In this newsletter, we provide a snapshot of the principal Asian, US, European and selected international governance and securities law developments of interest to Asian corporates and financial institutions.
Asia Developments
SAFE Policy Update
On 26 January 2017, the State Administration of Foreign Exchange (the "SAFE") issued the Notice on Further Promotion of Foreign Exchange Administration Reform and Improvement of the Authenticity and Compliance Review (the "Notice"). The Notice is aimed at relaxing certain foreign exchange inflow controls and strengthening the authenticity and compliance reviews for capital outflows carried out by China's designated foreign exchange banks. The key measures in the Notice include but not limited to (1) permitting funds under Nei Bao Wai Dai (an arrangement under which a borrower can obtain loans outside China using the domestic assets of its Chinese affiliate(s) as security) to be transferred back to China and used domestically, (2) permitting foreign institutions in the free trade zones to use offshore funds domestically after settlement of exchange and (3) requiring domestic entities that plan to make direct investments overseas to submit various supporting documents to verify the authenticity of such investments.
On 27 February 2017, the SAFE issued the Circular on the Relevant Issues of Foreign Exchange Risk Management of Foreign Institutional Investors of China's Interbank Bond Market ("CIBM") (Hui Fa [2017] 5 Hao) (the "Circular") and the associated media Q&A, under which foreign institutional investors of CIBM are permitted to apply for the business of RMB-to-foreign-currency derivatives at qualified onshore financial institutions to hedge their foreign exchange risks. Such foreign institutional investors, as clients, may conclude a foreign exchange derivatives transaction with their settlement agents. The types of the foreign exchange derivative transactions include forwards, swaps, cross-currency swaps and options. Foreign institutional investors and their settlement agents may, at their discretion, choose the type of master agreement to be concluded.
Fund Placement Agent , Administrator and Advisor Are Now Required to Register With AMAC
On 1 March 2017, the Asset Management Association of China ( "AMAC") circulated the Administrative Measures on the Private Investment Fund Service Business (the "Measures"), effective immediately.
The Measures apply to five types of services that could be provided by a servicing institution entrusted by a private fund manager, for a private fund or a private asset management plan issued by a securities or futures operation institution, i.e. fundraising, investment advisory, interest registration, valuation calculation and information technology system services. These services in essence cover the business of fund placement agents, administrators and investment advisors. These service providers are now required to register with AMAC and become members of AMAC. The servicing institutions are required to manage fund and investor assets separately. The Measures, along with the other major self-discipline regulatory rules for private funds issued by AMAC, become part of the framework of self-discipline regulatory rules for the private fund industry in mainland China.
CSRC Investigates and Penalizes the First Cross-border Manipulation Case under Stock Connect
On 10 March 2017, the China Securities Regulatory Commission (the "CSRC") issued its administrative sanction decision in relation to the case of Hanbo Tang's cross-border manipulation of the "Commodities City" (Stock Code: 600415) (the "Case"). The CSRC imposed the most serious administrative sanction permitted by law, confiscating the full amount of illegal gains and imposing a fine of RMB 208,821,180.
The CSRC found that Hanbo Tang, together with his trader Tao Wang, had manipulated the stocks of
"Commodities City", a stock available for trading on Stock Connect, by using three accounts opened in Hong Kong and one account opened in the mainland China, taking advantage of capital and utilizing various ways of manipulation such as spoofing, pushing stock prices up during trading hours, and wash trades, and obtained illegal gains of RMB 41,884,236.
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Disclaimer:
Shearman & Sterling is registered as a foreign law firm in the People's Republic of China ("PRC") and does not provide legal opinions in relation to PRC laws.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
