Strengthen credit disclosure and penetrating supervision, and wealth management sub-frequently collects large fines

Recently, the State Administration of Financial Supervision and Administration has intensively disclosed a number of fines for wealth management business, and the fined institutions involve CCB Wealth Management, Bank of China Wealth Management, CNCBI Wealth Management, CMB Wealth Management, Ping An Wealth Management, and China Merchants Bank. The above-mentioned fines were all issued in late June, and among them, 5 wealth managers were fined a total of 29 million yuan.

According to incomplete statistics from Yicai, since May 2022, the regulator has issued more than 10 fines to wealth management children. In contrast, this fine focuses more on the disclosure violations of the wealth management business and the penetration identification of the underlying assets.

5 wealth managers received another 29 million yuan in fines

Specifically, Bank of China Wealth Management was fined 2.5 million yuan for failing to effectively penetrate and identify the underlying assets, and the maturity date of the non-standard underlying assets was later than the maturity date of the closed-end wealth management products; CNCBI Wealth Management was fined a total of RMB7.5 million for non-standard information disclosure, failure to fulfill its duty of diligence in post-investment management of wealth management business, holding more than 10% of the net assets of a single bond in a single publicly offered wealth management product, and failing to measure the financial assets invested in the relevant wealth management products at fair value.

At the same time, CCB Wealth Management, CMB Wealth Management and Ping An Wealth Management all had problems of failing to effectively penetrate and identify the underlying assets and non-standard information disclosure, among which Ping An Wealth Management also had the situation that the maturity date of non-standard underlying assets was later than the maturity date of closed-end wealth management products, and the fines for the three were 4 million yuan, 8.5 million yuan and 6.5 million yuan respectively.

In addition, China Merchants Bank was also fined 3.5 million yuan for failing to effectively penetrate and identify the underlying assets and non-standard information disclosure in the wealth management business.

It is not the first time that the assets of wealth management positions exceed the prescribed proportion. In mid-June, Chongqing Rural Commercial Wealth Management was fined 1.1 million yuan by the Chongqing Supervision Bureau of the State Administration of Financial Supervision for the reason that the market value of a single security held by all publicly offered wealth management products exceeded 30% of the market value of the securities, and the review of the publicity and promotion materials of wealth management products was not in place.

According to the Puyi Standard report, the fine reveals to a certain extent the deficiencies in the compliance of the bank's wealth management business, especially the problems in information disclosure and identification of underlying assets. "Presumably, the reason [for the fine] may be due to increased regulatory requirements and enhanced investor protections." The report further points out that the transparency of banks' wealth management business is the key to maintaining market confidence and protecting consumer rights.

Puyi Standard believes that in view of the tightening of supervision, it is expected that banks and wealth management subsidiaries will further strengthen internal risk control and compliance management, improve the information transparency of wealth management products, and ensure the effective penetration and identification of underlying assets. In addition, financial institutions need to strengthen staff training to ensure that the new regulatory requirements are understood and implemented to avoid the recurrence of similar violations, while also providing a safer and more transparent investment environment for investors.

In retrospect, as of October last year, the regulatory authorities had issued a total of 27.65 million yuan of fines to Everbright Wealth Management, Bank of China Wealth Management, ABC Wealth Management, CCB Wealth Management, Hangzhou Bank Wealth Management, China Post Wealth Management and ICBC Wealth Management, and the record of wealth management sub-fines at that time was 7.1 million yuan for ICBC Wealth Management. (For details, see the report "ICBC Wealth Management and China Post Wealth Management Received a Total of Over 10 Million Yuan in Fines, Strict Supervision Becomes Normalized")

In November last year, IB Wealth Management was fined 12.4 million yuan for eight violations of laws and regulations, including the transfer of benefits between wealth management products, the illegal use of amortized cost measurement of investment assets of short-term fixed-opening products, and the multi-layer nesting of wealth management products after the purchase of wealth management products, setting a record for wealth management sub-fines again.

Strict financial supervision continues

In fact, since June this year, the trend of strict supervision of asset management products, including wealth management, has continued to emerge. Among them, in mid-June, it was reported that the State Administration of Financial Supervision issued a draft of the Administrative Measures for Product Information Disclosure for some trusts, wealth management companies and insurance asset management, further clarifying the information disclosure requirements for asset management products, involving general information disclosure requirements, product fundraising period information disclosure requirements, product duration information disclosure requirements, etc., while reiterating the prohibition of sexual behavior.

In this regard, an insider of a wealth management subsidiary of a large bank told reporters that the company did receive the relevant documents of the "Administrative Measures for Information Disclosure of Asset Management Products (Draft for Comments)" issued by the State Administration of Financial Supervision in mid-June. According to the analysis of a number of industry insiders, the loopholes in the implementation of the new regulations on asset management will be gradually plugged due to the rectification of the chaos of wealth management and trust cooperation and the reduction of the stock wealth management business of small and medium-sized banks.

Also in June, Yicai learned from the industry that the financial supervision bureau of a place in East China issued the "Notice on Further Strengthening the Compliance Management of the Cooperation Business between Trust Companies and Wealth Management Companies" (hereinafter referred to as the "Notice") to the trust companies under its jurisdiction. The "Notice" points out that there are four problems in the cooperation between trust companies and wealth management companies: first, cooperate with wealth management companies to use the smoothing mechanism in violation of regulations to adjust product returns; the second is to cooperate with wealth management companies to trade risky assets between different wealth management products; the third is to provide a channel for cash management wealth management to invest in low-rated bonds and nested investment deposits in violation of regulations; Fourth, it is necessary to cooperate with the improper use of valuation methods in wealth management products.

The "Notice" requires that the trust institutions within the jurisdiction complete the self-inspection and submit the self-inspection report before the end of June, and at the same time require all institutions to carefully formulate rectification plans, strictly prohibit the addition of the above-mentioned illegal business models, and the stock problems should be completed as soon as possible by requiring the redemption of relevant wealth management products, selling the relevant underlying assets, and negotiating and modifying the cooperation agreement or trust contract.

According to the reporter's understanding, the above requirements are not limited to individual provinces, and some financial insiders in South China told reporters that the company received a notice from cooperative trust institutions in June on cooperating with the investigation and rectification.

Some people in the financial industry told reporters that one of the major backgrounds of the above-mentioned regulatory guidance is that after the sharp adjustment of the bond market in 2022 triggered a redemption wave, the industry has increased the exploration of reducing the fluctuation of the net value of products, which is related to the low tolerance of investors for net value fluctuations, and on the other hand, many consignment channels are forced to put forward relevant requirements due to the pressure of sales and redemption and complaints.

According to the reporter's understanding, the above-mentioned "exploration" includes four aspects of the relatively concentrated problems pointed out by the regulator, such as a number of wealth management products through the purchase of the same trust plan to "make up for the apology" to smooth the income, to achieve "precise control" of the trust income; With the help of trust channels, some wealth management products break through the restriction that cash management wealth management products can only invest in money market instruments; Some wealth management products use a hybrid valuation method excessively.

However, there are many risks associated with the above-mentioned operations, including that the net value of wealth management products does not fully reflect the risk-return fluctuations of the underlying assets, violates the relevant requirements of the new asset management regulations on net-worth management, and is suspected of unfair treatment of investors. Many people in the industry pointed out that with the continuous expansion of the scale of the wealth management market, the urgency of rectifying the related chaos has also increased, and the trend of strict supervision will continue.

(This article is from Yicai)