The China Securities Regulatory Commission has published draft revisions to its rules on securities investment fund custody for public comment, aiming to rebalance the fund custody market, strengthen custodian accountability and investor protection, and allow eligible custodians to adjust their organisational structures. The draft would raise the bar for licensing by emphasising substantive operating capability and compliance and risk control, and would require applicants to commit from the application stage to focusing on their core custody responsibilities. It also strengthens risk isolation requirements, including clearer segregation of fund assets from other assets held in custody. Custodian obligations are expanded by requiring verification of information provided by fund managers, tighter client and product onboarding to avoid taking on problematic mandates, clarified requirements for private securities investment funds in “one custodian throughout” scenarios, stronger risk disclosure expectations, and limits on contractual arrangements that would prevent effective oversight. The proposal adds and refines licence revocation and cancellation pathways where a custodian does not conduct business in substance, no longer meets ongoing entry conditions, or voluntarily deregisters, and sets out transition arrangements when custody responsibilities end; it would also permit leading, high-quality custodians to establish wholly owned subsidiaries dedicated to custody business, subject to other financial regulators’ requirements. The CSRC will review feedback and further revise the measures before issuing them for implementation.

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