China proposes cutting equity fund launch threshold to 50 million yuan
In short
China's securities regulator opened public consultation on revised public fund operating rules on October 9. The draft would lower launch thresholds for equity funds and funds of funds from 200 million yuan to 50 million yuan, while retaining existing fixed-income fund thresholds.
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China's securities regulator sought public comment on October 9 on revised operating rules for publicly offered securities investment funds and supporting measures. The proposals include cutting launch thresholds for equity funds and funds of funds from 200 million yuan and 200 million units to 50 million yuan and 50 million units. Fixed-income fund thresholds would remain unchanged, China News Service, CLS, 36Kr and Jiemian reported. The existing operating rules were last revised and issued in 2014, according to Yicai and Jiemian. [ 2 , 5 , 12 , 13 , 16 , 17 ]
The China Securities Regulatory Commission said the revisions seek to improve oversight of fund investment operations, strengthen managers' responsibilities, support equity fund development and make operations more flexible. CLS reported that theme funds would have to define the investment direction indicated by their names in identifiable, quantifiable terms directly related to that direction. Funds whose names do not specify an industry or theme would have to diversify rather than concentrate on a single industry or theme. The draft would also prohibit managers from using multiple funds with similar investment styles in the same sales channel to induce frequent, short-term subscriptions and redemptions. [ 2 , 3 , 6 , 14 , 16 ]
Managers who choose to continue operating very small funds would have to pay their fixed operating expenses, according to CLS and Jiemian. The draft would also remove the existing requirement to terminate sponsor-seeded funds whose size remains below 200 million yuan after three years. Other proposals would refine the circumstances requiring a meeting of fund unit holders. CLS reported a one-year transition period allowing managers and custodians to agree contract amendments and announce them in accordance with the contracts. Jiemian reported that the regulator will further revise the proposals in light of public feedback and complete the relevant procedures before issuing and implementing them. [ 1 , 11 , 16 , 19 ]
Why it matters
The regulator says the proposals aim to support equity fund development, attract more medium- and long-term capital and increase operational flexibility. They would also strengthen investment-style requirements and make managers bear fixed costs when keeping very small funds operating.
Key facts
- The China Securities Regulatory Commission opened consultation on revised public fund operating rules and supporting rules on October 9. [ 13 , 16 , 20 , 22 ]
- The proposed equity fund and fund-of-funds launch thresholds would fall from 200 million yuan and 200 million units to 50 million yuan and 50 million units. [ 5 , 12 , 13 , 17 ]
- Fixed-income fund launch thresholds would remain unchanged. [ 5 , 12 , 13 , 17 ]
- Managers continuing to operate very small funds would have to bear their fixed operating costs. [ 10 , 11 , 19 ]
- The draft would require industry-themed funds to clearly define the investment direction indicated by their names. [ 1 , 3 , 18 ]
Confirmed by several sources
- The regulator is consulting on revised public fund operating rules. [ 2 , 13 , 16 , 20 , 22 ]
- The proposed launch threshold for equity funds would be 50 million yuan. [ 5 , 7 , 12 , 13 , 15 , 17 , 21 ]
- The draft would make managers bear fixed costs when they keep very small funds operating. [ 11 , 19 ]
Still unclear
- The final rules and implementation date are not yet established in the documents. Jiemian reports that the regulator will refine the drafts after consultation and complete the required procedures before publishing and implementing them.