Asset Manager Fined for Transferring Unused QDII Quotas
China’s foreign-exchange regulator handed out its first penalty to a domestic asset manager for transferring part of its investment quota to ineligible institutions.
Shanghai Haitong Asset Management Co. has been accused of transferring $16.28 million of its quota under the Qualified Domestic Institutional Investor (QDII) program to unqualified institutions between January 2015 and June 2016, the State Administration of Foreign Exchange (SAFE) said in a statement Friday. The asset manager also submitted false materials in its reports to SAFE, the regulator said.
Haitong Asset Management, which obtained a QDII quota of $800 million in January 2015, received a warning and a fine for 7.75 million yuan ($1.17 million), SAFE added.
For two years, China has not issued new quota for domestic institutional investors to legally invest in offshore markets under the country’s capital control, in a bid to stem capital outflows. Existing quotas have become a hot commodity since then, especially amid volatile domestic markets, low money-market rates and last year’s expectations of further yuan depreciation.
Caixin reported earlier that it became a problem for the regulator when non-QDII institutions were buying up existing quotas to relocate their assets for higher returns.
SAFE had said that it reserves the right to confiscate any unused part of a quota older than two years. It also asked companies not to transfer or resell any part of a quota to other institutions. So far, authorities have not reduced any company’s quota as punishment for transferring it to another company.
SAFE said it has also fined Shenzhen-based Lion Fund Management Co. 950,000 yuan for making illicit earnings from currency arbitrage.
The fund manager bought nearly $3 million as a QDII investment, and then exchanged the dollars back to yuan at a cheaper exchange rate against dollar during the day, SAFE said. Lion Fund Management had been granted a QDII quota of $300 million in December 2014.
The QDII program, launched in 2006, has granted $90 billion in investment quotas to 132 qualified institutions through December 2015. It has been considered one of the few official channels for domestic institutions to invest abroad.
Contact reporter Leng Cheng (firstname.lastname@example.org)
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