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China Regulator Names 3 Securities Firms in Cost-Shifting Scandal
China's regulator names 3 securities firms and 2 fund companies for offshore research cost-shifting.
In brief
China's regulator names 3 securities firms and 2 fund companies for offshore research cost-shifting. China's Department of Supervision of Securities and Fund Institutions named three securities firms and two fund companies for offshore research cost-shifting violations. Originally reported by BigGo Finance.
Regulator names 3 securities firms
China's Department of Supervision of Securities and Fund Institutions issued an institutional supervision bulletin on Oct. 16.
5 institutions named in scandal
The bulletin involved five institutions, three securities firms and two fund companies, and three responsible individuals were held accountable.
Guolian Minsheng Securities hit
Guolian Minsheng Securities was hit with a regulatory talk after an executive refused to cooperate with the inspection.
Hu Youwen and Kong Rong summoned
Vice President and Research Institute General Manager Hu Youwen and Deputy Director Kong Rong were both summoned.
Cost-shifting violations
When some fund companies joined offshore research trips organized by securities firms' research units, the brokers covered expert consultation fees and research conference tickets.
Personal travel expenses paid
In some cases securities firms paid round-trip airfare and hotel costs for fund company staff traveling abroad on personal vacations.
Violates clean practice rules
This directly violated the Provisions on Clean Practice for Securities and Futures Operating Institutions and Their Staff.
Regulator sets four red lines
The regulator set out clear requirements on costs, process, finance and culture to address the violations.
Cost rules specific
Research activities must not use trading commissions to shift payment for expert consultation, research intermediaries, conferences, tickets, airfare, accommodation.
Process requirements
Securities and fund companies must establish systems for research project approval, expense management, retention of research outputs and reporting of anomalies.
Finance requirements
Securities firms must improve financial management systems, strictly implement pre-approval mechanisms for research and conference hosting.
Cultural requirements
The cultural requirements cover all domestic and overseas travel and research occasions, explicitly prohibiting participation in activities that violate public order and good morals.
The essence
China's Department of Supervision of Securities and Fund Institutions named three securities firms and two fund companies for offshore research cost-shifting violations.
