devote themselves to their dutiesand perform the obligations of good faith, prudence anddiligence.
Fund practitioners shall have obtained the qualifications forpractice relating to funds, and shall abide by the laws,administrative regulations, professional ethics, and code ofconduct.
Article 10 Fund managers, fund trustees and fund share offeringinstitutions may establish trade associations to strengthenself-regulation, coordinate trade relationship, provide tradeservices, and promote the development of the trade.
Article 11 The securities regulatory department under the StateCouncil shall supervise and regulate the activities concerningsecurities investment fund according to law.
Chapter II Fund Managers
Article 12 Fund managers shall be assumed by the fund managementcompanies established according to law.To be a fund manager, theratification of the securities regulatory department under theState Council is required.
Article 13 For establishment of a fund management company, thefollowing conditions shall be satisfied and the approval of thesecurities regulatory department under the State Council isrequired:
1) Having the articles of association which are in conformitywith the present Law and the Company Law of the People's Republic of China;
2) Having a registered capital of no less than 100 million RMBand all of the capital being paid-in monetary capital;
3) Principal shareholders having good business performance and public reputation in the securities business, securities investmentconsultation, trust assets management or other financial assetsmanagement, having no record of violation of law within the last 3years, and having a registered capital of no less than 300 millionRMB;
4) The number of persons with fund practice qualification reachingthe statutory requirement;
5) Having business sites, security facilities and otherfacilities relating to fund management business that comply withthe requirements;
6) Having sound internal auditing and monitoring system and riskcontrol system;
7) Other conditions provided for by laws and administrativeregulations and those provided for by the securities regulatorydepartment under the State Council and approved by the StateCouncil.
Article 14 The securities regulatory department under the StateCouncil shall, within 6 months from accepting the application forestablishment of a fund management company, make the examinationpursuant to the conditions specified in Article 13 hereof and theprinciple of prudent regulation, make the decision whether to grantthe approval or not, and notify the applicant, and shall explainthe reasons if no approval is granted. Where a fund managementcompany is to establish any branch, modify its articles ofassociation, or alter any other major matters, it shall apply tothe securities regulatory department under the State Council forapproval. The securities regulatory department under the StateCouncil shall, within 60 days from the day of accepting theapplication, make the decision whether to grant approval or not,and notify the applicant, and shall explain the reasons if noapproval is granted.
Article 15 None of the following personnel may be a securitiespractitioner of a fund manager:
1) Those being given criminal penalties for the crime of briberyand embezzlement, malfeasance, or encroachment of property, or thecrime of undermining the socialist market economic order;
2) The directors, supervisors, factory directors, mangers andother senior executives who are personally liable for thebankruptcy and liquidation due to poor management or the revocationof business license due to violation of law of the companies andenterprises in which they hold office, provided that it has beenless than 5 years since the day of the end of the bankruptcyliquidation or of the revocation of business license;
3) Those with large amount of outstanding personal debts;
4) The practitioners of fund managers, fund trustees, securitiesexchanges, securities companies, securities registration andsettlement institutions, futures exchanges, futures brokeragecompanies and other institutions, and the state functionaries thathave been dismissed due to violations of law;
5) The lawyers, certified accountants, practitioners of assetsevaluation institutions and assets verification institutions, andpractitioners of investment consultation institutions whosepractice licenses have been revoked or who have been disqualifieddue to violations of law;
6) Other personnel that may not engage in the fund business asprovided for by any law or administrative regulation.
Article 16 The managers and other senior managerial personnel ofa fund manager shall be familiar with the laws and administrativeregulations concerning securities investment, have thequalification for fund practice, and have worked in the fieldrelevant to the position they hold for more than 3 years.
Article 17 The selection or change of the managers and othersenior managerial personnel of a fund manager shall be submitted tothe securities regulatory department under the State Council forexamination in accordance with the conditions for holding suchoffice provided for by the present Law and other relevant laws andadministrative regulations.
Article 18 The directors, supervisors, managers and otherpractitioners of a fund manager may not hold any position in thefund trustee or other fund managers, and may not conduct anysecurities transactions and other activities that impair the fundproperty and the interests of the fund share holders.
Article 19 A fund manager shall perform the followingduties:
1) Raising the fund according to law and handling or entrustingother institutions recognized by the securities regulatorydepartment under the State Council to handle the offering,subscription, redemption and registration of fund shares;
2) Making fund records;
3) Applying separate management and separate account books todifferent fund properties it manages to make securitiesinvestment;
4) Determining the scheme on distribution of fund proceedsaccording to the stipulations of the fund contract and distributingprofits to the holders of fund shares in good time;
5) Making fund accounting and preparing the fund financialaccounting report;
6) Preparing midterm and annual fund reports;
7) Calculating and publicizing the net value of the fund assetsand determining the prices for subscription and redemption of thefund shares;
8) Handling the relevant information disclosures related to themanagement of the fund property;
9) Convening the fund share holders'' meeting;
10) Keeping the records, account books, statements and otherrelevant materials of the fund property management;
11) Exercising litigation rights or carrying out other legalaction in the name of the fund manager for the interests of thefund share holders;
12) Other duties provided for by the securities regulatorydepartment under the State Council.
Article 20 A fund manager may not conduct any of the followingacts:
1) Mixing its own property or the property of others with thefund property to make securities investment;
2) Treating different fund properties it manages unfairly;
3) Seeking benefits for any third party other than the fundshare holders by using the fund property;
4) Unlawfully promising the fund share holders to make benefitsor bear losses;
5) Any other acts prohibited by the securities regulatorydepartment under the State Council in accordance with the relevantprovisions of the laws and administrative regulations.
Article 21 With respect to a fund manager under any of thefollowing circumstances, the securities regulatory department underthe State Council shall, according to its powers, order that fundmanager to make rectification or disqualify it as a fundmanager:
1) Having committed any serious violations of laws or rules;
2) No longer meeting the conditions provided for in Article 13hereof;
3) Other circumstances provided for by laws and administrativeregulations.
Article 22 Under any of the following circumstances, the dutiesof a fund manager shall terminate:
1) Being disqualified for fund management;
2) Being dismissed by the fund share holders'' meeting;
3) Being dissolved, or cancelled, or declared bankruptcyaccording to law;
4) Other circumstances stipulated in the fund contract.
Article 23 Where the duties of a fund manager terminate, thefund share holders'' meeting shall appoint a new fund managerwithin 6 months; before the appointment of the new fund manager,the securities regulatory department under the State Council shalldesignate a temporary fund manager.
A fund manager shall, upon termination of its duties, keep ingood conditions the materials of fund management and process theformalities for handover of the business in good time, the new fundmanger or temporary fund manager shall take over the business ingood time.
Article 24 A fund manager shall, upon termination of its duties,retain an accounting firm to audit the fund property, publicize theauditing results and put on record with the securities regulatorydepartment under the State Council.
Chapter III Fund Trustees
Article 25 Fund trustee shall be assumed by a commercial bankwhich was established according to law and has obtained thequalification for fund trust.
Article 26 To apply for the qualification for fund trust, acommercial bank shall satisfy the following conditions and beratified by the securities regulatory department and the bankingregulatory department under the State Council:
1) Its net assets and capital adequacy complying with therelevant provisions;
2) Having set up a specialized department of fund trust;
3) The number of the full-time personnel with fund practicequalification reaching the statutory requirement;
4) Having the conditions for safe keeping of the fund property;
5) Having safe and high efficient clearing and settlementsystem;
6) Having business sites, security facilities and otherfacilities relating to fund trust business that meet therequirement;
7) Having sound internal auditing and monitoring system and riskcontrol system;
8) Satisfying other conditions provided for by laws andadministrative regulations and the conditions provided for by thesecurities and banking regulatory departments under the StateCouncil and approved by the State Council.
Article 27 Articles 15 and 18 shall apply to the practitionersof the specialized fund trust department of a fund trustee.
Articles 16 and 17 shall apply to the managers and other seniormanagerial personnel of the specialized fund trust department of afund trustee.
Article 28 A fund trustee and a fund manager may not be the sameparty, and may not make capital contribution to or hold the sharesof each other.
Article 29 A fund trustee shall perform the followingduties:
1) Keeping the fund property safely;
2) Opening capital accounts and securities accounts of the fundproperty pursuant to the provisions;
3) Setting up separate accounts for different fund propertiesunder its trust and ensuring the completeness and independence ofthe fund properties;
4) Keeping the records, account books, statements and otherrelevant materials of the fund trust business;
5) Handling the clearing and settlement at the investment ordersof the fund manager pursuant to the stipulations of the fundcontract;
6) Handling the information disclosures relating to the fundtrust business activities;
7) Presenting opinions on the fund financial accounting reportand the midterm and annual fund reports;
8) Checking and examining the net value of the fund assets andthe subscription and redemption prices of the fund sharescalculated by the fund manager;
9) Convening the fund share holders'' meeting pursuant to theprovisions;
10) Supervising the investment operations of the fund managerpursuant to the provisions;
11) Other duties provided for by the securities regulatorydepartment under the State Council.
Article 30 Where a fund trustee finds out that any investmentorder of a fund manager is in violation of any of the laws,administrative regulations or other relevant provisions, or thestipulations of the fund contract, it shall refuse to execute suchorder, notify the fund manager immediately and report to thesecurities regulatory department under the State Council in goodtime.
Where a fund trustee finds out that any investment order of afund manager which has taken effect according to the transactionprocedures is in violation of the laws, administrative regulationsor other relevant provisions, or the stipulations of the fundcontract, it shall notify the fund manager immediately and reportto the securities regulatory department under the State Council ingood time.
Article 31 The provisions of Article 20 hereof shall apply tofund trustees.
Article 32 With respect to a fund trustee under any of thefollowing circumstances, the securities and banking regulatorydepartments under the State Council shall, according to theirpowers, order it to make rectification or disqualify it as a fundtrustee:
1) Having committed any serious violation of laws and rules;
2) No longer meeting the conditions provided for in Article 26hereof;
3) Other circumstances provided for by laws and administrativeregulations.
Article 33 The duties of a fund trustee shall be terminatedunder any of the following circumstances:
1) Being disqualified as a fund trustee;
2) Being dismissed by the fund share holders'' meeting;
3) Being dissolved, cancelled, or declared bankruptcy accordingto law; or
4) Other circumstances stipulated in the fund contract.
Article 34 Upon termination of the duties of a fund trustee, thefund share holders'' meeting shall appoint a new fund trusteewithin 6 months; and before the appointment of the new fundtrustee, the securities regulatory department under the StateCouncil shall designate a temporary fund trustee.
A fund trustee shall, upon termination of its duties, keep ingood conditions the fund property and fund trust business materialsand process the formalities for handover of the property andbusiness in good time, the new fund trustee or temporary fundtrustee shall take over the property and business in goodtime.
Article 35 A fund trustee shall, upon termination of its duties,retain an accounting firm to audit its fund property pursuant tothe provisions, publicize the auditing results, and report to thesecurities regulatory department under the State Council forarchival purposes at the same time.
Chapter IV Raising of Fund
Article 36 A fund manager shall, when offering fund shares andraising fund pursuant hereto, submit the following documents to andget ratification from the securities regulatory department underthe State Council:
1) An application report;
2) A draft fund contract;
3) A draft fund trust agreement;
4) A draft prospectus;
5) Qualification certificates of the fund manager and fundtrustee;
6) Financial accounting reports, which have been audited byaccounting firms, of the fund managers and fund trustees of thelast 3 years or since their establishment;
7) Letters of legal opinion issued by law firms; and
8) Other documents to be submitted as provided for by thesecurities regulatory department under the State Council.
Article 37 A fund contract shall include the followingcontents:
1) Purpose for raising the fund and the name of the fund;
2) Names and domiciles of the fund manager and fund trustee;
3) Method of fund operation;
4) Total fund shares and the valid term of the fund contract inthe case of a closed fund, or the minimum total shares to be raisedin the case of an open fund;
5) Principles for determining the date of offering of fundshares, the prices and expenses;
6) Rights and obligations of the fund share holders, fundmanager and fund trustee;
7) Procedures and rules for the convening of, and deliberationand voting on the fund share holders'meeting;
8) The procedures, time and place of the offering, trading,subscription and redemption of fund shares, the calculation methodof expenses, and the time and method of payment of redemptionprice;
9) Principles for the distribution of fund proceeds and themethod of execution of such principles;
10) Methods of drawing and paying and proportions of theadministrative fees and trust fees as the remuneration of the fundmanager and fund trustee;
11) Methods of drawing and paying other expenses relating to themanagement and utilization of fund property;
12) Directions of and restrictions on investment of fundproperty;
13) Calculation method and publicizing method of the net valuethe fund assets;
14) Methods of handling where the fund raised fails to meet thestatutory requirements;
15) Causes and procedures for avoidance and termination of thefund contract, as well as the liquidation method of the fundproperty;
16) Dispute settlement methods;
17) Other matters agreed upon by the parties.
Article 38 The prospectus of a fund shall include the followingcontents:
1) Name of the ratification document for the application forfund raising and the date of ratification;
2) Basic information of the fund manager and fund trustee;
3) Summary of the fund contract and fund trust agreement;
4) Date of offering, prices, expenses, and period of offering ofthe fund shares;
5) Method of offering the fund shares and the names of theoffering institution and registration institution;
6) Names and domiciles of the law firms issuing letters of legalopinion and the accounting firms auditing the fund property;
7) Methods of drawing and paying and proportions of theremuneration of the fund manager and fund trustee and otherrelevant expenses;
8) Contents of risk warning; and
9) Other contents provided for by the securities regulatorydepartment under the State Council.
Article 39 The securities regulatory department under the StateCouncil shall, within 6 months from the day of accepting anapplication for fund raising, make the examination pursuant to thelaws and administrative regulations, the provisions of thesecurities regulatory department under the State Council, and theprinciple of prudence, make the decision to grant ratification ornot and notify the applicant; and shall explain the reasons ifratification is not granted.
Article 40 Fund shares may be offered only after the applicationfor fund raising has been ratified.
Article 41 The offering of fund shares shall be theresponsibility of the fund manager; and the fund manager mayentrust another agency recognized by the securities regulatorydepartment under the State Council to handle the offering on itsbehalf.
Article 42 A fund manager shall publicize the prospectus, fundcontract and other relevant documents 3 days prior to the offeringof the fund shares.
The documents specified in the preceding paragraph shall betrue, accurate and complete.
Publicity and promotion of the fund raising shall be inconformity with the relevant laws and administrative regulationsand shall not involve any acts specified in Article 64hereof.
Article 43 A fund manager shall start raising fund within 6months from the day of receiving the ratification document. If thefund raising starts after that 6 months and no substantialalterations have happened to the ratified matters, the fund managershall report to the securities regulatory department under theState Council for archival purposes; and if there is anysubstantial alteration, it shall file a new application with thesecurities regulatory department under the State Council.
The fund raising shall be finished within the fund raisingperiod ratified by the securities regulatory department under theState Council. The fund raising period shall be calculated startingfrom the day of offering the fund shares.
Article 44 Upon expiration of the fund raising period, in thecase of a closed fund, if the total amount of fund shares raisedreaches 80% or more of the ratified scale, or in the case of anopen fund, if the total amount of fund shares raised reaches theminimum amount ratified, and if the number of the fund shareholders meets the provisions of the securities regulatorydepartment under the State Council, the fund manager shall, within10 days from the expiration of the fund raising period, retain astatutory capital verification agency to make capital verification,and shall, within 10 days from receiving the capital verificationreport, submit the report to the securities regulatory departmentunder the State Council, put on record the fund and make a public announcement.
Article 45 The capital raised during the fund raising periodshall be deposited in a special account, and nobody may use suchcapital before the end of the fund raising.
Article 46 The fund contract is concluded when an investor paysfor the fund shares it subscribes to; and the fund contract takeseffect after the fund manager put on record the fund with thesecurities regulatory department under the State Council pursuantto Article 44 hereof.
Upon the expiration of the fund raising period, if theconditions specified in Article 44 are not satisfied, the fundmanager shall assume the following liabilities:
1) Covering with its own property the debts and expensesincurred as a result of the fund raising;
2) Returning the money that the investors have paid, plus theinterest accruing thereon at the current deposit rate, within 30days after the expiration of the fund raising period.
Chapter V Trading of Fund Shares
Article 47 Fund shares of a closed fund may be traded on thesecurities exchange upon application of the fund manager andratification of the securities regulatory department under theState Council.
The securities regulatory department under the State Council mayauthorize the securities exchange to ratify the trading of fundshares on the market pursuant to the statutory conditions andprocedures.
Article 48 The following conditions shall be satisfied for thelisting and trading of fund shares: 第
1) The raising of fund complies with the provisions hereof;
2) The valid term of the fund contract is 5 years or more;
3) The capital raised is no less than 200 million RMB;
4) There are no less than 1,000 fund share holders;
5) Other conditions set forth in the listing rules of fundshares.
Article 49 The listing and trading rules of fund shares shall beformulated by the securities exchange and be submitted to thesecurities regulatory department under the State Council forratification.
Article 50 After the listing of fund shares, if any of thefollowing circumstances occurs, the securities exchange shallterminate its listing and report to the securities regulatorydepartment under the State Council for archival purposes:
1) The conditions for listing prescribed in Article 48 hereofare not long met;
2) The fund contract expires;
3) The fund share holders'' meeting decides to terminate thelisting prior to the due date;
4) Other circumstances under which the listing shall be terminatedas stipulated in the fund contract or provided for in the listingrules of fund shares.
Chapter VI Subscription and Redemption of FundShares
Article 51 The subscription, redemption and registration of anopen fund shall be handled by the fund manager; and the fundmanager may entrust another agency recognized by the securitiesregulatory department under the State Council to handle the matterson its behalf.
Article 52 A fund manager shall handle the subscription andredemption of fund shares every workday; if there are otherwisestipulations in the fund contract, such stipulations shall beobserved.
Article 53 A fund manager shall pay for the redemption on time,except under any of the following circumstances:
1) The fund manager is unable to pay for the redemption due toforce majeure;
2) The securities exchange decides to close the market accordingto law and as a consequence, the fund manager is unable tocalculate the net value of the fund assets of that day;
3) Other special circumstances stipulated in the fund contract.
Under any of the abovementioned circumstances, the fund managershall report to the securities regulatory department under theState Council for archival purposes on that exact day. After thecircumstances provided for in the first paragraph of this articleare eliminated, the fund manager shall pay for the redemption ingood time.
Article 54 Sufficient cash or government bonds shall be kept inthe case of an open fund as the provision for payment for theredemption by the fund share holders. The specific proportion ofthe cash or government bonds in the fund property shall be providedfor by the securities regulatory department under the StateCouncil.
Article 55 The prices of subscription and redemption of fundshares shall be calculated on the basis of the net value of the ofthe fund shares subscribed to and redeemed plus or minor therelevant expenses.
Article 56 If any error occurs in the calculation of price onthe basis of the net value of the fund shares, the fund managershall correct such error and take reasonable steps to preventfurther losses. Where the wrongly calculated price reaches 0.5% ofthe net value of the fund shares, the fund manager shall make a public announcement and report to the securities regulatorydepartment under the State Council for archival purposes. Where theerror in the calculation of price on the basis of the net value ofthe fund shares causes any loss to a fund share holder, that fundshare holder shall have the right to require the fund manager andfund trustee to make compensation.
Chapter VII Fund Operations and InformationDisclosure
Article 57 A fund manager shall employ the method of portfoliowhen using the fund property to make securities investment.
The specific mode of portfolio and the investment proportionsshall be stipulated in the fund contract pursuant to the provisionshereof and those provided for by the securities regulatorydepartment under the State Council.
Article 58 Fund property shall be used for the investmentof:
1) Listed stocks and bonds; and
2) Other securities types provided for by the securitiesregulatory department under the State Council.
Article 59 Fund property may not be used in the followinginvestments or activities:
1) Underwriting of securities;
2) Providing loans or guarantees to others;
3) Engaging in investment with unlimited liability;
4) Trading other fund shares, unless the State Council hasotherwise provisions;
5) Making capital contribution to the fund manager and fundtrustee of the property or trading the stocks or bonds issued bythe said fund manager and fund trustee;
6) Trading the securities issued by or the securitiesunderwritten within the underwriting period by the shareholdersholding controlling position in the fund manager and fund trusteeof the property or by the companies with other significant interestrelationships with the said fund manager and fund trustee;
7) Insider dealing, manipulating the securities price or otherwrongful securities dealings;
8) Other activities prohibited by the securities regulatorydepartment under the State Council pursuant to the laws andadministrative regulations.
Article 60 The fund manager and fund trustee and other personnelwith the obligation of information disclosure shall disclose thefund information according to law and shall ensure thetruthfulness, correctness and completeness of the informationdisclosed.
Article 61 The parties obliged to disclose fund informationshall ensure the information that should be disclosed is disclosedwithin the period of time prescribed by the securities regulatorydepartment under the State Council, and ensure that the investorsmay consult or copy the disclosed information pursuant to the timeand method stipulated in the fund contract.
Article 62 The fund information that should be disclosed to the public includes:
1) Prospectuses, fund contracts, and fund trusteeshipagreements;
2) Fund raising information;
3) Public announcements of listing of the fund shares;
4) Net value of the fund assets and fund shares;
5) Prices for subscription and redemption of fund shares;
6) Portfolio quarterly reports of fund property, financialaccounting reports and the midterm and annual fund reports;
7) Interim reports;
8) Resolutions of the fund share holders' meeting;
9) Significant personnel movements in the specialized fund trustdepartment of the fund manager and fund trustee;
10) Litigations involving the fund manager, fund property andfund trust business; and
11) Other information that should be disclosed as provided forthe securities regulatory department under the State Councilpursuant to the relevant provisions of the laws and administrativeregulations.
Article 63 The accounting firms and legal firms issuing auditingreports or letters of legal opinions with respect to the fundinformation disclosed to the public shall guarantee thetruthfulness, correctness and completeness of the documents theyissued.
Article 64 The following acts are not allowed in the public disclosure of fund information:
1) Making falsified records, misleading statements orsignificant omissions;
2) Making prediction of the securities investment performance;
3) Promising gaining of benefits or assuming of losses inviolation of rules;
4) Defaming other fund managers, fund trustees or institutionsoffering fund shares; or
5) Other acts prohibited as provided for by the securitiesregulatory department under the State Council pursuant to therelevant provisions of the laws and administrativeregulations.
Chapter VIII Alteration and Termination of the FundContract and Liquidation of Fund Property
Article 65 The method of fund operation may be changed on thebasis of stipulations of the fund contract or the resolution of thefund share holders'' meeting and upon the ratification of thesecurities regulatory department under the State Council.
Article 66 The following conditions shall be satisfied if the aclosed fund is to raise more capital or the valid term of the fundcontract thereof is to be extended, and the ratification of thesecurities regulatory department under the State Council isrequired:
1) Having good fund performance;
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2) The fund manager having no record of administrative or criminalpunishment for violations of laws or rules within the last 2 years;
3) The plan being adopted by the fund share holders'' meetingthrough resolution;
4) Other conditions provided for herein.
Article 67 The fund contract shall terminate under any of thefollowing circumstances:
1) The valid term of the fund contract has not been extendedupon expiration;
2) The fund share holders'' meeting decides to terminate thecontract;
3) The duties of the fund manager and fund trustee terminate andthere are no new fund manager and fund trustee to take over theduties within 6 months; or
4) Other circumstances stipulated in the fund contract.
Article 68 Upon termination of the fund contract, the fundmanager shall organize a liquidation group to make liquidation ofthe fund property.
The liquidation group shall consist of the fund manager, fundtrustee and the relevant intermediary agencies.
The liquidation report made by the liquidation group shall beaudited by the accounting firm, and shall, after the law firmissues the letter of legal opinions, being submitted to thesecurities regulatory department under the State Council forarchival purposes and a public announcement shall be made.
Article 69 The residual fund property after the liquidationshall be distributed according to the proportions of the sharesheld by the fund share holders.
Chapter IX Rights of the Fund Share Holders and theExercise thereof
Article 70 A fund share holder enjoys the following rights:
1) Sharing the proceeds of the fund property;
2) Being entitled to distribution of the residual fund propertyafter liquidation;
3) Transferring or applying for redemption of the fund shares heholds according to law;
4) Requiring the convening of the fund share holders'' meetingpursuant to the provisions;
5) Exercising the right of voting with respect to the mattersdeliberated at the fund share holders'meeting;
6) Consulting or duplicating the fund information and materialsdisclosed to the public;
7) Bringing lawsuits against the fund manager, fund trustee orfund share offering agency whose acts have impaired his legitimaterights and interests; and
8) Other rights stipulated in the fund contract.
Article 71 The following matters shall be deliberated anddecided by the fund share holders'' meeting:
1) Terminating the fund contract prior to the due date;
2) Raising more capital for the fund or extending the valid termof the fund contract;
3) Changing the method of fund operation;
4) Raising the remuneration standards of the fund manager andfund trustee;
5) Changing the fund manager or fund trustee;
6) Other matters stipulated in the fund contract.
Article 72 The fund share holders' meeting shall be convened bythe fund manager; where the fund manager fails or is unable toconvene the meeting pursuant to the provisions, the fund trusteeshall convene the meeting.
Where the fund share holders that represent more than 10% of thefund shares require the convening of the fund share holders'meetingwith respect to an identical matter, but neither the fund managernor the fund trustee is able to convene the meeting, the fund shareholders that represent more than 10% of the fund shares shall havethe right to convene the meeting by themselves and report to thesecurities regulatory department under the State Council forarchival purposes.
Article 73 To convene the fund share holders'' meeting, theconvener shall make a public announcement in respect of the timeand form of the meeting, the matters to be deliberated, the rulesof procedures, and the voting method, etc., at least 30 days priorto the convening of the meeting.
The fund share holders'' meeting may not hold a voting on anymatters that have not been publicly announced.
Article 74 The fund share holders'' meeting may be held with thepresence of the fund shareholders in person or by held throughcommunication, etc.
One voting right is attached to each fund share, and a fundshare holder may entrust an agent to attend the fund shareholders'' meeting and exercise the voting right.
Article 75 The fund share holders'' meeting may be held onlywhen it is constituted by a quorum of the fund share holdersrepresenting more than 50% of the fund shares; any decision to bemade on a deliberated matter shall be subject to more than 50% ofthe voting rights held by fund share holders attending the meeting;however, the decision to alter the fund operation method, to changethe fund manager or fund trustee, or to terminate the fund contractprior to the due date shall be subject to more than two thirds ofthe voting rights held by the fund share holders attending themeeting.
The matters decided by the fund share holders'' meeting shall bereported to the securities regulatory department under the StateCouncil for ratification or for archival purposes, and a public announcement shall be made.
Chapter X Supervision andAdministration
Article 76 The securities regulatory department under the StateCouncil shall perform the following duties according to law:
1) Formulating the regulation and rules on the supervision andadministration of the activities concerning securities investmentfund according to law and exercising the power of examination andapproval and ratification according to law;
2) Making records of the fund;
3) Supervising and administering the activities concerningsecurities investment fund undertaken by the fund manager, fundtrustee and other institutions, and investigating and punishing theillegal acts and making public announcements;
4) Formulating the qualification standards and code of conductof the fund practitioners and supervising the implementationthereof;
5) Supervising and inspecting the disclosure of fundinformation;
6) Directing and supervising the activities of the fundassociations; and
7) Other duties provided for by laws and administrativeregulations.
Article 77 The securities regulatory department under the StateCouncil shall have the right to take the following measures whenperforming its duties according to law:
1) Entering the scene where an illegal act occurred to makeinvestigation and obtain evidence;
2) Enquiring the parties concerned and the entities andindividuals relating to the event under investigation and requiringthem to make explanations with respect to the matters relating tothe event under investigation;
3) Consulting and duplicating the securities transactionrecords, transfer registration records, financial accountingmaterials and other relevant documents and materials of the partiesconcerned and the entities and individuals relating to the eventunder investigation, and sealing the documents and materials thatmight be transferred or hidden;
4) Enquiring about the capital accounts, securities accounts orfund accounts of the parties concerned and the entities andindividuals relating to the event under investigation, and applyingto judicial organs for freezing the illegal capital or securitieswhich may be transferred or hided as showed by evidence;
5) Other measures provided for by laws and administrativeregulations.
Article 78 There shall be no less than 2 functionaries of thesecurities regulatory department under the State Council whenperforming their duties and making the investigation or inspectionaccording to law, and they shall show their legal certificates.They are obliged to keep confidential the business secrets they getto know through the investigation or inspection.
Article 79 The functionaries of the securities regulatorydepartment under the State Council shall devote themselves to theirduties, execute their duties according to law, act honestly andimpartially, subject themselves to supervision, and may not seekprivate benefits by taking advantages of their positions.
Article 80 When the securities regulatory department under theState Council performs its duties according to law, the entity andindividual under investigation and inspection shall rendercooperation and faithfully provide the relevant documents andmaterials, and may not refuse or hinder the investigation andinspection or hide the documents and materials.
Article 81 The securities regulatory department under the StateCouncil shall, if finding out any illegal acts suspect of crimeswhen performing its duties according to law, transfer the case tothe judicial organ for handling.
Article 82 The functionaries of the securities regulatorydepartment under the State Council may not assume concurrentpositions in the regulated institutions.
Chapter XI Legal Liabilities
Article 83 If the fund manager and fund trustee violate any ofthe provisions hereof or the stipulations of the fund contract inthe performance of their respective duties and cause damages to thefund property or the fund share holders, they shall be liable forcompensation for their respective acts. Where they cause damages tothe fund property or fund share holders through joint acts, theyshall be jointly and severally liable for compensation.
Article 84 If any party uses the raised capital in violation ofArticle 45 hereof, it shall be ordered to return the money and theillegal gains shall be confiscated; if the illegal gains exceed500,000 Yuan, a fine of 1 time up to 5 times the illegal gainsshall be imposed concurrently; if there is no illegal gains or theillegal gains are less than 500,000 Yuan, a fine of 50,000 Yuan upto 500,000 Yuan shall be imposed concurrently; a warning shall begiven to the directly responsible personnel in charge and otherdirectly liable personnel and a fine of 30,000 Yuan up to 300,000Yuan shall be imposed; if any damages are caused to the investors,the offenders shall be liable for compensation according to law;and if any crime has been constituted, the offenders shall besubject to criminal liabilities.
Article 85 If any party raises capital for a fund withoutratification of the securities regulatory department under theState Council, it shall be ordered to stop the act and return thefund raised plus the interest thereon at the current rate of bankdeposit, the illegal gains shall be confiscated and a fine of 1% upto 5% of the sum raised shall be imposed; and if any crime has beenconstituted, the offender shall be subject to criminalliabilities.
Article 86 If any party, in violation of the provisions hereof,establishes any fund management company without authorization, thecompany shall be banned by the securities regulatory department,and a fine of 50,000 Yuan up to 500,000 Yuan shall be imposedconcurrently; and if any crime has been constituted, the offendershall be subject to criminal liabilities.
Article 87 If any party engages in fund management or fund trustbusiness without ratification of the securities regulatorydepartment under the State Council, it shall be ordered to stop theact and the illegal gains shall be confiscated; if the illegalgains exceed 1 million Yuan, a fine of 1 time up to 5 times theillegal gains shall be imposed concurrently; if there is no illegalgain or the illegal gains are less than 1 million Yuan, a fine of100,000 Yuan up to 1 million Yuan shall be imposed concurrently; ifany damages are caused to the fund property or the fund shareholders, the offender shall be liable for compensation; a warningshall be given to the directly responsible personnel in charge andother directly liable personnel, and a fine of 30,000 Yuan up to300,000 Yuan shall be imposed concurrently; and if any crime hasbeen constituted, the offenders shall be subject to criminalliabilities.
Article 88 If the fund manager or fund trustee, in violation ofthe provisions hereof, fails to apply separate management orseparate account books to the fund property or appropriate the fundproperty for other unauthorized purposes, they shall be ordered tocorrect the act and be imposed on a fine of 50,000 Yuan up to500,000 Yuan; if any damages are caused to the fund property orfund share holders, they shall be liable for compensation accordingto law; a warning shall be given to the directly responsiblepersonnel in charge and other directly liable personnel, and theirqualification for fund practice shall be suspended or cancelled,and a fine of 30,000 Yuan up to 300,000 Yuan shall be imposedconcurrently; if any crime has been constituted, the offendersshall be subject to criminal liabilities.
The property and proceeds obtained by the fund manager and fundtrustee through appropriation of the fund property for otherunauthorized purposes shall be included into the fund property.However, if there are otherwise provisions in the laws andadministrative regulations, such provisions shall beobserved.
Article 89 If the fund manager and fund trustee have committedany of the acts specified in Article 20 hereof, they shall beordered to correct the act and the illegal gains shall beconfiscated; if the illegal gains exceed 1 million Yuan, a fine of1 time up to 5 times the illegal gains shall be imposedconcurrently; if there is no illegal gains or the illegal gains areless than 1 million Yuan, a fine of 100,000 Yuan up to 1 millionYuan shall be imposed concurrently; if any damages are caused tothe fund property or fund share holders, they shall be liable forcompensation according to law; a warning shall be given to thedirectly responsible personnel in charge and other directly liablepersonnel, their qualification for fund practice shall be suspendedor cancelled, and a fine of 30,000 Yuan up to 300,000 Yuan shall beimposed concurrently; and if any crime has been constituted, theoffenders shall be subject to criminal liabilities.
Article 90 If the fund manager and fund trustee have committedany of the acts specified in Items 1) through 6) and in Item 8) ofArticle 59 hereof, they shall be ordered to correct the act and beimposed on a fine of 100,000 Yuan up to 1 million Yuan; if anydamages are caused to the fund property or fund share holders, theyshall be liable for compensation according to law; a warning shallbe given to the directly responsible personnel in charge and otherdirectly liable personnel, their qualification for fund practiceshall be suspended or cancelled, and a fine of 30,000 Yuan up to300,000 Yuan shall be imposed concurrently; and if any crime hasbeen constituted, the offenders shall be subject to criminalliabilities.
Where the fund manager and fund trustee have committed any ofthe acts prescribed in the preceding paragraph, the property andproceeds obtained through utilization of the fund property shall beincluded into the fund property. However, if there are otherwiseprovisions in the laws and administrative regulations, suchprovisions shall be observed.
Article 91 If the fund manager and fund trustee have committedthe act specified in Item 7) of Article 59 hereof, they shall bepunished pursuant to the relevant provisions of the Securities Lawof the People's Republic of China, and apart from that, a warningshall be given to the directly responsible personnel in charge andother directly liable personnel, their qualification for fundpractice shall be suspended or cancelled, and a fine of 30,000 Yuanup to 300,000 Yuan shall be imposed concurrently; if any damagesare caused to the fund property or fund share holders, theoffenders shall be liable for compensation according to law.
Article 92 If the fund manager and fund trustee, in violation ofthe provisions hereof, make capital contribution to or hold theshares of each other, they shall be ordered to correct the act andbe imposed on a fine of less than 100,000 Yuan.
Article 93 If any party obliged to disclose fund informationfails to make the disclosure according to law or the disclosedinformation contain falsified indications, misleading statements orsignificant omissions, that party shall be ordered to correct theact, with the illegal gains being confiscated, and be imposed on afine of 100,000 Yuan up to 1 million Yuan; if any damages arecaused to the fund property or fund share holders, the offendershall be liable for compensation according to law; a warning shallbe given to the directly responsible personnel in charge and otherdirectly liable personnel, their qualification for fund practiceshall be suspended or cancelled, and a fine of 30,000 Yuan up to300,000 Yuan shall be imposed concurrently; and if any crime hasbeen constituted, the offenders shall be subject to criminalliabilities.
Article 94 If any professional agency which issues the auditingreport or letter of legal opinions in respect of the fundinformation disclosed to the public by the parties obliged todisclose such information falsifies the contents for which it isresponsible, that agency shall be ordered to correct the act, withthe illegal gains being confiscated, and be imposed on a fine of 1time up to 5 times the illegal gains concurrently; if thecircumstances are serious, the agency shall be ordered to stop itsbusiness, and the relevant qualification of the directly liablepersonnel shall be suspended or cancelled; if any damages arecaused to the fund property or fund share holders, the offendershall be liable for compensation according to law; and if any crimehas been constituted, the offenders shall be subject to criminalliabilities.
Article 95 If the fund manager or fund trustee fails to convenethe fund share holders'' meeting pursuant to the provisions, itshall be ordered to correct the act and may be imposed on a fine ofless than 50,000 Yuan; a warning shall be given to the directlyresponsible personnel in charge and other directly liablepersonnel, and their qualification for fund practice shall besuspended or cancelled.
Article 96 If the fund manager or fund trustee violates theprovisions hereof and the circumstances are serious, the offendershall be disqualified for fund management or fund trust.
Article 97 If any practitioner in the specialized fund trustdepartment of a fund manager or fund trustee, in violation ofArticle 18 hereof, causes any damages to the fund property or fundshare holders, that person shall be liable for compensationaccording to law; if the circumstances are serious, he/she shall bedisqualified from fund practice; and if any crime has beenconstituted, he/she shall be subject to criminalliabilities.
Article 98 If any functionary of the securities regulatorydepartment neglects the duties, abuses the powers, seeks privatebenefits through wrongful means, or exerts or accepts money orproperty from others by taking advantages of his/her position, thatperson shall be given administrative sanctions according to law;and if any crime has been constituted, the offender shall besubject to criminal liabilities.
Article 99 If any party is liable for both civil compensationand fines or monetary penalty for violations of the provisionshereof and the property of that party is not sufficient to coverall the payments, priority shall be given to civilcompensation.
Article 100 With respect to the civil compensation and fines thefund manager and fund trustee should bear pursuant to theprovisions hereof, the fund manager and fund trustee shall make thepayment with their own property.
The fines and monetary penalties paid and the illegal gainsconfiscated according to law shall all be turned in to thetreasury.
Chapter XII Supplementary Provisions
Article 101 The State Council shall, pursuant to the principleshereof, enact separate specific measures for the administration ofthe securities investment activities undertaken by fund managementcompanies or other institutions approved by the State Council toraise capital from specified objects or to accept the propertytrust from certain objects.
Article 102 The State Council shall enact separate measures forthe administration of the securities investment activities ofraising capital through public offering of stocks and establishingsecurities investment companies.
Article 103 The present Law shall take effect as of June 1,2004.
(China.org.cn)
