Preface

The China Securities Investment Fund Industry Association (hereinafter referred to as the "Association") issued and officially implemented the revised "Management Rules for Fund Practitioners" (hereinafter referred to as the "Management Rules") and "Provisions on Relevant Matters Concerning the Implementation of the" Management Rules for Fund Practitioners "(hereinafter referred to as the" Implementation Regulations ") on November 24, 2023. Given that this revision involves the integration, modification, and abolition of the self-discipline rules for the management of many fund practitioners (hereinafter referred to as "practitioners"), this article intends to explain the relevant matters of fund practitioner management in the form of a Q&A, in order to provide useful references for private fund managers and fund practitioners.

What are the employees constrained by the Management Rules?

The employees referred to in the Management Rules refer to personnel engaged in fund business activities in the name of the institution, including formal employees who have established labor relations with the institution and other personnel who have established labor relations or dispatched labor to the institution. Among them, institutions refer to:

1. Public fund managers and securities and futures operating institutions engaged in private asset management business;

2. Private fund managers registered with the association;

3. Fund custodian;

Fund service institutions engaged in fund sales, sales payment, share registration, valuation, investment consulting, evaluation, information technology system services, and other businesses

Which practitioners should register and obtain the qualification for fund industry?

According to the Management Rules, personnel who should be registered and obtain qualifications for fund practice include the following five types of personnel:

1. Professional personnel engaged in fund sales, product development, research and analysis, investment management, trading, risk control, share registration, valuation accounting, settlement and settlement, supervision and audit, compliance management, information technology, financial management, etc. related to fund business among public fund managers, securities and futures operating institutions engaged in private asset management business, and private securities investment fund managers, including management personnel from relevant business departments;

2. Senior management personnel such as the legal representative, executive partner or their appointed representative, compliance and risk control person of private equity (including venture capital) investment fund managers, and professionals engaged in private fund fundraising business;

3. Professional personnel engaged in fund clearing, review, investment supervision, information disclosure, internal audit and monitoring related to fund business among fund custodians, including management personnel from relevant business departments;

4. Professional personnel engaged in fund sales, sales payment, share registration, valuation, investment consulting, evaluation, information technology system services related to fund business in fund service institutions, including management personnel from relevant business departments;

Other personnel required by laws, administrative regulations, China Securities Regulatory Commission, and associations to obtain professional qualifications.

What are the qualifications that individuals applying for the registration of fund practitioners should meet?

According to the Management Rules, personnel applying for the qualification to register funds should meet the following conditions:

1. Good conduct and professional ethics;

2. Passed the fund industry examination or met other conditions stipulated by the association;

3. Employed by the institution;

4. Has not been sentenced to criminal punishment in the past three years;

5. There is no situation as stipulated in Article 15 [1] of the Securities Investment Fund Law;

6. Has not had its fund practice qualification revoked by the China Securities Regulatory Commission or its association in the past 5 years;

7. Has not been banned by financial regulatory authorities or industry self regulatory organizations, or the enforcement period has expired;

8. Other conditions stipulated by laws, administrative regulations, China Securities Regulatory Commission, and associations.

Individuals applying for registration of professional qualifications who are exempt from all or part of the subjects of the fund industry examination shall comply with relevant regulations, possess the professional abilities required for engaging in fund business activities, master the relevant professional knowledge of fund business activities, and have not been subject to administrative penalties or regulatory measures by financial regulatory authorities or self disciplinary measures by financial industry self regulatory organizations in the past 5 years.

Applicants of fund sales institutions who meet the regulations and do not meet the requirements of "passing the fund industry examination" or other conditions stipulated by the association, and pass the special training recognized by the association and assessment in accordance with the regulations, shall be deemed to have temporary qualifications for registration within 2 years from the date of qualification. Employees who have registered temporary professional qualifications and meet relevant regulations can apply for conversion to professional qualifications.

What prohibited behaviors do practitioners engage in during their practice?

According to the Management Rules, this revision has added six new prohibitions for fund practitioners:

What are the main self-discipline management measures for personnel applying for fund industry qualifications, those with fund industry qualifications, and their institutions?

Chapter 3 of the Management Rules provides specific and clear provisions on the legal responsibilities of each subject who violates the regulations. The self-discipline management measures for personnel applying for fund industry qualifications, personnel with fund industry qualifications, and their institutions include but are not limited to the following:

1. Personnel applying for fund industry qualifications who apply or handle related business through improper means will not be registered; Those who have completed registration should be deregistered, and depending on the severity of the situation, they will not be accepted for professional qualification registration within 1-5 years and will be added to the blacklist.

2. If a person with the qualifications for fund practice violates the code of conduct, they will be subject to self-discipline management measures or disciplinary measures depending on the severity of the situation.

For institutions that fail to fulfill the main responsibility of managing employees as required, the association will take self-discipline management measures or disciplinary measures based on specific circumstances and the severity of the situation. The directly responsible supervisors and other directly responsible personnel will be seriously dealt with, and self-discipline management measures or disciplinary measures will be taken against them.

How can individuals applying for fund professional qualifications apply for registration of fund professional qualifications through examination?

According to the Implementation Regulations, if an applicant is hired by an institution, they can pass the examination and apply for the registration of fund professional qualifications by the employing institution. The "exams" include the fund industry exam and other exam scores recognition:

1. Fund Industry Examination

The fund industry examination sets up regulatory and professional subjects:

(1) Regulatory subjects, namely subject one "Fund Laws, Regulations and Professional Ethics";

(2) Professional subjects, including subjects 2 "Fundamentals of Securities Investment Funds" and subjects 3 "Fundamentals of Private Equity Investment Funds".

When the applicant registers for the fund industry qualification through the fund industry examination, they should pass subject one and also pass corresponding subjects two or three according to the type of fund business they are engaged in, as follows:

(1) Subject 2: Practitioners engaged in public fund management, private asset management of securities and futures operating institutions (excluding equity), securities private fund management, fund custody, and various securities fund services;

(2) Employees engaged in various non securities private fund management businesses through subjects 2 or 3;

(3) Subject 3: Private equity asset management plan investment manager engaged in equity investment in securities and futures operating institutions, and practitioners who only engage in private equity fund service business in various fund service institutions.

2. Recognition of other exam results

(1) Fund practitioners who have obtained basic knowledge of the securities market and securities investment funds, or subject one and securities investment funds, can apply for the registration of fund professional qualifications;

(2) Senior executives of private equity investment fund managers (including venture capital fund managers) who have passed the "Fundamentals of the Securities Market" and "Securities Issuance and Underwriting" exams can apply for the registration of fund professional qualifications;

(3) Employees engaged in fund sales business who have passed subject one and "Basic Knowledge of Securities Investment Fund Sales" can apply for the registration of fund professional qualifications; Those who pass the exams of Securities Investment Fund or Basic Knowledge of Securities Investment Fund Sales can apply for the qualification to register for fund sales business.

Applicants who pass the other recognized subject exams mentioned above and apply for the registration of fund industry qualification or fund sales business qualification with the association for the first time shall complete no less than 30 hours of follow-up vocational training within 2 years before registration.

What recognition methods can individuals applying for fund professional qualifications register for fund professional qualifications?

According to the Implementation Regulations, in addition to passing the fund industry examination or other recognized subject examinations in accordance with relevant regulations, there are also three ways to recognize fund industry qualifications:

1. Other qualification recognition both domestically and internationally. If a person applying for the qualification to work in the fund industry meets one of the following conditions through the subject, they can apply for registration by the employing institution:

(1) Passing the securities industry qualification examination subjects or completing the registration of securities industry practitioners;

(2) The chairman and senior executives of the public fund manager, as well as other directors and supervisors engaged in business management work, and senior executives of the specialized fund custody department of the public fund custodian, possess relevant qualifications for overseas fund industry;

(3) Senior executives of private fund managers who have passed financial related qualification exams such as securities, futures, banking, and licensed financial analysts (CFA), or have obtained qualifications as certified public accountants, legal professionals, asset appraisers, or serve as directors, supervisors, and senior executives of domestic listed companies; Or engaged in asset management related businesses in the past three years, with an average annual scale of assets under management of 10 million yuan or more;

(4) Hong Kong professionals engaged in fund business in mainland China hold the 4th (providing advice on securities)/9th (providing asset management) financial license issued by the Hong Kong Securities Regulatory Commission;

(5) Taiwanese compatriots engaged in fund business in mainland China are required to obtain qualifications as securities investment and advisory salespersons, securities investment analysts, senior securities firm salespersons, trust industry salespersons, or senior financial managers (AFMA) in Taiwan;

(6) Overseas professional talents engaged in fund business within the country have relevant qualifications for overseas funds (overseas fund related qualifications refer to those who have relevant qualifications for fund or asset management, fund sales, etc. in countries (regions) that have signed the Memorandum of Understanding on Securities and Futures Regulatory Cooperation with the China Securities Regulatory Commission, or whose countries (regions) do not require relevant qualifications for practice, but have been engaged in asset management for the past five years Securities investment analysis, fund marketing, and other businesses.

2. Academic qualification recognition. Domestic personnel with a full-time undergraduate degree or above recognized by the national education department may apply for registration by the employing institution after passing the required knowledge and skills assessment organized by their institution or other institutions recognized by qualified local fund industry associations. They do not need to participate in all subjects of the fund industry examination.

3. Recognition of work experience. The proposed senior executives of private equity investment fund managers (including venture capital fund managers) with more than 10 years of work experience in securities, funds, finance, law, accounting, etc. may apply for registration by the employing institution.

It is worth noting that according to the Implementation Regulations, applicants who register their qualifications for fund industry through recognition should also have good professional ethics and integrity records, and have not been subject to administrative penalties or regulatory measures by financial regulatory authorities or self regulatory measures by financial industry self regulatory organizations in the past 5 years. If the applicant registers the fund industry qualification through the overseas industry qualification recognition method, they shall have not been punished by the financial and securities regulatory authorities overseas and meet other conditions stipulated by laws, administrative regulations, and the China Securities Regulatory Commission.

What proof materials are required for each of the three types of fund professional qualification recognition methods?

According to the Implementation Regulations, if the applicant registers the qualification for fund practice through recognition, they shall provide relevant proof materials that meet the recognition criteria. Specifically:

1. Requirements for application materials for domestic and foreign professional qualification recognition: If the applicant registers the fund professional qualification through the domestic and foreign professional qualification recognition method, they shall provide relevant qualification certificates, certificates, or work experience certificates issued by relevant employment institutions. The proof of asset management scale in the past three years should be issued by third-party institutions such as fund custodians and fund service institutions. Institutions should contact the issuing unit that issues qualification certificates and certificates to verify the validity of the certificates, or contact relevant employment agencies to verify employment information.

2. Requirements for application materials for educational qualification certification: If the applicant registers the fund qualification through educational qualification certification, relevant educational certificates should be provided. Institutions should consult the China Higher Education Student Information Network and the website of the China (Ministry of Education) Study Abroad Service Center to verify educational qualifications.

3. Requirements for application materials for professional experience certification: If the applicant registers the fund professional qualification through professional experience certification, they should provide a work experience certificate issued by the relevant employment institution. Institutions should contact relevant employment institutions to verify their employment information, and entrust a law firm registered with the China Securities Regulatory Commission to issue a special legal opinion on whether the applicant meets the conditions for professional experience recognition.

If the provided materials are written in foreign languages, they should be accompanied by a Chinese translation or abstract stamped with the official seal of the institution or the seal of the human resources department. The institution shall carefully verify the relevant certification materials provided by the applicant, and after verification, issue a commitment letter or compliance review opinion that meets the conditions for professional qualification recognition.

Conclusion

The newly revised "Management Rules" and "Implementation Regulations" further strengthen the main responsibility of the management of employees in institutions, clarify the six prohibitive behavior requirements for employees, and add two types of fund professional qualification recognition: education recognition and work experience recognition. They also promote the qualification recognition of overseas fund professionals nationwide, While expanding the channels for obtaining professional qualifications, it also strengthens the subsequent training, guidance, and management education for practitioners. We understand that fund institutions and practitioners should register their fund professional qualifications and manage them during and after compliance in accordance with the new regulations, promoting institutional compliance and professional standardization in the fund industry.