In order to enrich overseas wealth management products and promote the development of the overseas wealth management, the China Banking Regulatory Committee (“CBRC”) promulgated the Notice of the Adjustments to the Investment Scope of Overseas Wealth Management Business of Commercial Banks on behalf of Clients (the “Notice”) on May 10, 2007. According to the Notice, commercial banks are allowed to directly invest in overseas stocks and related structural products on behalf of clients. However, commodities-based derivative products, hedge funds and debt securities with credit ratings below BBB as rated by an international credit rating agency are still forbidden for the overseas investment made by commercial banks on behalf of clients (the “Overseas Investment”).

According to the Notice, the commercial banks shall meet the following six requirements on the Overseas Investment in stocks:
1. The stocks to be invested shall be traded in an overseas stock exchange;
2. The aggregated investment in stocks shall not exceed 50% of the total net asset value of single overseas wealth management product while the investment in a stock shall not exceed 5% of the total net asset value of single overseas wealth management product;
3. The minimum investment by a client shall not be less than RMB300, 000 (or equivalent foreign currency);
4. The client shall have relevant experience in investing in stocks;
5. The overseas investment managers shall have been authorized or licensed by the overseas regulatory authorities which have entered into a memorandum of understanding on regulatory cooperation on overseas wealth management business of commercial banks on behalf of clients (‘MOU’) with the CBRC; and
6. The commercial banks shall only make investment in the stock markets which have MOU with the CBRC.

The Notice also provides requirements of the public offering funds and structural products for commercial banks to select. The public offering funds duly approved, registered or authorized by the overseas regulatory authorities which have MOU with the CBRC can be invested by commercial banks on behalf of clients, and as for structural products, they shall be issued by authorized financial institutions with a credit rating of A or above as rated by an international credit rating agency.

In addition, the Notice sets forth high qualifications for investment management, fund management, client evaluation, marketing and sales of product, information disclosure, client complaints handling, risk management and etc. The Notice emphasizes that commercial banks shall evaluate investors’ professional skills, so as to provide them with more comprehensive understanding of the investment risk in the overseas financial market.