Core Viewpoint - The China Securities Regulatory Commission (CSRC) has released a draft for the revised "Securities Investment Fund Custody Business Management Measures," aiming to reshape the private fund custody industry and prevent "sick custody" practices. The draft includes stricter entry requirements, enhanced risk isolation, and clearer responsibilities for custodians, with feedback due by May 3, 2025 [1]. Group 1: Regulatory Changes - The draft aims to improve the entry threshold for custodians, strengthen their supervisory responsibilities, and clarify the "one custodian to the end" requirement for private securities investment funds [3][6]. - The new regulations are expected to accelerate the clearing of the industry, leading to a stronger competitive landscape where only the most capable custodians thrive [21][22]. Group 2: Custodian Responsibilities - The draft emphasizes the need for custodians to actively supervise and report any significant discrepancies in fund valuations or net asset values on the same day they are discovered [10][11]. - Custodians are required to refuse to execute investment instructions from fund managers that violate laws or regulations, thereby enhancing their supervisory role [10][11]. Group 3: Industry Impact - The new regulations are anticipated to lead to a significant reshaping of the custody industry, with a focus on compliance and professionalization, potentially resulting in the exit of 20% to 30% of smaller custodians within three years [23]. - The draft encourages a concentration of resources among larger custodians, as smaller firms may struggle to meet the new compliance and operational standards [22][23]. Group 4: Transition Period - A three-year transition period is established for existing private funds that do not meet the "one custodian to the end" requirement, allowing them to rectify their compliance issues [7][22]. - The draft also sets forth that custodians must conduct thorough due diligence and verification of the information provided by fund managers, ensuring a higher standard of operational integrity [10][11]. Group 5: Market Dynamics - The new rules are expected to enhance market transparency and investor protection, as custodians will be held to stricter standards of accountability and operational oversight [15][21]. - The shift towards a more regulated environment is likely to favor larger, more established custodians, thereby increasing the competitive pressure on smaller firms [20][21].

Core Viewpoint - The China Securities Regulatory Commission (CSRC) is revising the "Securities Investment Fund Custody Business Management Measures" to address industry issues and promote the standardized and professional development of the custody industry, thereby supporting the high-quality development of the capital market [1][2]. Group 1: Industry Issues - The current custody industry is highly concentrated, with national commercial banks and a few securities companies holding approximately 80% to 90% of public and private securities investment funds [2]. - Some institutions are engaging in activities outside the core business of "securities investment fund" custody, necessitating a clarification of business boundaries [3]. - Certain custody institutions are failing to fulfill their responsibilities adequately, as evidenced by private fund default incidents, highlighting the need for enhanced regulatory requirements [3]. - The existing market exit mechanism is inadequate, lacking clear standards for "non-business" activities, which leads to risks of unauthorized operations [4]. - The current regulations do not fully align with the needs of industry innovation, indicating a need for specific policies for specialized custody subsidiaries [5]. Group 2: Key Measures for Development - The revised measures will enhance entry thresholds by strengthening requirements for substantial operational capabilities and compliance risk management [6]. - There will be a focus on substantial operations and risk isolation, requiring applicants to commit to core responsibilities and ensuring the separation of fund assets from other custody assets [7]. - Custodians will be held accountable for verifying information provided by fund managers and must disclose risks adequately, with clear responsibilities for reporting and settlement [7]. - The exit mechanism will be improved by adding conditions for license cancellation, ensuring an orderly market mechanism [7]. - High-quality custody institutions will be allowed to establish wholly-owned subsidiaries dedicated to custody business, subject to relevant financial regulatory requirements [8]. Group 3: Industry Context and Growth - As of the end of the first quarter of this year, there are 73 institutions with custody qualifications, and the total assets under custody for public funds exceed 33 trillion yuan [9]. - The Industrial and Commercial Bank of China leads with a custody scale of 4.48 trillion yuan, holding a market share of 13.78% [9]. - The overall principle of the revision is to ensure stringent entry, focus on core business, enforce responsibilities, and promote innovation, aiming to enhance the custody industry's standardization and professionalism [9].

Core Viewpoint - The China Securities Regulatory Commission (CSRC) plans to revise the "Securities Investment Fund Custody Business Management Measures" to enhance the responsibilities of custodians and protect investor interests, aiming to improve the regulatory framework and promote healthy market development [1][2]. Group 1: Revision of Custodian Entry Requirements - The revision will tighten entry requirements for custodians, focusing on substantial operational capabilities and compliance risk control, with a minimum net asset requirement of 50 billion yuan for commercial banks and 30 billion yuan for securities firms [3][6]. - The revised measures will increase the total number of chapters from six to seven and the number of articles from 43 to 61, with 25 articles being revised and 18 new articles added [2][3]. Group 2: Addressing Custodian Responsibilities - The CSRC aims to address issues where some custodians are "custodians without management" or "unable to manage," highlighting the need for enhanced due diligence, investment supervision, and information disclosure [5][6]. - Specific measures include strengthening the verification of information provided by fund managers, enhancing client and product entry requirements, and clarifying the responsibilities of custodians in risk disclosure and reporting [5][6]. Group 3: Improvement of Exit Mechanisms - The revised measures will establish a more orderly market mechanism for exiting custodians, detailing conditions for license cancellation and ensuring a smooth transition for custodians who no longer meet entry requirements [6]. - The revision will also allow leading custodians to establish wholly-owned subsidiaries dedicated to custody services, reinforcing the responsibilities of parent companies [6].

Core Viewpoint - The China Securities Regulatory Commission (CSRC) is seeking public opinion on the revised "Securities Investment Fund Custody Business Management Measures," aiming to optimize the fund custody industry, enhance custodian responsibilities, and protect investor interests [1][2]. Group 1: Revised Entry Requirements - The revised measures strengthen the entry threshold for fund custodians, requiring substantial operational capabilities and sustainable business models, with total asset scale or public fund sales ranking among the industry leaders [4]. - The net asset requirement is set at a minimum of 50 billion RMB for commercial banks and 30 billion RMB for securities companies and other financial institutions [4]. Group 2: Focus on Core Responsibilities - The measures emphasize the need for custodians to focus on their primary responsibilities and effectively conduct fund custody business, ensuring that fund assets are kept separate from other custodial assets [5]. - Custodians are required to verify information provided by fund managers and take necessary actions if cooperation is not provided [5][6]. Group 3: Strengthening Custodian Accountability - The revised measures aim to prevent "custody without management" and "ill-managed custody" by clarifying the responsibilities of custodians and enhancing client and product entry requirements [6]. - Custodians must report significant anomalies to the CSRC on the same day they are discovered, reinforcing their reporting obligations [6]. Group 4: Exit Mechanism Clarification - The measures clarify the exit mechanism for custodians, specifying conditions under which a custodian's qualification may be revoked, such as failing to maintain an average fund custody asset scale of 5 billion RMB for 36 consecutive months [8]. - The responsibilities of custodians after termination are detailed, including the appointment of temporary custodians and the responsibilities during the transition period [8]. Group 5: Allowing Subsidiaries for Custody Business - High-quality custodians are permitted to establish wholly-owned subsidiaries dedicated to custody business, provided they meet specific performance and compliance criteria [9]. - The capital requirement for these subsidiaries is lowered to 5 billion RMB, with the parent company required to support the subsidiary's operational responsibilities [9]. Group 6: Transitional Arrangements for Existing Custodians - Existing custodians will be allowed to apply for custody qualifications under the current measures, ensuring a smooth transition to the revised requirements [10]. - Existing private funds that do not meet the new "one custodian" requirement must complete rectification within three years, barring special circumstances approved by the CSRC [11].

Core Viewpoint - The China Securities Regulatory Commission (CSRC) has revised the "Securities Investment Fund Custody Business Management Measures" to enhance regulation, prevent risks, and promote high-quality development in the fund custody industry, while also protecting investor interests [1][2]. Summary by Sections Revision Background - The current custody measures were jointly revised and published by the CSRC and the former China Banking and Insurance Regulatory Commission in July 2020, positively impacting the fund custody industry and strengthening the responsibilities of fund custodians [2]. Key Issues Identified - Recent changes in industry conditions and regulatory environments have revealed new issues, such as increased industry concentration, some custodians deviating from their core business, and an incomplete market exit mechanism for custodians [2]. Main Content of the Revision - **Improved Entry Thresholds**: Strengthening requirements for substantive operational capabilities and compliance risk control, supporting qualified entities with strong potential in the custody field to apply for custody qualifications [2]. - **Enhanced Operational and Risk Isolation Requirements**: Requiring applicants to commit to focusing on their core responsibilities and ensuring the separation of fund assets from other custody assets [2]. - **Increased Custodian Responsibilities**: Custodians must verify the information provided by fund managers, enforce client and product entry requirements to avoid "problematic custody," and clearly disclose risks [2]. - **Improved Exit Mechanism**: Establishing clear conditions for license cancellation, including lack of substantive operations and voluntary deregistration, to create an orderly market mechanism [2]. - **Allowing Establishment of Subsidiaries**: Permitting high-quality custodians to set up wholly-owned subsidiaries dedicated to custody business, subject to relevant financial regulatory requirements [2]. Public Feedback - The CSRC welcomes feedback from all sectors of society and will consider these opinions for further revisions before implementation [3].