Provisional Rules on Entrusted Funds Management of Trust and Investment
1.These rules are formulated according to the "Trust Law of the People's
Republic of China", the " Law on the People's Bank of China of the People's
Republic of China" and relevant provisions in the "Rules on administration of
Trust and Investment Companies" of the People's Bank of China, so as to
standardize entrusted funds management of the Trust and Investment Companies
（TICs） and protect legitimate interests of all the involved parties of the
entrusted funds management.
2."Entrusted Funds Management" in these rules refers to the following
activities:Based on his or her trust in a TIC, a client entrusts his or her
legitimately held funds to the TIC to be managed, used and disposed of by the
TIC on its own name in a way that is in line with the client's will and aimed at
benefiting the beneficiary or achieving other particular goals.Except TICs
established with approval of the People's Bank of China, no other entities or
individuals shall be allowed to engage in trust business unless stipulated
otherwise by laws and administrative regulations.
3.Entrusted funds a TIC obtains shall not be regarded as its liabilities,
neither shall any assets arising from its management, utilization and disposal
of entrusted funds be included in its own assets.
4.A TIC shall abide by following provisions when conducting entrusted funds
management:1） It is not allowed to take deposits in any form or in any disguised
way.2） It is not allowed to issue bonds, or finance and conduct any liability
business by issuing certificate of entrusted investment, certificate of agent
investment, certificate of benefits, certificate of custody of securities or in
other ways. 3） It is not allowed to borrow from abroad.4） It is not allowed to
promise no losses of entrusted funds or guarantee minimum returns of entrusted
funds.5） It is not allowed to promote marketing or publicity through newspaper,
TV, radio or other public media.Any TICs that has violated the provisions above
will be treated as conducting illegal financing activities. Any losses brought
by such irregularities shall be assumed by the investors.
5.When conducting entrusted funds management, a TIC may manage, use or dispose
of entrusted funds separately or collectively according to the terms of
entrustment contract and the will of clients. Separate management, utilization
or disposal of entrusted funds refers to the activity that a TIC accepts
entrustment of a single client and manage and utilize the entrusted funds
separately in an approach determined by the client.Collective management,
utilization or disposal of entrusted funds refers to the activity that a TIC
accepts entrustment of two or more than two clients and manage and utilize the
entrusted funds in an approach determined by the clients or by the TIC on behalf
of the clients.
6.When managing, using or disposing of entrusted funds collectively, a TIC may
accept no more than 200 entrustment contracts （200 inclusive） and the amount of
each contract shall be no less than RMB50000 yuan （50000 inclusive）.
7.When conducting entrusted funds management, a TIC shall sign an entrustment
contract with the client or in other written form according to laws and
administrative regulations to create the entrustment.An entrustment contract
shall contain following contents:1） Objectives of the entrustment.2） Name and
addresses of the client and the trustee.3） Name and addresses of the beneficiary
or the coverage of beneficiaries.4） Denominated currency and amount of entrusted
funds.5） Maturity of the entrustment.6） Management of the entrusted property and
the trustee's authorization of management, utilization and disposal of entrusted
funds.7） Arrangement or specific approach to manage, utilize and dispose of the
entrusted funds.8） Calculation of benefits of the entrustment; when and how the
benefits to be transferred to the beneficiary.9） Tax payments on the entrusted
property; accounting and payment of other costs.10） Calculation of a TIC's
remuneration; intervals and modality of remuneration payment.11） Ownership and
distribution of the entrusted property when the entrustment terminates.12）
Reporting of entrustment affairs.13） Rights and obligations of involved parties
of the entrustment.14） Revealing of risks.15） When there are losses resulted
form the management of the entrusted funds, who is to assume the losses and
how.16） Responsibilities for defaults of the involved parties and resolution of
disputes.17） Other items that involved parties of the entrustment deem necessary
to be included.
8.When conducting entrusted funds management, a TIC shall also sign a
statement with the client on the risks involved in the management and
utilization of entrusted funds apart from the entrustment contract.Such a
statement shall contain following contents:1） Losses resulted from a TIC' s
management and utilization of entrusted funds in compliance with the terms of
the entrustment contract shall be covered by the entrusted property.2） Losses of
entrusted funds due to a TIC's management, utilization and disposal of entrusted
funds in violation of the terms of the entrustment contract shall be first
compensated by the TIC. If the compensation cannot fully cover the losses, the
residue shall be covered by the entrusted property.
9.When the trustee drafts the entrustment contract or other entrustment
documents, he or she shall put following words in bold letters on the top right
of the first page:"When managing the entrusted funds, the trustee shall be
faithful to its duties and fulfill the obligation of being honest, credible,
prudent and efficient. Any risks arising from management of the entrusted funds
in compliance with the terms of this entrustment contract shall be covered by
the entrusted property, which includes property entrusted by the client and
assets arising from the trustee's utilization of that property. Any losses of
entrusted funds due to the trustee's violation of entrustment contract or
improper disposal of entrustment affairs shall be compensated by the trustee."
10.Within the validity period of entrustment documents, the beneficiary may
transfer its beneficial rights from the entrustment to others according to the
entrustment documents.A TIC shall follow needed procedures to process beneficial
rights' transfer of the beneficiary.
11.When conducting entrusted funds management, a TIC shall establish
departments that particularly serve the entrusted funds management, including
departments of entrusted funds utilization and information processing.A TIC
shall appoint different senior managers to head department of entrusted funds
utilization and the department of self-owned funds utilization.
12.When conducting entrusted funds management, a TIC shall appoint an
executive manager and supporting staff to perform the entrustment.A person to be
appointed as executive manager of an entrustment shall have the "Certificate of
qualification for trust business manager" issued by the People's Bank of China.
13.Losses of entrusted funds due to a TIC's management, utilization or
disposal of entrusted funds in violation of the terms of the entrustment
contract shall be compensated by the TIC. The TIC may require its directors,
supervisors and senior management to compensate such resulted losses according
to relevant provisions of the "Company Law of the People's Republic of China".
14.A TIC shall open separate accounts for different entrusted funds. As for
different entrustments, separate accounts shall be maintained in banks, while
separate securities accounts and funds accounts shall be set up in securities
15.When a funds entrustment terminates, the entrusted property belongs to the
person designated by the entrustment document. The TIC shall inform the owner of
the entrusted property in written form to retrieve the entrusted property
according to the entrusted document.Entrusted property that has not been
retrieved shall be kept in custody by the TIC. During the custody, the custodian
shall not use this property, while the benefits during the custody belong to the
owner of the entrusted property. Cost of the custody shall be covered by the
entrusted property in custody.
16.Return of the entrusted property may be conducted in cash payment,
maintaining the original status of the property as it is when the entrustment
terminates, or a combination of these two. In cash payment, a TIC shall encash
the entrusted property before the date of distribution or entrustment
termination as stipulated in the entrustment contract （If there are public
holidays at the moment, the encashment can be deferred accordingly）, and deposit
the cash in the account designated by the entrustment document.In maintaining
the original status of the property as it is when the entrustment terminates,
the TIC shall complete the procedure of transferring the entrusted property to
the owner within the agreed period of time after the entrustment matures.
17.When a funds entrustment ends, the TIC shall prepare a liquidation report
on its entrustment affairs within 10 working days after the ending of the
entrustment and deliver it to the owner of the entrusted property.
18.When conducting entrusted funds management, a TIC shall inform in written
form the person designated by the entrustment document on management of the
entrusted funds as well as uses and earnings of the entrusted property on
quarterly basis or according to the entrustment contract. For entrustment over
one year, the reporting shall be made at least once a year.A TIC shall report
information on entrusted funds management to the People's Bank of China
according to the "Rules on Administration of Trust and Investment Companies".
19.Report of entrusted funds management shall contain following contents:1）
Management, utilization, disposal and earnings of the entrusted funds.2）
Investment portfolio of entrusted funds.3） Profiles of the top 10 projects in
terms of invested amount.4） Explanation of change of the executive manager for
the entrustment.5） Explanation of substantial change of utilization of the
entrusted funds.6） Incidents that involves prosecution or damages to the
entrusted property or interests of the client or the beneficiary.7） Other items
included in the entrustment contract.
20.A TIC shall keep carefully all the information of its entrusted funds
management at least 15 years after the termination of the entrustment.
21.Any TIC that has violated these rules shall be punished by the People's
Bank of China according to the "Rules on Punishment of Financial Irregularities"
and other relevant regulations. If the circumstances are serious, its
eligibility for conducting entrusted fund management business may be suspended
or revoked. As for those involved senior managers, the People's Bank of China
can disqualify them form holding any positions in the trust business for a
specified period of time or even for life. As for staff immediately responsible
for such a violation, his or her qualification for trust business shall be
22.The People's Bank of China is responsible for the interpretation of these