The China Securities Regulatory Commission (CSRC) has banned ChinaAMC from launching new products effective January 1, and may take further punitive measures if Citic does not take corrective action by April 1, Citic Securities said in a statement to the Shanghai Stock Exchange.
China's securities regulator bars any single shareholder from owning more than 49 percent of a fund house, and had urged Citic Securities to transfer some China AMC shares by the end of last year to conform to fund management rules.
Citic Securities could get around the requirement to sell 51 percent of China AMC by choosing to sell a 25 percent stake in the unit to a foreign investor to form a joint venture, which would enable it to retain a 75 percent stake.
Selling a major stake in ChinaAMC would hurt Citic Securities' performance, as the unit, which manages more than 260 billion yuan ($38 billion) as China's biggest fund management firm, is a big contributor to Citic Securities' revenue.
China AMC's fund management income reached 1.25 billion yuan in the first half of 2009, while its income from selling funds hit 67.8 million yuan, according to the Shanghai Securities News.
(Reporting by Samuel Shen and Jason Subler; Editing by Jonathan Hopfner)