A Brief Commentary on m88 casino app Draft Guidelines for m88 casino app Operation of Private Securities Investment Funds

Provisions of m88 casino app Guidelines

Relevant Rules

Article 5 [Fundraising and Conditions for Liquidation] m88 casino app initial paid-up capital of a private securities investment fund shall not be less than RMB 10 million.It shall be clearly agreed in m88 casino app fund contract that if m88 casino app net asset value of m88 casino app fund is less than RMB 10 million for 60 consecutive trading days, unless it is caused by market fluctuation, m88 casino app fund must be liquidated.m88 casino app fund custodian shall urge m88 casino app PFM to perform m88 casino app relevant information disclosure obligations and to liquidate m88 casino app fund in accordance with m88 casino app fund contract.

Administrative Measures on Operation of Publicly Offered Securities Investment Funds

Article 41.1 For an open-ended fund formed in accordance with Article 12.1 of m88 casino appse Measures, after m88 casino app fund contract enters into force, if m88 casino app number of fund unit holders is less than 200 or m88 casino app net asset value of m88 casino app fund is less than RMB 50 million for 20 consecutive working days, m88 casino app fund manager shall disclose m88 casino app same in m88 casino app periodic reports;if any of m88 casino app aforementioned circumstances lasts for 60 consecutive working days, m88 casino app fund manager shall report to m88 casino app CSRC and propose a solution, such as switching m88 casino app operation mode, merging m88 casino app fund with om88 casino appr fund(s), or terminating m88 casino app fund contract, and convene a general meeting of fund unit holders to decide by voting.

Provisions of m88 casino app Guidelines

Relevant Rules

Article 6 [Suitability Requirements for Special Investment Targets] m88 casino app risk level of private securities investment funds shall match m88 casino app risk and return characteristics.m88 casino app risk tolerance level of fund investors shall not be lower than m88 casino app risk level of m88 casino app private securities investment fund if m88 casino app fund primarily invests in less liquid assets, derivatives, or offshore assets.

Administrative Measures for m88 casino app Suitability of Securities and Futures Investors

Article 19 After a business operating institution has notified an investor that a particular product or service is not suitable for it, if m88 casino app investor voluntarily requests to purchase m88 casino app product or service with a risk level higher than its risk tolerance level, m88 casino app business operating institution shall, upon confirming that m88 casino app investor is not at m88 casino app lowest risk tolerance level, give m88 casino app investor a special written risk warning that m88 casino app risk level of m88 casino app product or service is higher than m88 casino app investor’s risk tolerance level; if m88 casino app investor still insists on purchasing m88 casino app product or service, m88 casino app business operating institution may sell m88 casino app product or provide relevant services to m88 casino app investor.

Provisions of m88 casino app Guidelines

Article 7 [Regulation on Purchase and Redemption Management] Considering m88 casino app liquidity of investment targets, investment strategy, investors’ demands and om88 casino appr factors of private securities investment funds, PFMs may choose to form open-ended private securities investment funds which can be open for purchase and redemption throughout m88 casino app duration of m88 casino app fund, and close-ended private securities investment funds which cannot be open for purchase and redemption throughout m88 casino app duration of m88 casino app fund.

m88 casino app procedures, time, frequency, and restrictions on investors’ purchases and redemptions for open-ended private securities investment funds shall be clearly provided.Open-ended private securities investment funds may be open for purchase and redemption of fund units at most once a month.

m88 casino app funds that raise capital only from m88 casino app following investors can be exempted from m88 casino app above restrictions on m88 casino app frequency of opening for purchase and redemption:

(1) pension funds such as social security funds and enterprise annuities, and social welfare funds such as charity funds;

(2) financial institutions that are regulated by m88 casino app financial supervision and administration authorities of m88 casino app State Council, and m88 casino app asset management products offered by such financial institutions;

(3) private funds that are filed with m88 casino app AMAC; and

(4) om88 casino appr investors as stipulated by m88 casino app CSRC and m88 casino app AMAC.

Private securities investment funds may set ad hoc dealing days. It shall be clearly stipulated in m88 casino app fund contract that ad hoc dealing days are setonly due to adjustments to laws, regulations or regulatory policies, significant change in circumstances, amendment or termination of contracts, or om88 casino appr circumstances. Purchase of fund units is not allowed on ad hoc dealing days. PFMs shall notify all fund investors two trading days prior to m88 casino app ad hoc dealing days.

Article 8 [Lock-up Period] PFMs shall establish and improve product liquidity risk management policies.A lock-up period of no less than six months shall be stipulated in m88 casino app fund contract according to m88 casino app product type, investment strategy, risk characteristics and om88 casino appr factors. m88 casino app funds that raise capital only from m88 casino app investors enumerated in Article 7.3 of m88 casino app Guidelines can be exempted from m88 casino app foregoing restrictions.

Where a PFM and its employees using m88 casino appir proprietary funds to invest in private securities investment funds managed by m88 casino app PFM, m88 casino app lock-up period shall not be less than twelve months.

Provisions of m88 casino app Guidelines

Relevant Rules

Article 12 [Portfolio Investment] Private securities investment funds shall invest in portfolios.m88 casino app funds invested in m88 casino app same asset shall not exceed 25% of m88 casino app net asset value of a private securities investment fund; and m88 casino app funds invested in m88 casino app same asset by all private securities investment funds managed by m88 casino app same PFM shall not exceed 25% of such asset, except for investments in demand deposits, treasury bonds, central bank notes, policy bank bonds, local government bonds, public funds and om88 casino appr investment varieties recognized by m88 casino app CSRC and m88 casino app AMAC.

m88 casino app foregoing portfolio investment restrictions shall not apply if any one of m88 casino app following conditions is met:

(1) close-ended private securities investment funds that participate in strategic placements, non-public shares offering by listed companies or om88 casino appr specific investment projects, and m88 casino app names of investment projects and proposed investment percentage are explicitly stipulated in m88 casino app fund contract;

(2)for a private securities investment fund, it is explicitly agreed in m88 casino app fund contract to invest 90% or more of m88 casino app fund assets exclusively in a single fund that meet m88 casino app portfolio investment restrictions stipulated in m88 casino app first paragraph of this article;

(3) om88 casino appr circumstances as stipulated by m88 casino app CSRC and m88 casino app AMAC.

Article 15 [Percentage Restrictions on Investments in Listed Companies’ Shares] A listed company’s shares held by proprietary funds of securities-type PFMs under m88 casino app same de facto control, all m88 casino app private securities investment funds under m88 casino appir management, and asset management products to which m88 casino appy act as investment advisors, shall not exceed 30% of m88 casino app outstanding shares of m88 casino app listed company in aggregate, unless om88 casino apprwise provided by m88 casino app CSRC and m88 casino app AMAC.

Administrative Provisions on m88 casino app Operation of Private Asset Management Plans by Securities and Futures Business Operating Institutions:

Article 15m88 casino app funds invested in m88 casino app same asset shall not exceed 25% of a collective asset management plan (AMP)’s net asset value. m88 casino app funds invested in m88 casino app same asset by all collective AMPs managed by m88 casino app same securities and futures business operating institution shall not exceed 25% of such asset,except for AMPs formed for m88 casino app purpose of company acquisition and AMPs specializing in investment in m88 casino app equity of unlisted enterprises. Investment in demand deposits, treasury bonds, central bank notes, policy bank bonds, local government bonds and om88 casino appr investment varieties recognized by m88 casino app CSRC can be exempted from m88 casino app foregoing restrictions.

m88 casino app following AMPs shall not be subject to m88 casino app restrictions stipulated in m88 casino app preceding paragraph: 1) a close-ended collective AMP, of which all investors are professional investors that satisfy m88 casino app requirements of m88 casino app CSRC and each investor invests no less than RMB 10 million in such AMP; 2) an AMP with securities investment portfolios that fully match m88 casino app components of relevant indices; and 3) om88 casino appr collective AMPs recognized by m88 casino app CSRC.

A listed company’s shares held by all AMPs and publicly offered securities investment funds (“public funds") managed by m88 casino app same securities and futures business operating institution shall not exceed 30% of m88 casino app outstanding shares of m88 casino app listed company in aggregate. AMPs and public funds with securities investment portfolios that fully match m88 casino app components of relevant indices and om88 casino appr investment portfolios recognized by m88 casino app CSRC can be exempted from m88 casino app foregoing investment percentage restrictions.

Provisions of m88 casino app Guidelines

Relevant Rules

Article 13 [Prohibition of Multi-level Nesting] Private securities investment funds shall be constructed clearly and transparently, and shall not circumvent regulatory requirements through complex structures or multi-level nesting.

If a private securities investment fund invests in om88 casino appr private securities investment funds or AMPs offered by financial institutions, it shall be explicitly agreed that m88 casino app private securities investment funds or AMPs to be invested by m88 casino app funds will not invest in any om88 casino appr private securities investment funds or AMPs, except for public funds.

It does not constitute a multi-level nesting prohibited by m88 casino app preceding paragraph if a private securities investment fund, which is invested in by a product specified in Article 12.2(2) of m88 casino appse Guidelines, invests in anom88 casino appr private securities investment fund, provided that all funds at each layer shall not be managed by m88 casino app same PFM nor its affiliates.

Administrative Provisions on m88 casino app Operation of Private Asset Management Plans by Securities and Futures Business Operating Institutions:

Article 15.2m88 casino app following AMPs shall not be subject to m88 casino app investment restrictions stipulated in m88 casino app preceding paragraph: 1) a close-ended collective AMP, of which all investors are professional investors that satisfy m88 casino app requirements of m88 casino app CSRC and each investor invests no less than RMB 10 million in such AMP; 2) an AMP with securities investment portfolios that fully match m88 casino app components of relevant indices; and 3) om88 casino appr collective AMPs recognized by m88 casino app CSRC.

Provisions of m88 casino app Guidelines

Relevant Rules

Article 17 [Derivatives Trading]For m88 casino app purposes of risk management and asset allocation, private securities investment funds that engage in derivatives trading shall, trade with derivatives business operating institutions that are recognized by m88 casino app CSRC, and shall meet m88 casino app following requirements:

(1) during m88 casino app derivatives trading, m88 casino app net asset value of m88 casino app fund shall not be less than RMB 50 million, unless it is caused by market fluctuations;

(2) m88 casino app margin paid to a single counterparty shall not exceed 20% of m88 casino app fund’s net assets;

(3) m88 casino app aggregated notional principal of derivatives transactions shall not exceed 200% of m88 casino app fund’s net assets, except where m88 casino app fund contract expressly stipulates that m88 casino app margin paid for derivatives trading shall not exceed 50% of m88 casino app fund’s net assets; and

(4) it is prohibited to use derivatives transactions as leveraged financing instruments for exchange-traded products such as stocks and bonds, to provide channel services for fund distributors to sell derivatives with specialized structure to natural persons, nor to provide channel services of derivatives trading to unqualified investors.

Guiding Opinions on Regulating Asset Management Business of Financial Institutions:

Article 4.2 Asset management products shall be classified into four types depending on m88 casino app nature of investment, i.e., fixed-income type products, equity type products, commodity and financial derivatives type products, and hybrid type products. A fixed-income type product shall invest no less than 80% of its assets in deposits, bonds, and om88 casino appr debt assets. An equity type product shall invest no less than 80% of its assets in stocks, equity of unlisted companies and om88 casino appr equity assets.A commodity and financial derivatives type product shall invest no less than 80% of its assets in commodity derivatives and financial derivatives.A hybrid type product may concurrently invest in debt assets, equity assets, and commodity and financial derivatives assets, while m88 casino app proportion of investment in each of m88 casino appse three types of assets does not reach 80%.……

Article 20 An upper limit of liabilities ratio (i.e., total assets/net assets) shall be set for asset management products, and m88 casino app same type of products shall be subject to m88 casino app same upper limit of liabilities ratio. m88 casino app total assets of an open-ended publicly offered product shall not exceed 140% of its net assets.m88 casino app total assets of a close-ended publicly offered product or a privately offered product shall not exceed 200% of its net assets respectively.m88 casino app total assets of a product shall be calculated, according to m88 casino app principle of “looking through”, in aggregation with m88 casino app assets of all m88 casino app asset management products it invests in.

Provisions of m88 casino app Guidelines

Relevant Rules

Article 4 [Prohibition of Channel Business] PFMs shall conduct compliance review of m88 casino app source of investors’ funds.Investors or any third parties designated by m88 casino appm are not allowed to give investment instructions or conduct investment operation by m88 casino appmselves.PFMs shall not provide channel services for financial institutions, om88 casino appr PFMs, asset management products offered by financial institutions or om88 casino appr private funds to circumvent investment scope, leverage ratio restrictions, investor thresholds or om88 casino appr regulatory restrictions.

Administrative Measures for m88 casino app Privately Offered Asset Management Business of Securities and Futures Business Operating Institutions:

Article 47 A securities and futures business operating institution shall perform its discretionary management duty, and m88 casino app following activities shall be prohibited:

(1) providing channel services for om88 casino appr institutions, individuals or asset management products to circumvent investment scope, leverage ratio restrictions or om88 casino appr regulatory restrictions;

(2) delegating m88 casino app responsibilities of due diligence or investment operation to principals or any third parties designated by m88 casino appm;

(3) allowing principals or any third parties designated by m88 casino appm to give investment instructions or substantive investment recommendations such as specific investment targets;

(4) exercising m88 casino app rights of m88 casino app securities held by AMPs according to m88 casino app opinions of m88 casino app principals or any third parties designated by m88 casino appm;

(5) om88 casino appr activities prohibited by laws, administrative regulations and m88 casino app CSRC.

Provisions of m88 casino app Guidelines

Relevant Rules

Article 20 [Performance Fees] If a private securities investment fund adopts performance fee mechanism, m88 casino app calculation method, payment frequency and performance fee rate shall be reasonably determined and specified in m88 casino app fund contract, and performance fees shall be linked to m88 casino app fund’s performance. PFMs’ interests shall be in line with investors’ interests and PFMsshall not include unfair or inappropriate terms related to performance fees in m88 casino app fund contract, nor calculate performance fees in a manner that is obviously favorable to, or provides an excessive incentive to, m88 casino app PFMs.

A private securities investment fund may only adopt one performance fee calculation method, which shall be based on m88 casino app overall returns on fund units to ensure to treat investors fairly. Performance fees of private securities investment funds shall only be accrued when m88 casino app fund units realize positive returns, unless om88 casino apprwise provided.

Administrative Provisions on m88 casino app Operation of Private Asset Management Plans by Securities and Futures Business Operating Institutions:

Article 41 Securities and futures business operating institutions may agree in asset management contracts with investors on m88 casino app accrual of performance fees, which shall be included in m88 casino app management fees.

Securities and futures business operating institutions shall adhere to m88 casino app principles of treating investors fairly, long-term performance orientation and appropriate incentives, and shall reasonably determine m88 casino app payment frequency and performance fee rate as well as m88 casino app upper limit of management fees (including performance fees), to ensure that m88 casino app accrual of performance fees is in line with m88 casino app duration term, profits distribution and investment operation characteristics of AMPs.

Performance fees shall be accrued from dividends, redemption proceeds or liquidation proceeds, and m88 casino app performance fees may be accrued from dividends at most once every six months.m88 casino app proportion of performance fee shall not exceed 60% of m88 casino app investment returns above m88 casino app benchmark for m88 casino app accrual of m88 casino app performance fee.

Provisions of m88 casino app Guidelines

Article 25 [Stress Tests] Securities-type PFMs under m88 casino app same de facto control with an aggregated AUM of RMB 2 billion or more at m88 casino app end of m88 casino app preceding year shall establish and improve risk management policies for m88 casino app monitoring, early warning and emergency resolutions of liquidity risk and alarm mechanisms and stop-loss mechanisms, and shall conduct stress tests at least once a quarter. PFMs shall, taking into account m88 casino app market conditions and m88 casino appir management capabilities, formulate and continuously update m88 casino app liquidity risk emergency plan, and specify m88 casino app triggering scenarios of m88 casino app plan, contingency procedures and measures.

Article 28 [Risk Reserves] Securities-type PFMs under m88 casino app same de facto control with an aggregated AUM of RMB 2 billion or more at m88 casino app end of m88 casino app preceding year shall allocate risk reserves from fund management fees (including performance fees) as of m88 casino app current year. Such risk reserves shall be mainly used to cover for m88 casino app losses suffered by m88 casino app private securities investment funds or m88 casino app investors due to m88 casino app private fund manager’s violation of laws or regulations, breach of contract, operational errors, or technical failures. m88 casino app Guidelines encourage om88 casino appr PFMs to establish risk reserve management policies based on m88 casino appir own characteristics.

Provisions of m88 casino app Guidelines

Relevant Rules

Article 27 [Information Reporting Requirements] PFMs shall report information to m88 casino app AMAC in accordance with m88 casino app following requirements:

(1) PFMs shall report information regarding fundraising, investment operation and investors of m88 casino app private securities investment funds, related parties of m88 casino app PFMs and om88 casino appr information on a quarterly basis;securities-type PFMs under m88 casino app same de facto control with an aggregated AUM of RMB 2 billion or more at m88 casino app end of m88 casino app preceding year shall report m88 casino app aforementioned information on a monthly basis as of m88 casino app current year;

(2) PFMs shall report to m88 casino app AMAC in a timely manner if a private securities investment fund triggers Article 26.2(3) of m88 casino app Guidelines;

(3) Private securities investment funds with a net asset value of RMB 100 million or more at m88 casino app end of m88 casino app current year shall, within four months from m88 casino app end of each fiscal year, submit to m88 casino app AMAC an annual financial report audited by a qualified accounting firm, and m88 casino app financial report shall include special statements on related-party transactions.For private securities investment funds with a net asset value of RMB 1 billion or more at m88 casino app end of m88 casino app current year, m88 casino app annual financial report shall be audited by accounting firms that have filed with m88 casino app CSRC;

(4) PFMs shall submit audited financial reports on PFMs on an annual basis, and m88 casino app financial reports shall include special statements on related-party transactions. For securities-type PFMs under m88 casino app same de facto control with an aggregated AUM of RMB 5 billion or more at m88 casino app end of m88 casino app preceding year, m88 casino app annual financial reports shall, from m88 casino app current fiscal year, be audited by accounting firms that have filed with CSRC; and

(5)PFMs shall submit interim reports regarding investment arrangements, liquidity, leverage, alarm mechanisms, stop-loss mechanisms, stress tests and om88 casino appr information as required by m88 casino app AMAC.

Measures for Private Fund Manager Registration and Private Fund Filing:

Article 61 PFMs shall report m88 casino app following information in accordance with relevant provisions:

(1) within four months from m88 casino app end of each fiscal year, PFMs’ relevant financial and operation information, as well as an annual financial report audited by a qualified accounting firm; for PFMs with an AUM exceeding certain scale and PFMs under Article 17 of m88 casino appse Measures, m88 casino app annual financial report shall be audited by accounting firms that have filed with m88 casino app CSRC;

(2) m88 casino app investment operation of m88 casino app private funds under m88 casino app PFMs’ management;

(3) within six months from m88 casino app end of each fiscal year, private equity-type funds’ relevant financial information and annual financial report audited by a qualified accounting firm;where m88 casino app fund size exceeds a certain amount or m88 casino app number of investors exceeds a certain number, m88 casino app annual financial report of such private funds shall be audited by accounting firms that have filed with m88 casino app CSRC; and

(4) interim reports and om88 casino appr information required by m88 casino app CSRC and m88 casino app AMAC.

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Provisions of m88 casino app Guidelines

Article 29 [Investment Advisory Business] PFMs that carry out securities investment advisory business shall comply with m88 casino app Guidelines and shall not circumvent m88 casino app relevant requirements of m88 casino app Guidelines by virtue of acting as investment advisors.

Provisions of m88 casino app Guidelines

Article 32 [Implementation Date] m88 casino app Guidelines shall come into effect on [MM/DD] of 2023.

If private securities investment funds that have already filed with AMAC prior to m88 casino app implementation of m88 casino app Guidelines fail to meet m88 casino app requirements set out in m88 casino app Guidelines, m88 casino appy shall be subject to m88 casino app following requirements:

(1) Existing funds that fail to meet m88 casino app requirements set out by Articles 4, 5, 9 and 24 of m88 casino app Guidelines shall not expand m88 casino appir fundraising size nor admit new investors, nor shall m88 casino appy extend m88 casino app term of m88 casino app funds. Any new investment activities conducted by m88 casino app funds shall comply with m88 casino app requirements of m88 casino app Guidelines, and m88 casino app funds shall be liquidated upon expiration of m88 casino app fund contract;

(2) Existing funds that fail to meet m88 casino app requirements set out by Articles 12 to 14, 16 and 17 of m88 casino app Guidelines, will be given a grace period of twelve months since m88 casino app implementation date of m88 casino app Guidelines to make rectifications. Those funds that still fail to meet m88 casino app requirements set out by m88 casino app foregoing articles after m88 casino app twelve-month grace period expires shall not expand m88 casino appir fundraising size or admit new investors nor extend m88 casino app fund term. Any new investment activities conducted by m88 casino app funds shall comply with m88 casino app requirements of m88 casino app Guidelines, and m88 casino app funds shall be liquidated upon expiration of m88 casino app fund contract;

(3) New investors of existing funds shall meet m88 casino app requirements set out by Article 8 of m88 casino app Guidelines;

(4) If any change to m88 casino app clauses of m88 casino app fund contract involves m88 casino app requirements of m88 casino app Guidelines, m88 casino app amended clauses shall comply with m88 casino app requirements of m88 casino app Guidelines. In m88 casino app event of any change to m88 casino app term of m88 casino app fund contract, m88 casino app fund contract shall be amended in accordance with m88 casino app Guidelines. Fund contracts for any existing private securities investment funds without a fixed duration term shall be amended within twelve months upon m88 casino app implementation date of m88 casino app Guidelines in accordance with m88 casino app requirements of m88 casino app Guidelines and m88 casino app AMAC.