China Securities Regulatory Commission (CSRC) is reportedly planning to let select brokerages’ asset management units set up private equity funds as early as this year.
CSRC did not respond to requests for comment by press time.
A number of securities firms have been in talks with CSRC and the regulator is also in the process of drafting relevant rules that would allow Chinese brokerages to raise money, according to a Reuters report.
The move is seen as broadening brokerages’ revenue streams, reducing their reliance on trading commissions, Reuters said. It also reflects CSRC’s ambition to put more weight in China’s booming private equity industry.
“Private equity funds could be a welcome innovative business that could attract new clients and fuel asset growth at brokerages,” Zhao Xianghuai, analyst at Ping An Securities, was quoted as saying in Reuters.
Currently, select brokerages are able to invest directly in unlisted companies.
In 2007, CSRC launched a pilot programme under which two securities firms, CITIC Securities and China International Capital Corporation, were allowed to launch direct investment activities in unlisted companies.
In early 2008, the regulator laid out certain conditions for securities firms wanting to invest in direct private equity. Under the regulation, securities firms can only invest up to 15 percent of their net worth in direct private equity, and they can only make investments through a subsidiary that operates as a separate company.
Other brokerages that have been granted approval to invest in direct private equity include Huatai Securities, Guosen Securities and Haitong Securities.