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Ma Jing/Table Chen Jinxing/Chart

Securities Times reporter Ma Jing

The test outlines for two important positions in securities firms will be significantly revised. Recently, a Securities Times reporter learned from the industry that the China Securities Association has revised and improved the proficiency test standards for senior executives and compliance managers of securities firms in light of the reform and development of the capital market and the achievements of the rule of law in recent years, and has formed two new test outlines, and is currently soliciting opinions from the industry.

It is understood that this revision mainly added new test points related to a sound remuneration system, information security management, protection of small and medium shareholders, programmed trading, and public offering commission rate reform.

Analysts told reporters that the above amendments reflect the regulators' active efforts to improve industry standards, enhance market transparency and protect investors' rights. The series of adjustments will also have a profound impact on the operation model, risk management strategy and selection and training of senior executives of securities firms in the future.

Test Syllabus Revision

Two major characteristics

According to relevant regulations, the China Securities Association is responsible for organizing the level evaluation test of securities company senior executives and compliance officers, and the test results are used as a reference for the appointment of relevant personnel. The current "Outline for the Level Evaluation Test of Senior Managers of Securities Companies" and "Outline for the Level Evaluation Test of Compliance Managers of Securities Companies" were both issued by the China Securities Association in October 2022.

Talking about the reasons for this revision, the China Securities Association said that since 2023, the reform of the stock issuance registration system has been fully implemented, corporate bonds have been included in the unified supervision of corporate bonds, the new "Company Law" has been revised and issued, and the new "Nine National Regulations" have been issued. A number of supporting system rules and policy documents have been released one after another around the main line of risk prevention, strong supervision and high-quality development. The above-mentioned major progress in the construction of the rule of law and major reforms in the capital market need to be included as what senior executives should know and should be able to do, and they should pass the corresponding level test.

Counting by subheadings, the two revised outlines have nearly 100 knowledge points. The reporter found that the revision ideas of this exam outline have two major characteristics:

First, we need to find out the gaps and make them comprehensive and detailed. The two outlines have added, supplemented and improved more than ten policy documents and institutional rules issued since last year, including both the new "Nine National Rules" and other programmatic documents, as well as business rules such as the "Securities Brokerage Business Management Measures", guiding senior executives and compliance managers to establish correct business concepts in terms of ideological understanding, rules and regulations.

Second, keep pace with the times and focus on the main business. The two outlines update the relevant knowledge points such as protection of small and medium shareholders, programmed trading, and private equity management according to the newly revised documents and business rules such as the "Company Law", and include relevant requirements such as information security, risk management, and internal auditing into the assessment. At the same time, according to business needs, knowledge points such as the "Accounting Law and Auditing Law" that are not directly related to compliance management work have been deleted.

Additions and revisions

Five aspects

Specifically, the revisions made by the China Securities Association to the above two test outlines are mainly reflected in five aspects:

First, actively convey the central government’s major decisions and deployments, and urge senior executives to strengthen their understanding of the political and people-oriented nature of the capital market.

Second, implement the requirements of strong supervision. According to the Opinions on Strengthening Supervision of Securities Companies and Public Funds to Accelerate the Construction of First-Class Investment Banks and Investment Institutions (Trial) and the issuance or revision of institutional rules such as the Securities Companies Remuneration Guidelines and the Management Regulations of Two Types of Subsidiaries, the two outlines add the knowledge points that securities companies should correct their institutional positioning, improve corporate governance, strengthen internal control and risk management, improve personnel management and incentives, establish and improve investor protection and shareholder return mechanisms, strengthen internal control of subsidiaries, and establish a sound remuneration system, so as to guide senior executives to establish a correct business philosophy.

The third is to improve the relevant requirements for information security, risk management, internal audit, etc. The two outlines include the recently issued and implemented "Securities and Futures Industry Network and Information Security Management Measures" and other rules into the test scope of the two types of executives, adding the overall requirements for brokerage network and information security management, management responsibilities, emergency response, investor personal information protection, as well as operational risk management, internal audit requirements and other knowledge points, to guide executives to enhance their awareness of information security and risk prevention.

Fourth, based on the new "Company Law" that has been implemented, the relevant knowledge points in the two outlines are supplemented or improved to reflect the new legal revisions closely related to the capital market, such as company shareholders' capital contribution, share issuance and transfer, directors, supervisors and senior managers' loyalty and diligence obligations, protection of small and medium shareholders, listed company governance, and company bond issuance.

Fifth, in the test outline for securities firms’ compliance management personnel, the corresponding requirements are updated according to the changes in the rules of each business line. In this regard, the study of relevant rules such as private placement supervision, program trading, and public offering commission rate reform has been strengthened, and relevant knowledge points have been added. At the same time, the test outline has deleted knowledge points that are not directly related to compliance management work, such as the Enterprise Bankruptcy Law, the Anti-Unfair Competition Law and the Anti-Monopoly Law, the Accounting Law, and the Auditing Law, focusing on the key points of the examination.

since this year

At least 8 brokerage executives were fined

"The adjustment of the examination outline shows the regulator's ability to quickly adapt and respond to market changes, especially in emerging areas such as program trading and private placement supervision." Tian Lihui, dean of the Institute of Financial Development at Nankai University, told reporters that the revision specifically mentioned investor protection and shareholder return mechanisms, showing the regulator's emphasis on protecting investor rights. He also mentioned that the update of the examination outline requires additional education and training for brokerage executives and compliance managers to ensure that they can meet the new job requirements.

In addition to revising the examination guidelines for senior executives and compliance managers, the reporter noticed that regulatory agencies are also continuing to tighten the management responsibilities of senior executives. According to an incomplete review, at least eight senior executives of securities firms have been issued administrative supervision measures this year. Most of these fined executives are responsible for the company's violations, and a few are "breaking the law knowingly".

For example, the China Securities Association recently disclosed seven cases of securities practitioners illegally participating in stock trading. In one case, Xiong Tao, a senior executive of a securities company, made huge profits by directly and indirectly manipulating multiple accounts to conduct large-scale stock transactions, and was eventually banned from the securities market for life.

It is worth noting that some securities firms have already started internal accountability for the fined executives. On July 24, Guodu Securities announced that the board of directors passed a motion to hold the relevant responsible persons accountable for a fine previously issued by the Beijing Securities Regulatory Bureau. The previous announcement showed that Guodu Securities was ordered by the Beijing Securities Regulatory Bureau to make corrections due to problems such as imperfect internal control systems for honest employment. At that time, Yang Jiangquan, general manager of Guodu Securities, and Sun Guannan, then general manager of the Comprehensive Management Department, were issued warning letters for being responsible for the above-mentioned violations.