(Original title: The China Securities Regulatory Commission released a big announcement! The monetary fund welcomes strong supervision and the fund manager’s salary must not be linked to the scale! More than 200 billion yuan will be included in additional supervision)
On January 14, the China Securities Regulatory Commission solicited opinions from the market on the “Interim Regulations on the Supervision of Important Money Market Funds” (referred to as the “Interim Regulations”), which aim to improve the supervision of important money market funds and protect the legitimate rights and interests of fund share holders.
The “Interim Regulations” clarify the definition and evaluation methods of important money market funds, effectively identify important money market funds, strengthen the additional regulatory requirements for important money market funds, and the risk prevention and supervision and management mechanisms for important money market funds.
Monetary fund investors exceed 500 million, strengthening investment security
In recent years, my country’s public fund industry has developed rapidly, with the overall scale exceeding 25 trillion yuan and the number of investors exceeding 500 million. As an inclusive financial product for cash management, money market funds have the characteristics of high security, good liquidity and low investment costs. They have become an important variety of public funds and actively serve the wealth management of investors.
In view of the large scale of individual money market funds or the large number of investors, in order to further enhance the anti-risk ability of fund managers, enhance product resilience, and ensure the safety and liquidity of investors’ investment, the China Securities Regulatory Commission has studied and drafted the “Interim Regulations”. Put forward more stringent and prudent regulatory requirements for important money market funds. First, clarify the definition and assessment of important money market funds to effectively identify important money market funds; second, clarify additional regulatory requirements for important money market funds to enhance risk resistance; The third is to clarify the risk prevention and control and supervision and management mechanism of important money market funds.
Significant money market funds that meet these criteria
The “Interim Regulations” consist of five chapters and twenty articles, clarifying the definition of important money market funds. Important money market funds refer to money market funds that may have a significant adverse impact on the capital market and financial system due to the large scale of fund assets or the large number of investors and strong correlation with other financial institutions or financial products. fund.
In terms of the scope of assessment, first, it is clarified that if a single fund meets the conditions of a net asset scale of more than 200 billion yuan, or the number of investors is more than 50 million, it should be included in the scope of participation. Money market funds should be aggregated.
The CSRC will evaluate the money market funds reported by the fund managers, and the evaluation criteria include but are not limited to the fund’s net asset value. Including the recent trend of changes in the size of the fund’s net asset value and the potential rise, etc.; the degree of correlation. Including fund leverage ratio and leverage scale, inter-bank business investment balance, etc.; Substitutability. Including the proportion of securities held by the fund in the corresponding market size, the number of fund share holders, the top ten fund share holders and the proportion of shares held, etc.; complexity. Including the ratio of the fund’s portfolio asset realization period to the investor’s redemption period, the proportion of liquidity-restricted assets to the fund’s net asset value, and the potential valuation loss of portfolio assets.
For products whose size and number of investors have not met the above conditions for 3 consecutive months, the CSRC may remove them from the list of important money market funds.
Fund manager compensation and incentives must not be linked to scale
The Interim Regulations specify additional regulatory requirements for important money market funds. From the aspects of business investment philosophy, risk management, personnel and system configuration, investment ratio, transaction behavior, scale control, application and redemption management, sales behavior, risk reserve accrual, etc., fund managers, custodians and fund managers of important money market funds. Sales agencies put forward stricter and more prudent requirements than conventional funds.
The Interim Regulations clarify that fund managers should comprehensively and prudently evaluate the impact of important money market funds on investors and financial markets, follow long-term and stable operation and investment philosophy, and ensure their own investment research, staffing, system operation, customer service, and risk management. The level of capability in management and crisis response shall match the management scale of important money market funds, and the fund scale shall not be blindly expanded. The assessment, evaluation, remuneration and rewards of the senior management personnel, fund managers and other relevant personnel of the fund manager shall not be directly or indirectly linked to the size of the fund. Fund custodians shall effectively perform their fiduciary duties, and prudently and strictly supervise the investment operations of important money market funds.
At the same time, fund managers should establish and improve the risk management system of important money market funds in a targeted manner, set stricter and prudent risk control requirements, and increase the frequency of stress tests. Fund managers shall improve the investment management mechanism, comprehensively strengthen internal credit rating management, and have timely and sufficient research support for investment targets and relevant decisions. The fund manager shall allocate special personnel for investment, research, trading, risk control, compliance, operation, audit and other positions for important money market funds. The personnel in relevant positions shall have more than 3 years of working experience in the position, and the fund managers of important money market funds shall Not less than 2 people.
In terms of investment indicators, the investment operation indicators of important money market funds should hold securities issued by a company whose market value should not exceed 5% of the fund’s net asset value; the internal credit rating of financial instruments such as bonds, asset-backed securities, bank deposits, and interbank certificates of deposit, etc. And the internal credit rating of the counterparty of the bond reverse repurchase transaction shall be the highest; the total balance of the bond reverse repurchase transaction with private asset management products as the counterparty shall not exceed 10% of the fund’s net asset value, and the internal credit rating of the relevant pledged bonds shall be It is the highest level and is included in the ratio of 5% in this article; among which, the balance of reverse repurchase transactions of bonds of the same counterparty shall not exceed 1% of the net asset value of the fund; cash, treasury bonds, central bank bills, policy financial bonds and The proportion of other financial instruments due within 5 trading days shall not be less than 20% of the fund’s net asset value; the total active investment in restricted liquidity assets shall not exceed 5% of the fund’s net asset value, and bank deposits with a deposit period shall not exceed the fund’s assets 50% of the net value; the average remaining term of the investment portfolio shall not exceed 90 days; the total assets of the fund shall not exceed 110% of the net assets of the fund.
Among them, those that meet the special investment indicators, that is, if the net asset value of the fund exceeds RMB 500 billion for 20 consecutive trading days, shall also meet the requirements of two aspects within 3 months. First, the average remaining period of the investment portfolio shall not exceed 60 days; Bond repurchase transactions are not allowed under normal market conditions.
In terms of transaction behavior, the “Interim Regulations” clearly stipulate that fund managers should strengthen the management of the transaction behavior of important money market funds, take effective measures to ensure that the normal transaction order of the market is not adversely affected, and must not abuse the market position and bargaining of important money market funds. ability, must not suppress counterparties or financing entities, and must not crowd out competitors with predatory and discriminatory pricing.
Strengthen the liquidity management of important cargo bases
The Interim Regulations clarify that fund managers should take effective measures to strengthen liquidity management of important money market funds, optimize the structure of fund share holders, and strengthen fund scale management and control.
The first is to prudently confirm large-amount subscription applications to avoid the situation where the shares held by a single investor exceed 5% of the total fund shares after accepting the subscription application; if the shares held by a single investor exceed 5% of the total fund shares, the fund manager shall Make binding arrangements with relevant investors in advance on their redemption behavior, including but not limited to measures such as the net redemption share in a single day shall not exceed 5% of the total fund share, and delaying the payment of part of the redemption monies;
The second is to proactively understand and analyze investors’ potential redemption needs in a timely manner, measure the impact of asset realization on product operation and market order, and adjust liquid assets in advance to smoothly respond to investor redemption;
The third is to prudently confirm the application for huge redemption in accordance with laws and regulations, and report to the CSRC on the day when the huge redemption occurs;
Fourth, according to the principle of protecting the interests of fund share holders to the greatest extent possible, if necessary, it may be possible to set the upper limit of the single investor’s single-day subscription amount, the upper limit of the fund’s single-day net subscription ratio, determine the size of the accepted subscription applications based on the scale of redemption applications, and suspend Scale control measures such as fund subscription.
In terms of publicity, the CSRC requires that investors should comprehensively and clearly disclose the investment risks of important money market funds, and not one-sidedly publicize the scale, market share, fund managers, historical performance and convenience of redemption of important money market funds. Discriminatory sales arrangements shall not be implemented against other funds. The ratio of risk reserves drawn by fund managers and fund custodians from the management fees and custody fees of important money market funds each month shall not be lower than 40% and 20%, respectively. Fund sales agencies shall establish a risk reserve mechanism for important money market funds, and the proportion of risk reserves drawn from the total sales income of important money market funds every month shall not be less than 20%.
In addition, the “Interim Regulations” also clarified the risk prevention and control and supervision and management mechanisms of important money market funds. Fund managers and relevant market entities are required to jointly formulate reasonable and effective risk response plans, and make arrangements for risk disposal matters in advance. It stipulates the risk disposal team mechanism in the case of major risks, and the risk disposal responsibilities and requirements of market entities such as fund managers. The fund manager’s own funds, risk reserves, major shareholders and other sources of funds for disposal under different circumstances are stipulated.