China's securities watchdog released a temporary regulation on supervision of
securities houses in the assets management business, a move that will help curb
irregularities and encourage fair competition in the sector.
The China Securities Regulatory Commission (CSRC) announced the regulation on
Thursday, setting up standards on asset management services of securities
companies, including thresholds on market entries, exact business spheres, codes
of practice and liabilities in risk management.
The rules, to take effect next February, say qualified securities houses can
either provide asset management services specially designed for one specific
client or launch collective investment funds for groups of investors.
But they cannot make any promises of minimum returns to the clients or use
other misleading promotion methods to sell their products.
Those who want to provide collective funding projects should have minimum net
assets 500 million yuan (US$60 million) and have no criminal records. The new
regulation offers clearer standards and adds more liabilities on asset managers,
clarifying the designs of such investment projects. Many are gaining popularity
among securities companies who are exploring new products and income resources,
experts said.
Some securities companies have tried to win over more customers by
exaggerating their returns and playing down risks. The concern over
irregularities made the CSRC temporarily ban such business in the securities
houses in May.
A spokesman said following the announcement of the new rule, a few pilot
securities companies would be approved to launch private funding projects soon.
More detailed rules regarding such business will be released soon to further
facilitate practices and supervision.
Such rule-designs will help build up a good market in the overall asset
management business, said Zhao Xinyu, an official of the China Asset Management
Company, a Beijing-based fund management company that is also a direct
competitor to asset managers in securities houses.
"Now we can compete on an equal basis,'' he said.
So far, 70 of 132 securities companies in China have opened asset management
services. It is estimated that about half of the 132 will pass the new
threshold.
