Compliance & Regulation

China to bring in new regulations for asset management

Regulators seek to curb financial risk and break implicit guarantee of returns through new draft regulations

According to Bloomberg, China’s financial regulators have proposed new regulations that will require that financial institutions offer yields based on the net asset value of the products they issue, to reflect the risks and return of the underlying assets, instead of offering a guaranteed principal repayment or rate of return.

New regulations also suggest that closed-end asset management products should have a maturity longer than 90 days and products with longer durations will enjoy lower management fees, that asset-managements products can only invest in one layer of other investment products, and that the leverage (total assets divided by net assets) for publicly-raised funds and private funds will be capped at 140 percent and 200 percent, respectively.

The draft rules were released for public consultation and firms will be given a grace period until June 30, 2019 to comply.