The China Securities Regulatory Commission issued the "Measures for the Supervision and Administration of Publicly Offered Securities Investment Fund Sales Institutions" and supporting rules, which will be effective from October 1, 2020. The "Sales Measures" have been significantly revised, and the fund sales market has undergone major changes.
The revision of the "Sales Measures" and supporting rules mainly involves four major contents. The first is to strengthen the licensing access requirements for fund sales activities and clarify the responsibilities of fund sales agencies and related fund service agencies. The second is to optimize the access and exit mechanisms for fund sales institutions and strive to build a fund sales industry ecosystem with orderly advance and retreat and healthy development. The third is to consolidate business standards and institutional management and control, and promote the establishment of a system and mechanism with the interests of investors as the core. The fourth is to improve the supervision of independent fund sales agencies and promote the professional, compliant and steady development of independent fund sales agencies.
The "Sales Measures" are very rich in content. The new regulations first mention the renewal mechanism, introduce a license renewal system for newly registered institutions, and focus on basic business development conditions, compliance internal control systems, non-goods base holdings, etc. indicators, further optimizing the exit mechanism. At the same time, the renewal procedures are further simplified and institutions are not required to submit renewal applications. The dispatched agencies will implement automatic renewal for qualified institutions based on the supervision situation.
In response to the problems reported by the industry of rising customer maintenance fees and eroding the foundation for sustainable development of the industry, the new regulations have carried out differentiated arrangements for trailing commissions and stipulated the upper limit of their proportions. Among them, for the holdings formed by sales to individual investors, the agreed ratio of customer maintenance fees to fund management fees shall not exceed 50%; for the holdings formed by sales to non-individual investors, the customer maintenance fees shall account for 50% of the fund management fees. The agreed ratio shall not exceed 30%. This requirement will help balance the long-term interests of fund sales agencies and fund companies.
The new regulations also adjust the restrictions on the business scope of independent selling institutions. In addition to the sales of public funds, independent selling institutions are allowed to engage in the sales business of private securities investment funds. These regulations respond to the reasonable needs of private securities investment funds to regulate sales through sole sales institutions, and also reserve space for sole sales institutions to sell private equity funds in the future.
The new regulations also particularly emphasize that fund sales agencies need to improve the internal assessment mechanism of fund sales business, include the scale of fund sales retention, investors' long-term investment income, etc. into the assessment and evaluation index system of branches and fund sales personnel, and add The incentive arrangements for continued sales of existing fund products, regular fixed-amount investments and other businesses adhere to the concept of focusing on the interests of investors and long-term investment.
It is reported that the "Sales Measures" are the basic supporting rules of the "Securities Investment Fund Law". They were first released in 2004 and revised twice in 2011 and 2013.
The following is a summary of the key points of the "Sales Measures":
1. Strengthen the requirements for fund sales license access
The "Sales Measures" clarify the fund sales business The connotation and denotation. According to the "Sales Measures", fund sales refer to activities such as opening fund trading accounts for investors, publicizing and promoting funds, handling fund share sales, subscriptions, redemptions, and providing fund trading account information inquiries. It is worth noting that publicizing and promoting funds is also defined as fund sales behavior.
The "Sales Measures" clarify the business boundaries and bottom-line requirements for cooperation between sales agencies and non-licensed Internet platforms, and support fund managers and fund sales agencies to standardize the use of Internet platforms to expand customers.
2. Appropriately adjust the access conditions for independent sales agencies
The "Sales Measures" fully incorporate opinions and suggestions, and make adjustments based on the previously released draft for comments. Rigid requirements such as financial indicators and professional experience for shareholders with more than 5% of shareholders have been appropriately reduced. At the same time, it puts forward requirements for controlling shareholders to improve the governance structure of independent sales agencies, maintain the independence of independent sales agencies, and formulate relevant risk disposal plans; enrich equity management requirements, and put forward clear regulations on equity pledge issues, etc.
Independent fund sales agencies implement “one participation, one control” management. The number of shareholders of independent fund sales institutions and their controlling shareholders and actual controllers shall not participate in more than 2 independent fund sales institutions, and the number of independent fund sales institutions that control them shall not exceed 1. Except for circumstances otherwise stipulated by the China Securities Regulatory Commission.
3. Clarify the business scope of independent sales agencies
The "Sales Measures" release clearly states that, unless otherwise specified by the China Securities Regulatory Commission, independent sales agencies can engage in public funds and private securities investment funds. The sales business covers private equity asset management plans of securities and futures operating institutions, as well as private equity funds registered with the Asset Management Association.
Independent sales agencies may sell private securities investment funds, but may not sell non-standardized investment products, unless otherwise specified by the China Securities Regulatory Commission.
4. Improve the exit mechanism and implement the license renewal system
Optimize the access and exit mechanism of fund sales institutions, and strive to build an industry ecosystem with orderly advancement and sound development. In accordance with the authorization of the Securities Investment Fund Law, institutional arrangements such as business suspension and license revocation shall be strengthened; and mature regulatory experience shall be drawn on to introduce a fund sales business license validity extension system for newly registered institutions to promote the standardized and orderly development of fund sales institutions.
5. The differential arrangement of trailing commissions shall not exceed 50%.
In the supporting rules, regarding the implementation of the "Measures for the Supervision and Administration of Publicly Offered Securities Investment Fund Sales Agencies", Fund Management A person and a fund sales agency may agree in a fund sales agreement to withdraw a certain percentage of customer maintenance fees based on the amount of funds sold by the fund sales agency to pay the fund sales agency related expenses incurred in fund sales and customer service activities.
In response to the industry's concerns about rising customer maintenance fees and eroding the industry's foundation for sustainable development, differentiated regulations have been made on the upper limit of its proportion. For holdings formed by sales to individual investors, the agreed ratio of customer maintenance fees to fund management fees shall not exceed 50%. For holdings formed from sales to non-individual investors, the agreed ratio of customer maintenance fees to fund management fees shall not exceed 30%.
6. The first mention of renewal arrangements
The "Sales Measures" first mention the renewal arrangements of fund sales agencies. The old and new are separated, and the renewal is aimed at new fund sales agencies. Focus on three types of situations. Optimize the procedural arrangements and do not require institutions to submit renewal applications. The dispatched agencies will implement automatic renewal for institutions that meet the renewal conditions based on the supervision situation.
7. Short-term performance promotion is prohibited, emphasizing that "hungry marketing" is not allowed
The "Sales Measures" prohibit short-term performance promotion, and any performance range displayed in fund promotion materials should exceed 6 moon. In addition, arrangements such as standardized fundraising ceilings and proportional allotments can be explained as risk reminders in promotional materials, but they must not be emphasized in different fonts, enlarged font sizes, etc., and must not be used as a sales theme for marketing promotions.
8. Promote long-term investment and put an end to inducing short-term redemptions
The "Sales Measures" require the cultivation of long-term investment, rational investment and fund industry ecology with investor interests as the core.
Fund sales funds should promote the development of regular fixed-amount investment, pension reserve investment and other businesses, promote investors' steady investment, and prevent investors from inducing short-term redemptions and frequent redemptions. In addition, the "Sales Measures" also require fund sales agencies to establish and improve internal business assessment mechanisms and adhere to the concept of focusing on the interests of investors and long-term investment.
9. Support the standardized use of Internet platforms to expand customers
Clarify the business boundaries and bottom-line requirements for cooperation between fund sales agencies and non-licensed Internet platforms, and support the standardization of fund managers and fund sales agencies Use the Internet platform to expand customers.
10. Add a special chapter of "Internal Control and Risk Management"
The "Sales Measures" add a special chapter of "Internal Control and Risk Management", requiring all types of fund sales agencies to improve their coordination with the funds. Internal system for sales business matching.
The "Sales Measures" require that fund sales institutions shall, in accordance with the principle of prudent operation, establish, improve and effectively implement internal control and risk management systems for fund sales business, improve internal accountability mechanisms, and ensure that fund sales business complies with the law. regulations and the provisions of the China Securities Regulatory Commission.
11. Product access management of sales agencies
The "Sales Measures" stipulate that fund sales agencies should conduct prudent investigations and risk assessments on fund managers and fund products, and fully understand the product Investment scope, investment strategy, risk and return characteristics, etc., and establish a product access committee or special group to implement centralized and unified management of sales product access.
12. Deadline for rectification of relevant arrangements during the transition period that do not comply with the new regulations
In order to promote the smooth implementation of the regulations, the "Implementation Regulations" provide sufficient transition for some normative matters after the implementation of the rules Expect. First, a one-year transition period will be given for matters such as staffing of fund sales agencies, transformation of information technology systems, or adjustment of sales documents. Second, a two-year transition period will be given to the business scope and other normative matters of exclusive selling institutions. Among them, if an exclusive sales agency is engaged in the sales of products other than those prescribed by law, during the transition period, the sales volume of relevant products should be reduced in an orderly manner.