Economic subjects | Finance » Interim Measures for the Appraisal of Securities Investment Funds

Source: http://www.doksinet Interim Measures for the Appraisal of Securities Investment Funds Chapter I General Provisions Article 1 To regulate the appraisal of securities investment funds, guide the development of the long-term investment concept for securities investment funds and protect the legitimate rights and interests of fund investors and other relevant parties, these Measures are formulated pursuant to the Securities Law, the Law on Securities Investment Funds and other relevant laws and regulations. Article 2 Where fund appraisal agencies appraise securities investment funds (hereinafter referred to as “funds”) and disclose the fund appraisal results in public forms within the People’s Republic of China, these Measures shall apply.Where a fund appraisal agency discloses the fund appraisal results in a private form, these Measures shall not apply. In that case, the agency shall conclude an agreement with the user of fund appraisal results, forbidding the latter from

using the appraisal results in public. Article 3 The term “fund appraisal” includes the rating, bonus appraisal, single-indicator ranking and other CSRC-approved appraisal activities as conducted by fund appraisal agencies and their appraisers on the investment yield and risk of funds or the management ability of fund managers.Rating refers to a process where fund appraisal agencies and their appraisers comprehensively analyze the investment yield and risk of funds or the management ability of fund managers with certain methods and express the analysis results with symbols, figures or characters which have given meanings.“In public forms” refers to forms in which fund appraisal results are disclosed to unspecific targets via mass media such as newspapers, periodicals, radio stations, TV stations, internet, etc, or lectures, report meetings, analysis meetings, computer terminals, telephone calls, faxes, e-mails, text messages, etc. Article 4 To engage in fund appraisal, one

shall follow:1. The long term principle, which requires putting stress on the long-term appraisal of funds, cultivating and developing the long-term investment concept of investors, and refraining from misleading investors with short-term, frequent fund appraisal results;2. The impartiality principle, which requires staying impartial, equally treating all appraisal targets, refraining from misrepresenting or defaming any appraisal target, and preventing potential conflict of interest;3. The comprehensiveness principle, which requires comprehensively appraising the investment yield and risk of funds or the management ability of fund managers, and refraining from using a single indicator as the sole criteria for appraisal;4. The objectivity principle, which requires guaranteeing the objectivity and accuracy of the fund appraisal process and results, and refraining from using false information as a basis for fund appraisal or from publishing false fund appraisal results;5. The consistency

principle, which requires maintaining consistency in terms of the fund appraisal standards, methods and procedures, and refraining from using any standards, methods or procedures that have not be disclosed to the public; and6. The openness principle, which requires using information that has been disclosed to the public, and refraining from using any data other than that. Article 5 The CSRC and its offices shall supervise and regulate the fund appraisal activities. The Securities Association of China (SAC) shall make self-disciplinary management over the fund appraisal activities. Chapter II Fund Appraisal Agencies and Appraisers Source: http://www.doksinet Article 6 Fund appraisal agencies are required to become a member of the SAC.The SAC shall make rigid self-disciplinary rules, practicing norms, admission requirements and admission procedures for fund appraisal agencies. A fund appraisal agency shall, within 30 workdays after these Measures come into force or 30 workdays after

it starts fund appraisal operations, apply to the SAC for going through the admission procedures according to the requirements announced by the SAC. Article 7 A fund appraisal agency shall submit written materials to the CSRC for archival purposes within 15 workdays after acceding to the SAC. The written materials include:1 Its basic information;2. A photocopy of its business license for enterprises as legal persons;3 A list of its fund appraisers and its chief person in charge, their resumes and identity certificates, and photocopies of their certificates for engaging in fund operations;4. An integrated explanation on the theoretical basis, standards and methods for fund appraisal;5. Its internal control rules and business flows;6. A letter of commitment to good faith; and7 Other documents as specified by the CSRC. Article 8 A fund appraisal agency shall have a sound organizational setup and efficient internal control rules, have enough professionals with profound knowledge of the

fund operations and fund appraisal activities, have good and systematic appraisal standards and methods, and have precise business norms. Article 9 The internal control rules of a fund appraisal agency should be able to propel the efficient operation and legal development of the fund appraisal business:1. Having a reliable fund information acquisition system, rigidly managing the database, and guaranteeing the security, authenticity and integrity of fund information;2. Having specified fund appraisal standards, methods and procedures, and establishing and maintaining the information analysis and processing systems on that basis;3. Making and executing rigorous rectification and review proceedings, and guaranteeing the objectivity and accuracy of the appraisal results;4. Establishing a system for the disclosure of fund appraisal standards, methods and procedures, and disclosing the said information in an authentic, accurate, integrated and timely manner;5. Setting up and executing a

rigid, standard documentation system, and properly retaining business data, working papers and other relevant documents;6. Establishing a system for the review and evaluation of fund appraisal standards, methods and procedures, and guaranteeing the consistency of the fund appraisal operations; and7. Establishing rules and procedures for publishing fund appraisal results and making sure that the published fund appraisal results conform to the relevant business norms. Article 10 Fund appraisers should have the qualification for fund operations.“Fund appraisers” refers to persons who engage in the fund appraisal business. A fund appraiser may engage in the fund appraisal business only after he is employed by a fund appraisal agency. No fund appraiser may concurrently practice in two or more fund appraisal agencies.No fund appraisal agency may hire any person with any record of violation of law or discipline to engage in the fund appraisal business. Chapter III Fund Appraisal Business

Article 11 To engage in the fund appraisal business, a fund appraisal agency shall have a sound and systematic theoretical basis, standards and methods. A fund appraisal agency shall develop its fund appraisal methods upon its own research, and may not infringe upon the intellectual property of any other fund appraisal agency.To appraise a fund, a fund appraisal agency shall at least consider:1. The prospectus of the fund, and the investment orientation, investment scope, Source: http://www.doksinet investment methods and benchmarks as stipulated in the fund contract;2. The risk and return characteristics of the fund; and3. The efficiency and consistency of the fund investment decision-making system and the fund investment trading system.To appraise a fund manager, a fund appraisal agency shall at least consider:1. The regulation compliance of the fund management company and its employees;2. The governance structure of the fund management company;3. The stability of the

shareholders, senior managers and fund managers;4 The investment management and research capability; and5. The ability for information disclosure and risk control. Article 12 The classification of funds shall be based on the relevant laws, administrative regulations and the CSRC provisions, and further sub-classification can be made according to the relevant laws, administrative regulations and the CSRC provisions in this regard. Where any classification method not mentioned in the relevant laws, administrative regulations and CSRC provisions is employed, it shall be expressly specified and the reasons shall be given. Article 13 A fund appraisal agency shall file its fund appraisal standards, methods and procedures with the CSRC and the SAC, and announce them to the public at the SAC website, its own website and at least one medium as designated by the CSRC for information disclosure. Where any of the above-mentioned contents is modified, the fund appraisal agency shall timely file and

announce the modification. Article 14 Any agency which engages in the fund appraisal business and discloses appraisal results in public forms may not:1. Appraise funds of different groups on a consolidated basis;2 Rate funds in a group which contains less than 10 funds or rank them by any single indicator;3. Commend any funds (except for money market funds) whose contract has been effective for less than 6 months for excellence or rank them by any single indicator;4. Rate any fund (except for money market funds) or fund manager for a period of less than 36 months;5. Update the rating of any fund or fund manager at an interval of less than 3 months;6. Commend any fund or fund manager for excellence for a period of less than 12 months;7. Rank funds or fund managers under a single indicator for a period of less than 3 months (including the data presentation at a website or consulting system which has the function of clicking to sequence);8. Update the single-indicator ranking of funds and

fund managers at an interval of less than one month; or9. Appraise the asset management plan of a specific client. Article 15 Where a fund appraisal agency has or may have a conflict of interest with an appraisal target, it shall disclose its relationship with the appraisal target in the rating report and the appraisal report and describe the measures it has taken in the process of appraisal so as not to be influence by the conflict of interest. Article 16 A fund appraisal agency shall avoid assigning any person who has or may have a conflict of interest with the appraisal target to appraise the target. Article 17 Fund appraisal reports and other such documents shall declare that the appraisal results do not predict the future performance and should not be taken as fund investment advice. Article 18 The fund appraisal results shall be published in the name of a fund appraisal agency instead of any individual fund appraiser. Article 19 A fund appraisal agency shall retain the fund

appraisal data and materials provided to fund investors and the general public for 15 years from the date when those materials are provided. Chapter IV Quotation of Fund Appraisal Results Source: http://www.doksinet Article 20 No fund manager, fund sales agency or media designated by the CSRC for information disclosure may quote the fund appraisal results provided by an agency which is not a SAC member. Article 21 Where a fund manager, a fund sales agency or a medium as designated by the CSRC for information disclosure decides to cooperate with a fund appraisal agency and quote the fund appraisal results, it shall make a prudential investigation on the fund appraisal agency under Article 9 of these Measures beforehand to check whether the latter’s internal control rules are sound enough to guarantee the efficient operation and legal development of the fund appraisal business.A fund manager, a fund sales agency or a medium designated by the CSRC for information disclosure shall

avoid quoting the fund appraisal results provided by a fund appraisal agency which violates the internal control requirements under Article 9 of these Measures. Article 22 Where a fund manager, a fund sales agency or a medium as designated by the CSRC for information disclosure decides to quote the fund appraisal results, it shall examine the fund appraisal results pursuant to the business norms under Article 14 of these Measures beforehand. If the business norms are violated in any event, it shall ask the fund appraisal agency concerned to make an adjustment or refuse to quote the results. Chapter V Supervision, Administration and Legal Responsibility Article 23 Where any fund appraisal agency or any of its appraisers engages in the fund appraisal business in violation of these Measures, the CSRC shall order it/him to correct, hold a regulatory interview, issue a letter of warning or take other regulatory measures, impose an administrative punishment if the circumstances are serious,

and, if there is any party suspected of being involved in any crime, transfer the case to the judicial organ and subject the liable party to criminal responsibility. Article 24 The SAC shall take disciplinary actions against the violators of the self-disciplinary rules and the practicing norms and, if the circumstances are serious, cancel their membership. Article 25 Fund appraisal agencies shall submit filing documents and annual reports to the SAC pursuant to the relevant SAC provisions. Article 26 The SAC shall set up databases and credit archives for fund appraisal agencies and their appraisers, publish the membership status of fund appraisal agencies in appropriate ways, and set up a system for tracking their fund appraisal behaviors. Article 27 The SAC can inspect the business activities of a fund appraisal agency and its appraisers. The agency under inspection shall be cooperative, and may not disrupt or hinder the inspection. The SAC shall timely report the problems, if any,

found in the process of inspection to the CSRC. Article 28 Where a fund appraisal agency, after acceding to the SAC, engages in the fund appraisal business without filing the relevant materials with the CSRC under Article 7 of these Measures, the CSRC shall order it to correct, and give him a warning or/and impose a fine upon him. For the directly liable person in charge and other directly liable persons, the CSRC shall give him a warning or/and impose a fine upon him. Article 29 Where a fund manager, fund sales agency or medium as designated by the CSRC for information disclosure quotes or publishes the fund appraisal results provided by a fund appraisal agency which is not a SAC member, the CSRC shall order it to correct, hold a regulatory interview, issue a letter of warning or take any other regulatory measure against it, and give him a warning or/and impose a fine upon him. For the directly liable person in charge and other directly liable Source: http://www.doksinet persons,

the CSRC shall give him a warning or/and impose a fine upon him. Article 30 Where a fund appraisal agency, in violation of these Measures, hires any person unqualified for fund appraisal operations, the CSRC shall order it to correct or take any other regulatory measures, and give him a warning or/and impose a fine upon him. For the directly liable person in charge or other directly liable persons, the CSRC shall give him a warning or/and impose a fine upon him. Article 31 Where a fund appraisal agency fails to retain the relevant documents and materials under these Measures, the CSRC shall order it to correct, and give him a warning or/and impose a fine upon him. Article 32 Where a fund appraisal agency commits any of the following acts, the CSRC shall order it to correct, hold a regulatory interview, issue a letter of warning or take any other regulatory measure against it, and give it a warning or/and impose a fine upon it:1. Its internal control rules contravene Article 9 of these

Measures;2. Its fund appraisal standards and methods contravene Article 11 or 12 of these Measures;3. It fails to disclose the fund appraisal standards, methods and procedures as required by Article 13 of these Measures, or fails to operate the fund appraisal business based on the disclosed fund appraisal standards, methods and procedures;4. It is engaged in fund appraisal or discloses fund appraisal results in violation of Article 14 of these Measures;5. It violates the conflict-of-interest prevention rule as described in Articles 15 and 16 of these Measures; or6. It fails to equally treat appraisal targets, debates or defames any other fund appraisal agency or appraiser, or commits any other act of unfair competition. Chapter VI Supplementary Provisions Article 33 These Measures shall come into force on January 1, 2010