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the classification and evaluation system for public fund managers is undergoing revision, with compliance requirements ranking first. on september 11, a beijing business daily reporter learned from the industry that the latest institutional supervision situation report (hereinafter referred to as the "report") released recently showed that the relevant departments of the china securities regulatory commission have comprehensively revised the classification and evaluation system for public fund managers, and simultaneously carried out the 2023 classification evaluation work. in terms of content, the report emphasizes more emphasis on compliance risk control, functional performance and investor sense of gain, avoiding "seniority" based solely on business scale; it also mentions relevant requirements for remuneration management. some industry insiders believe that optimizing the classification and evaluation system will help motivate managers to continuously improve themselves by strengthening risk control, optimizing incentive mechanisms, and improving investor experience, strive to improve ratings and overall competitiveness, promote the healthy development of the industry, and improve the overall service level.

avoid seniority based on size

on september 11, a beijing business daily reporter learned that relevant departments of the china securities regulatory commission recently issued the third notice of 2024, which mentioned that the capital market's "1+n" policy document proposed to revise the classification evaluation system for public fund managers, and urge them to establish rational investment, value investment, and long-term investment concepts; improve the classification supervision system for industry institutions, and highlight "supporting the best and limiting the worst."

in order to implement the above-mentioned requirements, further highlight the seriousness, fairness and guidance of the classification and evaluation work, and guide industry institutions to better play the "five functions", the classification evaluation system for public fund managers has been comprehensively revised, and the 2023 classification evaluation work has been carried out simultaneously.

looking back, the new "nine national regulations" issued on april 12 mentioned that we should vigorously promote the entry of medium- and long-term funds into the market, continuously strengthen long-term investment forces, and for the first time propose to revise the classification and evaluation system for fund managers to urge the establishment of rational investment, value investment, and long-term investment concepts.

it is reported that this classification evaluation will place more emphasis on compliance risk control, functional performance and investor sense of gain, avoiding "seniority ranking" based solely on business scale. the overall principles are divided into three aspects. the first is to highlight the institutional position of "compliance risk control first", continue to use compliance risk control scoring as a pre-evaluation procedure for class a managers, and increase the bottom line ratio of compliance risk control pre-evaluation from 10% to 20%; adjust the ratio of class a, class b, and class c managers from 50%, 40%, and 10% to 30%, 50%, and 20%, so that the structural distribution of the evaluation results is more reasonable and better reflects the overall situation of compliance risk control in industry institutions.

secondly, we will strengthen the regulatory orientation of "better performance of functions". we will focus on the "five functions" of maintaining stable and healthy market development, promoting the improvement of professional capabilities, enhancing the ability to serve medium- and long-term funds, improving investors' long-term returns, and promoting high-level opening up. we will improve the evaluation indicators of serving investors, guide managers to practice rational investment, value investment, and long-term investment, and focus on improving investor experience.

in addition, the implementation of "key special tasks" has been added. according to the deployment of key tasks during the evaluation period, corresponding special evaluation indicators have been added to increase positive incentives and negative constraints on the managers' implementation of key regulatory tasks.

yang delun, chief economist of qianhai kaiyuan fund, believes that avoiding "seniority ranking" based solely on business scale is also a way to comprehensively consider multiple factors such as the fund company's investment performance, social contribution, social influence, and corporate governance, and prevent fund companies from simply pursuing scale growth, which is conducive to the long-term healthy development of the fund industry.

an insider of a public fund also mentioned that avoiding using business scale as the only evaluation criterion will help reduce the industry's scale "competition". fund managers of different sizes can develop in a distinctive and differentiated manner based on their own advantages and characteristics.

points will be deducted if salary management does not meet the guidelines

judging from the evaluation indicators of the public offering classification evaluation system revised this time, they are mainly concentrated in three aspects: compliance and risk control indicators, investor service indicators, and special work evaluation indicators.

among them, compliance indicators include criminal penalties, administrative penalties, and regulatory measures taken by judicial and administrative agencies, and disciplinary sanctions and self-regulatory measures taken by industry self-regulatory organizations. risk control indicators mainly evaluate corporate governance, comprehensive risk management, information system security, and investor rights protection.

the indicator of serving investors includes significantly increasing the weight of equity fund scale bonus, optimizing the bonus index of medium- and long-term yield of various types of products, adding counter-cyclical layout index, deducting points from managers with large issuance scale and poor investor experience, and adding points to managers with poor investor experience. it also highlights the situation of serving key areas such as elderly care, technology and green.

the special work evaluation indicators are to give extra points to managers who focus on grasping the long-term trend and actively play a role in stabilizing the market; to deduct points from managers whose long-term incentive and constraint mechanisms are not sound and whose salary management does not conform to policy orientations; to give extra points to managers who increase investor reach and actively publicize capital market policies and regulations; and to deduct points from managers whose internal control mechanisms for the practice management of the "revolving door" between government and business are not in place.

the aforementioned public fund insider said that adhering to compliant operations is the bottom line that cannot be crossed for the survival and development of public funds, and constantly strengthening risk identification and response capabilities will help effectively prevent and resolve risks. strengthening the performance of functions and leading the industry to pay more attention to investors' real sense of gain is the fundamental guarantee for the steady progress of the industry. in terms of remuneration, the emphasis is on the establishment of a long-term incentive and constraint mechanism, prompting managers to pay more attention to long-term performance and risk control, practicing a long-term assessment mechanism, setting up salary deferrals, bonus follow-up investments, etc., which is also aimed at effectively returning to the business basis of public funds "being entrusted by others and managing their finances on their behalf" and improving investor satisfaction and experience.

expected to promote long-term healthy development of the market

in addition to adjusting the evaluation indicators, the classification evaluation results will also affect the business development of public fund managers.

the notice mentioned that the classification evaluation results can be used as a reference for implementing differentiated supervision in terms of on-site inspections and off-site monitoring, administrative licensing, and risk reserve provisioning. class a managers can participate in innovative product (business) pilots on a priority basis; class c managers are not allowed to participate in principle, and their inspection and monitoring efforts will be increased accordingly, and their applications for the establishment of subsidiaries or new business qualifications will be treated with caution.

the aforementioned public fund insider commented that, overall, optimizing the classification evaluation system will help motivate managers to continuously improve themselves by strengthening risk control, optimizing incentive mechanisms, and improving investor experience, strive to improve ratings, improve overall competitiveness, promote the healthy development of the industry, and improve overall service levels. "the future regulatory orientation may still follow the requirements of the new 'nine national regulations', adhere to rational investment, value investment, and long-term investment. as institutional investors, public funds should set an example in this regard, which will help guide the capital market towards rationality and value investment, and will also play a positive role in promoting the long-term healthy development of the capital market." yang delong said.

in addition, the circular also mentioned that the classification evaluation system is an important means to transmit the value orientation of industry development, optimize the allocation of regulatory resources, and guide industry institutions to practice high-quality development. in the next step, the china securities regulatory commission will continue to optimize the classification evaluation indicators and strengthen the application of classification evaluation results in accordance with the spirit of the central financial work conference and the requirements of the capital market's "1+n" policy documents, and further enhance the effectiveness and pertinence of supervision. fund managers should also refer to the overall framework and indicators of classification evaluation, continue to deepen corporate governance and cultural construction, consolidate the foundation of compliance and risk control, further strengthen the function, vigorously develop equity funds, strive to enhance investors' sense of gain, and accelerate the construction of first-class investment institutions.

beijing business daily reporter li haiyuan