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Text | Li Delin

The independent director's name is on the list, but his opinion is not included in the company's regular report. If the company has problems, who will be responsible? In the Kangmei Pharmaceutical fraud case, the five independent directors were ordered by the court to pay 360 million yuan in compensation, which made many independent directors sleepless at night. They took the money from selling cabbages, but in the end they had to pay and lose everything? In addition to listed companies, public funds also have an independent director system. Now in the report of Chunhou Fund, the board of directors has collectively lost their voice. Where have they gone?

Chunhou Fund was established in 2018 and is a public fund under the individual system. As of the end of the second quarter of 2024, under the statistical caliber of non-consolidated calculation of shares, there are 44 funds under management with a management scale of 35.294 billion. It ranks 95th among public funds and top five among public funds under the individual system. As of June 30, Chunhou Fund had no harvest in the first half of 2024, and no new funds were issued. What is more striking is that since the 2023 annual report and thereafter, the shadow of the board of directors has disappeared in the regular reports of Chunhou Fund's products.

On July 19, Chunhou Xinze Flexible Allocation Hybrid Securities Investment Fund (hereinafter referred to as "Chunhou Xinze") announced its second quarter report. The fund is jointly managed by two fund managers, Liao Chenxuan and Xue Lili, of whom Xue Lili is also the deputy general manager of Chunhou Fund. The "Important Notice" of this quarterly report is different from others. It says: The fund manager guarantees that the information contained in this report does not contain false records, misleading statements or major omissions, and bears individual and joint liability for the authenticity, accuracy and completeness of its content.

Opening Chunhou Xinze's quarterly report for the same period of 2023, the "Important Notice" says: The board of directors and directors of the fund manager guarantee that the information contained in this report does not contain false records, misleading statements or major omissions, and bear individual and joint liability for the authenticity, accuracy and completeness of its contents. Until the fourth quarter report of 2023, Chunhou Xinze's "Important Notice" had the guarantee of the board of directors and directors. But in the annual report of 2023, the guarantee of the board of directors and directors disappeared.

Whether it is a public fund or a listed company, because they have to face hundreds, thousands, or even tens of thousands of public investors, regular reports are an important window for investors to observe funds or listed companies. The board of directors, as the decision-making body, guarantees the authenticity, accuracy and completeness of quarterly reports, annual reports, etc., which becomes an important basis for investors' decision-making. Once a fund or listed company has false records, misleading statements or major omissions, the directors need to bear joint and several liability. Kangmei Pharmaceutical is a typical case.

What is incredible is that the change in the disclosure of Chunhou Xinze's regular reports is not an isolated case, and all its products have the same problem. The fourth quarter report of 2023 has the guarantee of the board of directors and directors, but in the annual report of 2023, there is only the guarantee of the fund manager. What is a fund manager? It can be translated as a fund company. From the annual report of Chunhou Fund in 2023 to the current regular reports, the fund manager bears joint and several liability, which means that no specific person is responsible.

Who is responsible for the fund's regular reporting?

As an important part of the capital market, public funds are subject to supervision. Both institutional and individual public funds must comply with the "Securities Investment Fund Information Disclosure Content and Format Standard No. 4 - Content and Format of Quarterly Reports" (hereinafter referred to as "No. 4 Standard") and "Securities Investment Fund Information Disclosure Content and Format Standard No. 2 - Content and Format of Annual Reports" (hereinafter referred to as "No. 2 Standard") issued by the China Securities Regulatory Commission. The board of directors and directors are required to bear individual and joint legal responsibilities for the authenticity, accuracy and completeness of periodic reports, and the annual report also requires the signatures of more than two-thirds of independent directors and is issued by the chairman.

Is Chunhou Fund's periodic report a human error? Or is there something else going on? According to the CSRC's regulatory rules on public fund information disclosure, whether it is a quarterly report or an annual report, a board meeting must be held before the report is released. The board of directors must review the authenticity, accuracy and completeness of the report. In particular, the annual report requires the signatures of two-thirds of the independent directors and the chairman of the board to issue it in person. So has Chunhou Fund held a board meeting since the 2023 annual report?

When formulating Guideline No. 4, the CSRC also specifically emphasized that the provisions of this guideline are the minimum requirements for information disclosure in fund quarterly reports. Fund managers should disclose any information that has a significant impact on investors' decision-making, regardless of whether this guideline has clear provisions. So Chunhou Fund's regular reports are an important basis for investors' investment decisions. Did they issue reports directly without holding a board meeting?

Both Standard No. 2 for annual reports and Standard No. 4 for quarterly reports clearly point out that if individual directors cannot guarantee the authenticity, accuracy, and completeness of the report content or have objections, they should state their reasons and express their opinions separately. Among them, Standard No. 2, because it is related to annual financial reports, also specifically requires that the names of directors who did not attend the meeting be listed separately. Therefore, if Chunhou Fund’s regular reports do not hold a board meeting, it should be clearly stated in the "Important Reminder" of the report that the board of directors and directors did not hold a meeting.

So Chunhou Fund issued the annual report without the guarantee of the board of directors and directors in the periodic report, and even without the signature of two-thirds of the independent directors and the chairman. Did Chunhou Fund think that the CSRC's guidelines were not applicable? When formulating the guidelines, the CSRC also specifically mentioned that if some specific requirements of the guidelines are indeed not applicable to the fund, the fund manager can make appropriate modifications based on the actual situation without affecting the integrity of the disclosure content after approval by the CSRC.

Judging from the information disclosed by public funds, only Chunhou Fund is different. Its periodic reports do not have the guarantee of the board of directors and directors. Did Chunhou Fund hold a board meeting but not announce it? Or did it not hold a board meeting at all and conceal the truth when disclosing the periodic reports? If public funds do not hold a board meeting to review the periodic reports, then what is the responsibility of the board of directors of Chunhou Fund? Is it a formality to deal with supervision? Or is the control of the company's insiders superior to the board of directors?

Chunhou Fund manages more than 35 billion yuan of funds. If the company's board of directors is just a decoration, then where is the standardization and compliance of corporate governance? Who will guarantee the rights and interests of investors? The fund manager Chunhou Fund is a legal person enterprise. There is no specific person to bear joint and several legal liability. So once the company's governance goes off track, who will be responsible? According to the requirements of the fund management company compliance management regulations revised in 2024, fund management companies should implement compliance management through effective internal control measures.

According to public information of Chunhou Fund, the board of directors has 4 directors and 3 independent directors, of which Jia Hongbo is the chairman. This means that the board of directors of Chunhou Fund exists, so why is there no responsibility that the board of directors should bear in the periodic report disclosure? There are two possibilities. One is that the board of directors did not hold a meeting at all, and the other is that it was held but the company did not write it in the information disclosure. If the board of directors held a meeting but did not announce it, then why did General Manager Xing Yuan and Inspector General Shen Zhiting not remind them?

According to the rules of public funds, the general manager of the fund manager is responsible for comprehensively promoting and improving the effectiveness of the company's compliance management; the inspector general is responsible for guiding the compliance management department to carry out compliance management work, and should also focus on whether the information disclosure of the fund and the company is true, accurate, complete and timely, and whether there are false records, misleading statements or major omissions. Xing Yuan, the largest shareholder and legal representative, and Shen Zhiting, who joined the company in April 2023, did not notice the problem with the report disclosure?

Now the board of directors of Chunhou Fund is speechless. Is it that the entire board has lost control? Or is it that the insider control overrides the board of directors? The new "Company Law" that came into effect on July 1 requires financial institutions to establish an effective decision-making, execution, and supervision check and balance mechanism, and strengthen the decision-making mechanism of the board of directors to prevent major shareholders or actual controllers from abusing control. The directors of Chunhou Fund no longer guarantee regular reports. General Manager Xing Yuan and Inspector General Shen Zhiting should give investors a public explanation.

According to Article 72 of the Company Law, if Jia Hongbo, the chairman of Chunhou Fund, cannot convene and preside over the board of directors, or cannot perform the duties of the chairman, in the absence of a vice chairman, Chunhou Fund should have a director jointly nominated by more than half of the directors to convene and preside over the meeting. If the board of directors does not act, or has become a decoration, the supervisory board of Chunhou Fund can require directors and senior management to submit reports on the performance of their duties in accordance with Article 80 of the Company Law.

Whether it is the Company Law or the series of administrative rules and regulations specifically implemented by the China Securities Regulatory Commission for public funds, they are all aimed at strengthening the corporate governance of public funds. If the board of directors and directors cannot perform their duties normally, once the public funds that manage tens of billions of funds lose effective mutual restraint and mutual supervision, the company's management rights will be too concentrated in internal managers or shareholders. They can easily seek more self-interest, which in disguise increases the risk of infringement of investors' rights and interests.

The board of directors of public funds collectively lost their voice, and the periodic reports disclosed publicly did not comply with regulatory rules. During the two sessions, Wu Qing, chairman of the China Securities Regulatory Commission, pointed out that it is necessary to comprehensively review and speed up the filling of the shortcomings and weaknesses in supervision in various fields, entities, and links such as the stock market, bond market, futures and derivatives market, strengthen early correction of problematic institutions and companies, and deal with various risks as soon as possible. I believe that supervision will not allow the internal governance of Chunhou Fund to get out of control outside the regulatory rules. Faced with the speechlessness of the board of directors of Chunhou Fund, perhaps, ordinary people will say that they are all acting with cramps in their legs, how can they step down?