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cailianshe news, september 16 (reporter yan jun)the chongqing securities regulatory bureau fined three banks in one day, issuing two warning letters and one order to correct measures due to non-compliance in the agency sales of public funds.

selling funds before obtaining a fund practitioner qualification certificate, only showing good performance when promoting fund managers' past performance, not reporting to regulators when fund sales personnel are replaced...regulators have taken decisive action against these irregularities in the bank's agency sales of public funds. on september 15, the chongqing securities regulatory bureau issued warning letters and fines such as orders to correct to the chongqing branch of the industrial and commercial bank of china, the chongqing branch of china guangfa bank, and the chongqing branch of china merchants bank.

from the perspective of investor suitability, the supervision of public fund agency sales has been continuously standardized. since the beginning of this year, many banks have successively standardized or tightened the public fund agency sales policies, including but not limited to raising the risk level of public funds, prohibiting investors aged 65 and above from trading public funds at excessive risk, issuing risk mismatch warning letters and signing confirmation letters, and other measures to regulate the sales process.

in addition, cailianshe reporters learned that regulators recently revised the public offering classification evaluation system, dividing public fund managers into a, b, and c categories. in principle, class c fund managers are not allowed to participate in innovative products.at present, the classification rating results have been issued, and many banks have asked their cooperating fund managers to report the classification evaluation results. some industry insiders speculate that banks may organize and make adjustments to the products of class c fund managers based on the classification evaluation results.

icbc, gf bank and cmb branches received fines

due to irregularities in the public offering agency sales process, the chongqing branch of the industrial and commercial bank of china and the chongqing branch of china merchants bank were respectively issued warning letters by the chongqing securities regulatory bureau, while the chongqing branch of china guangfa bank was issued an order to take corrective measures.

because some employees of icbc chongqing branch were engaged in fund sales management without obtaining fund practitioner qualifications, the chongqing securities regulatory bureau issued a warning letter to it and required the bank to strengthen compliance management, intensify supervision of employees' professional behavior, and prevent such problems from happening again.

the chongqing branch of china merchants bank also received a warning letter. the chongqing securities regulatory bureau found two major problems with the bank:

1. during the process of ordinary investors of fund products applying to become professional investors, the differences in fulfilling suitability obligations for different categories of investors were not explained to investors, and they were not warned of the possible investment risks.

2. some of the promotional materials used by the bank in the fund sales process published the past performance of the fund manager's specific products, but did not cover the past performance of all similar products managed by the fund manager; some of the promotional materials were one-sided and exaggerated in promoting the fund manager's past performance.

therefore, the regulator took administrative supervision measures against it by issuing a warning letter, requiring the bank to effectively strengthen investor suitability management, further standardize fund publicity and promotion behaviors, and prevent such problems from happening again.

in the process of agency sales of funds, in order to attract investors, only showing the fund managers' better management performance seems to be the industry's "unspoken rule". this is not an isolated case. the regulatory penalty this time has also sounded the alarm for the entire industry.during the sales process, the display of the fund manager's past performance must cover the past performance of all similar products managed by the fund manager. selective disclosure will be considered as one-sided and exaggerated publicity.

the chongqing branch of china guangfa bank was ordered to make corrections by the regulator for three reasons:

first, the person in charge of fund sales business, some compliance personnel and the person in charge of fund sales business of individual branches did not obtain the fund practitioner qualifications.

2. adjustments were made to the person in charge of fund sales business, but the record materials for the dismissal and appointment of relevant personnel were not submitted.

3. no self-examination of the suitability of fund sales business was conducted in the first half of 2023.

the chongqing securities regulatory bureau requires the bank to immediately take effective measures to rectify the above problems, establish and improve relevant internal control systems, standardize employee professional behavior, strictly implement filing and reporting requirements, and improve the compliance management level of fund sales. in addition, the chongqing branch of china guangfa bank must submit a written rectification report to the regulator within 30 days.

banks’ agency sales of public offerings are being regulated

the equity market is volatile. some public and private equity funds that were previously sold through bank channels at high levels are now facing a large pullback. due to the resulting pressure from customer complaints, banks continue to standardize and improve fund sales.

in terms of private equity agency sales, as early as june this year, the market had heard that relevant departments would revise the relevant regulations on commercial banks' agency sales of private equity investment funds, including that commercial banks shall not sell products issued by institutions outside the scope specified in this notice, shall not act as agents to sell private equity investment funds, or sell private equity investment funds in disguised form by borrowing other licensed financial products.

although there is no further news at present, the industry believes that the implementation of the above requirements is not surprising given the backdrop of private equity firms joining the liquidation and stricter supervision.

in terms of public fund agency sales, tightening public fund agency sales from the perspective of investor suitability is ongoing. for example, some banks have added double recording functions to public fund agency sales through mobile banking, prohibited investors aged 65 and above from trading public funds at excessive risk, issued risk mismatch warning letters and signed confirmation letters, and other measures.

according to previous media reports, many banks, including china construction bank, agricultural bank of china, china merchants bank, china minsheng bank, and bank of ningbo, have raised the risk level of some of their agency-sold public funds in batches this year. for example, in june this year, ccb adjusted 39 agency-sold public funds from "r3-medium risk" to "r4-medium-high risk". in the adjustment announcement, ccb stated that the reason for the adjustment was to fulfill the appropriateness obligations and protect the rights and interests of investors in accordance with relevant regulations and follow the principle of the higher product risk level assessment.

generally speaking, the rating of public offering products sold by banks is based on the public offering fund risk level classification method of the financial product research center of haitong securities research institute. in order of risk from low to high, there are five risk levels: r1-low risk, r2-medium-low risk, r3-medium risk, r4-medium-high risk, and r5-high risk. the corresponding products can be roughly divided into r1 corresponding to money market funds, bond funds can correspond to r2-r4, hybrid, index, and qdii funds can correspond to r3-r5, and stock funds correspond to r5.

according to a previous announcement by bank of china,when the risk rating result is inconsistent with the fund manager's risk rating result, the bank shall adopt the rating result corresponding to the higher risk level and may adjust the rating upward based on market conditions.

investors need to test their risk tolerance before purchasing fund products. different risks correspond to investors with different risk tolerance. there is also a simple correspondence, that is, r1-r5 corresponds to c1-c5 (conservative, stable, balanced, active and aggressive investors). the increase in the risk assessment of agency-sold public funds ensures that investors can purchase products that match their risk tolerance and avoid investment risks that exceed their tolerance.

at present, including china merchants bank, industrial bank and others no longer support ultra-risk trading of public funds, that is, if investors buy public funds that exceed their own risk level, the system will prompt "risk mismatch" and then not support purchase. however, some banks give investors the option to buy beyond their risk tolerance, and they need to fill out a risk mismatch warning letter and confirmation letter.