CSRC solicits public opinions on the "Interim Measures for the Administration of Securities Investment Fund Custody Business (Revised Draft for Soliciting Opinions)"

China Securities Regulatory Commission revised the "Administrative Measures for Securities Investment Fund Custody Business" (hereinafter referred to as the "Custody Measures"), and is now publicly soliciting opinions from the society. The main content includes: improving the access threshold. Strengthening the requirements for substantial business development capabilities and compliance risk control capabilities, and supporting entities with outstanding potential in the custody field and excellent compliance and risk control capabilities to apply for this qualification. Strengthening the requirements for substantial business development and risk segregation supervision. At the application stage, applicants are required to make commitments focusing on their main duties and responsibilities; strengthening the segregation of fund assets from other custody assets. The existing "Custody Measures" were jointly revised and issued by the China Securities Regulatory Commission and the former China Banking and Insurance Regulatory Commission in July 2020, which played a positive role in enriching the fund custody industry ecosystem and strengthening the responsibilities of fund custodians. In recent years, the industry situation and regulatory environment have further changed, revealing some new issues, such as the more obvious trend of industry concentration, individual custody institutions deviating from their business origins or failing to fulfill their responsibilities effectively, and the imperfect market exit mechanism of custody institutions. In order to address these problems from a institutional perspective, the China Securities Regulatory Commission has revised the "Custody Measures" based on a comprehensive summary of practical experiences. The main content includes: first, improving the access threshold. Strengthening the requirements for substantial business development capabilities and compliance risk control capabilities, and supporting entities with outstanding potential in the custody field and excellent compliance and risk control capabilities to apply for this qualification. Second, strengthening the requirements for substantial business development and risk segregation supervision. Applicants are required to make commitments focusing on their main duties and responsibilities at the application stage; strengthening the segregation of fund assets from other custody assets. Third, strengthening the responsibilities of fund custodians. Requiring custodians to verify the information provided by fund managers through necessary means; strengthening customer and product access requirements to avoid "sick custody"; clarifying the application of the "single custody" situation for private equity securities investment funds and related custody requirements; requiring fund custodians to fully disclose risks, not to agree on ways of supervision that prevent fund custodians from fulfilling their duties completely and effectively; strengthening custodian reporting obligations, settlement and delivery responsibilities, etc. Fourth, establishing an exit mechanism. Adding or improving three situations for cancelling licenses, such as not engaging in substantial business development, not continuously meeting access requirements, voluntary deregistration, and establishing a sound market mechanism for orderly entry and exit, while detailing the arrangement after the termination of custodian responsibilities. Fifth, allowing high-quality custodian institutions to establish wholly-owned subsidiaries specialized in custody business. High-quality custodian institutions leading the custodian business are allowed to establish wholly-owned subsidiaries specializing in custody business, and they should also comply with the relevant regulations of the financial regulatory departments. Suggestions from all sectors of society are welcome, and the China Securities Regulatory Commission will carefully study feedback from various parties, further revise and improve, and then implement the revised measures. This article is selected from the official WeChat account "CSRC Releases". Editor: Liu Xuan.