On September 11, the National Association of Financial Market Institutional Investors of China (hereinafter referred to as the "National Association of Financial Market Institutional Investors") announced that the National Association of Financial Market Institutional Investors (NAFMII) interviewed major securities companies and urged them to standardize their investment advisory business.
Specifically, in the course of self-discipline management, the NAFMII found that some securities companies had problems such as controlling customer transactions, mixing proprietary and investment advisory businesses, and adjusting income and benefit transfer between different accounts through disguised capital pools in the process of carrying out investment advisory business serving small and medium-sized banks.
In order to strengthen the regulation of the bond market and promote the smooth operation of the market, the National Association of Institutional Investors recently interviewed major securities companies with large investment advisory business scales, urging them to strictly isolate different business lines, standardize investment consulting business and service methods, and prevent conflicts of interest and moral hazard. Securities companies are required to conduct a comprehensive and serious self-examination of the investment advisory business, report the self-examination to the association within the specified time, and submit all investment advisory agreements. For securities companies that fail to truthfully reflect the problems in their self-examination, the NAFMII will take further self-discipline measures as appropriate.
The NAFMII said that in the next step, financial institutions will be required to file investment advisory agreements with the association, and will recommend that the regulatory authorities strengthen supervision and standardize the business development of institutions for the problems of inadequate internal control and corporate governance of institutional business exposed by securities companies and small and medium-sized banks in the investment advisory business. The NAFMII will continue to strengthen the self-discipline management of transactions in the interbank market, formulate self-discipline rules related to investment advisory business, strengthen the investigation and punishment of violations, and maintain the normal operation and order of the market.
Mainland securities companies carry out bond investment advisory business on a regular basis, and the largest ones are mainly leading securities companies. The bond investment advisory business is subject to the supervision of the relevant financial management and regulatory authorities. Securities companies are required to comply with the Securities Law and other laws and regulations when carrying out bond investment advisory business.
According to the Guidelines for Internal Control of Bond Investment and Trading Business of Securities and Fund Operating Institutions (hereinafter referred to as the "Guidelines"), securities and fund operating institutions shall establish an information technology management system (hereinafter referred to as the "Management System") for the management of bond investment and trading business, and the bond investment and trading business shall be carried out on the management system platform in a unified manner. The management system shall isolate the self-operated, asset management and investment advisory businesses, and securities and fund operating institutions may establish separate management systems for the self-operated, asset management and investment advisory business lines.
Article 14 of the Guidelines stipulates that securities and fund operating institutions shall effectively monitor the transactions between proprietary and asset management accounts and the transactions involving their proprietary and asset management accounts in investment advisory proposals, so as to prevent the transfer of interests, conflicts and risk transmission.
As an important participant in the inter-bank bond market, securities companies need to further strengthen self-restraint, earnestly comply with the relevant regulatory provisions and self-discipline rules of bond trading, standardize the conduct of various businesses, and resolutely oppose illegal benefit transfer.
Source: Financial Times client