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Enforcement Letter

 
Organisation: Financial Supervisory Commission
Issue No.: Financial-Supervisory-Securities-Futures-1090365253 
Issue Date: 2020/11/30
Content:     Order of the Financial Supervisory Commission

    Issue date: 30 November 2020
    Issue no.: Financial-Supervisory-Securities-Futures-1090365253

  1. This Order prescribes the time limits, procedures, resolution methods, meeting protocol, and other matters for compliance in convening a beneficial owners meeting pursuant to Article 97, paragraph 1 of the Regulations Governing Futures Trust Funds ("the Regulations").
    1. Any time a meeting of beneficial owners is to be convened, the following shall be reported to the Financial Supervisory Commission (FSC):
      1. Before the futures trust enterprise, beneficial owners, or the fund custodian convenes a beneficial owners meeting, they shall report the reason(s) for convening the meeting to the FSC.
      2. Before beneficial owners themselves convene a beneficial owners meeting under Article 96, paragraphs 1 and 2 of the Regulations, the beneficial owners shall directly file a written application with the FSC, stating the matters to be proposed and the reasons for convening the meeting, and convene the beneficial owners meeting after obtaining the FSC's approval.
      3. When the fund custodian or the trust supervisor is to convene a beneficial owners meeting under Article 96, paragraph 1 of the Regulations, it shall, within 2 days from the day that the futures trust enterprise is unable or fails to convene a beneficial owners meeting, report the convening of the meeting to the FSC, stating the reason(s) for convening the meeting. However, in the case of a meeting to be convened under Article 71, paragraph 3 of the Regulations, the fund custodian shall immediately report to the FSC, and shall promptly convene the meeting after obtaining the FSC's approval.
    2. Beneficial owners meeting notice: Unless otherwise approved by the FSC, 20 days before convening a beneficial owners meeting, the convener shall send by registered mail a meeting notice specifying the meeting date, time, and location, and the reason(s) for convening the meeting or proposal(s) to be put forward, to the FSC, the futures trust enterprise, all beneficial owners, and the fund custodian or trust supervisor, with a copy forwarded to the Chinese National Futures Association.
    3. Method for convening of a beneficial owners meeting: A beneficial owners meeting may be convened in writing or by attendance in person (including attendance by the beneficial owner personally or by a proxy appointed thereby). The convener of a beneficial owners meeting may list electronic transmission as one of the means for exercising voting rights. The methods for exercising voting rights shall be specified in the beneficial owners meeting notice.
      1. When a beneficial owners meeting is convened in writing, a beneficial owner may exercise voting rights in writing or by electronic transmission in accordance with the methods specified in the beneficial owners meeting notice:
        1. When a beneficial owner exercises voting rights in writing, the beneficial owner shall make their declarations in the written documents (including ballots) printed and distributed by the beneficial owners meeting convener, and after affixing their signature or seal matching the original retained specimen thereof, shall deliver the aforesaid documents by mail or by hand to the location designated by the meeting convener. Late documents (including ballots) shall not be included in the calculation of the number of beneficial interest units in attendance.
        2. When a beneficial owner exercises voting rights in writing or by electronic transmission, the beneficial owner's declaration of intention shall be delivered to the designated location by two days prior to the scheduled date of the beneficial owners meeting. If two or more declarations of intention are delivered, the one received first shall prevail, unless an explicit statement to rescind the previous declaration of intention is made in the declaration received later.
      2. When a beneficial owners meeting is to be convened for attendance by beneficial owners in person (including attendance by the beneficial owner personally or by a proxy appointed thereby):
        1. A beneficial owner may exercise voting rights by attending in person or by electronic transmission, in accordance with the methods specified in the beneficial owners meeting. A beneficial owner alternatively may authorize a proxy to attend the beneficial owners meeting by issuing a proxy card printed and distributed by the beneficial owners meeting convener. The proxy card shall be affixed with the signature or seal of the beneficial owner that matches the original retained specimen, as well as the signature or seal of the proxy, shall specify the scope of authorization of the proxy, and shall be accompanied by a photocopy of the proxy's national identification card.
        2. If a beneficial owner who has exercised voting rights by means of electronic transmission subsequently wishes to exercise the voting rights by attending the beneficial owners meeting in person, the beneficial owner shall, two days prior to the scheduled date of the beneficial owners meeting, use electronic transmission to rescind the beneficial owner's previous declaration of intention. In the absence of a timely rescission of the previous declaration of intention, the voting rights exercised by means of electronic transmission shall prevail.
        3. Each beneficial owner who authorizes a proxy to attend a beneficial owners meeting is limited to issuing a single proxy card to a single proxy. Five days prior to the convening of the beneficial owners meeting, the proxy card shall be delivered to the location designated by the beneficial owners meeting convener. When two or more proxy cards are delivered, the one received earlier shall prevail. Notwithstanding the foregoing, this provision shall not apply if a declaration is made to void the earlier proxy card.
        4. After the delivery of the power of attorney of a proxy to the designated location, if the beneficial owner who issued the proxy subsequently wishes to exercise the voting rights by attending the beneficial owners meeting in person or by means of electronic transmission, the beneficial owner shall give a proxy rescission notice to the convener of the beneficial owners meeting in writing by two days prior to the scheduled date of the beneficial owners meeting. In the absence of a timely rescission of the proxy, the voting rights exercised by the authorized proxy at the meeting shall prevail.
        5. If a beneficial owner has exercised voting rights via electronic transmission, and has also authorized a proxy to attend the beneficial owners meeting on the beneficial owner's behalf, then the voting rights exercised by the attending authorized proxy for the beneficial owner shall prevail.
      3. A beneficial owner who exercises voting rights by means of electronic transmission shall make a declaration of intention with respect to each motion on the electronic form prepared by the convener of the beneficial owners meeting, and the beneficial owner's declarations of intention shall be delivered to the designated location by two days before the scheduled date of the beneficial owners meeting. If no declaration of intention is made, the beneficial owner shall be deemed to have waived the voting rights with respect to that motion.
      4. A beneficial owner who exercises voting rights by means of electronic transmission shall be deemed to have waived the beneficial owner's voting rights in respect of any extemporary motion(s) and/or amendment(s) to the contents of the original proposal(s) at that beneficial owners meeting.
      5. When voting rights at a beneficial owners meeting are exercised by means of electronic transmission, matters related to the electronic voting shall be outsourced for handling by a securities central depository enterprise or other institution approved by the FSC.
    4. Meeting procedures for beneficial owners meetings:
      1. The chairperson of a beneficial owners meeting shall be appointed by the convener of the beneficial owners meeting. If the meeting is convened by beneficial owners themselves, the beneficial owners shall elect a chairperson from among themselves.
      2. A beneficial owners meeting may not be held unless attended by beneficial owners representing one-half or more of the total number of issued beneficial interest units.
      3. If a beneficial owners meeting is convened in writing, when a beneficial owner exercises voting rights in writing, the written documents (including ballots) shall be delivered to the designated location. Late documents (including ballots) shall not be included in the calculation of the number of beneficial interest units in attendance.
      4. A beneficial owner that mails back written documents (including ballots) exhibiting any of the circumstances listed below may not be deemed to have attended the beneficial owners meeting in accordance with requirements:
        1. The beneficial owner has failed to affix a signature or seal.
        2. The signature or seal of the beneficial owner does not correspond to the original retained specimen, or cannot be identified as corresponding to the original retained specimen.
        3. The beneficial owner has not used the written documents (including ballots) printed and distributed by the beneficial owners meeting convener.
      5. Upon receiving the written documents (including ballots), the meeting convener or the registrar and transfer agent for beneficial interest certificates appointed by the convener shall affix document receipt stamps recording the date thereupon, and shall compile a register of beneficial owners, recording their account numbers, full names, and numbers of beneficial interest units. After authenticating and opening the ballots, it shall provide them to the on-site voting monitor(s) for review, and to the recording secretary for tallying.
      6. To authenticate and open beneficial owners meeting ballots, the recording secretary shall record in the register of beneficial owners the written or electronic declarations of intention, and the numbers of voting rights represented thereby. After all the ballots are recorded, the recording secretary shall announce the results of tallying, and report them to the monitor(s) for recordation.
    5. The matters listed below may not be raised as an extraordinary motion at a beneficial owners meeting:
      1. A switch to a different futures trust enterprise or fund custodian.
      2. Termination of the futures trust deed.
      3. Increasing the management or custodial fees of the futures trust enterprise or fund custodian.
      4. Materially amending the basic policies or scope of futures trading or investment in futures-related spot instruments by the futures trust fund.
    6. Resolutions of beneficial owners meetings:
      1. Each beneficial interest unit held by a beneficial owner carries one voting right. Voting shall be done by the casting of ballots.
      2. The procedures for conducting a beneficial owners meeting vote in writing and the standards for determining the validity of voting ballots shall be drafted by the Chinese National Futures Association and submitted to the FSC for approval.
    7. Resolutions of beneficial owners meetings:
      1. Adoption of a resolution of a beneficial owners meeting, unless otherwise specified by the futures trust deed, shall require the approval of one-half or more of the total number of votes of the beneficial owners in attendance at a meeting attended by beneficial owners representing one-half or more of the total number of issued beneficial interest units.
      2. Matters put to resolution at a beneficial owners meeting shall be written up in meeting minutes, and the chairperson shall affix his or her signature or seal thereupon. Within 30 days after the meeting, the convener furthermore shall deliver the meeting minutes to the FSC, the futures trust enterprise, the beneficial owners, and the fund custodian or trust supervisor, with a copy forwarded to the Chinese National Futures Association.
      3. The meeting minutes shall record the year, month, day, and venue of the meeting, as well as the chairperson's full name, and the method of deciding resolutions. The minutes shall also give a summary of the essential points of the proceedings and state the results, and shall be retained in perpetuity as long the futures trust fund continues to exist.
      4. The meeting minutes shall be retained at the futures trust enterprise together with the sign-in book for beneficial owners in attendance, register of beneficial owners that sent back written documents (including ballots), and the proxy cards of attending proxies. However, if the beneficial owners meeting is convened in writing, a sign-in book for beneficial owners does not need to be included.
  2. This Order is effective from this day forward. FSC Order No. Financial-Supervisory-Securities-VII-0960073755 of 11 January 2008 is repealed from this day forward.