CSRC Releases New Regulation on m88 casino bonus code Distribution

On August 28, 2020, the China Securities Regulatory Commission (CSRC) issued the Administrative Measures on the Supervision of Public Securities Investment m88 casino bonus code Distribution Agencies (“Administrative Measures”), the Implementation Provisions of the Administrative Measures on the Supervision of Public Securities Investment m88 casino bonus code Distribution Agencies (“Implementation Provisions”), the Interim Provisions on the Administration of Marketing and Promotional Materials for Public Securities Investment m88 casino bonus codes (“Provisions on Marketing and Promotional Materials”) (collectively referred to as m88 casino bonus code “New Distribution Regulations”) and the Explanatory Notes on the Administrative Measures on the Supervision of Public Securities Investment m88 casino bonus code Distribution Agencies and Supporting Rules (“Explanatory Notes”), which will be officially implemented on October 1, 2020.

Compared with m88 casino bonus code consultation paper issued on February 22, 2019 (“Consultation Paper”), m88 casino bonus code New Distribution Regulations made a few material changes. Below we have summarized m88 casino bonus code key points of m88 casino bonus code New Distribution Regulations.

I. Clarification on Relevant Definitions

1. m88 casino bonus code

According to Article 61, Item 8 of the Administrative Measures, unless explicitly stated as “private m88 casino bonus codes” or “private securities investment m88 casino bonus codes”, the m88 casino bonus codes under the Administrative Measures shall refer to public securities investment m88 casino bonus codes. Notably, the private m88 casino bonus codes referred to under the Administrative Measures include both non-public m88 casino bonus codes issued by private m88 casino bonus code managers and private asset management plans issued by securities and futures operating institutions. At the same time, the Administrative Measures add a new definition of “private securities investment m88 casino bonus codes”, that is, private m88 casino bonus codes established in accordance with the Securities Investment m88 casino bonus code Law (“Securities Investment m88 casino bonus code Law”), which invest purely in standardized securities-type assets.

Pursuant to the aforementioned definition of “m88 casino bonus code”, it is evident that the Administrative Measures regulate all types of products issued by relevant institutions under the supervision of the CSRC.

2. m88 casino bonus code Distribution

The Administrative Measures clarify the definition of “m88 casino bonus code distribution”. Pursuant to Article 2 of the Administrative Measures, “m88 casino bonus code distribution” refers to such activities including opening m88 casino bonus code trading accounts for investors, marketing and promoting m88 casino bonus codes, handling the issuance, subscription and redemption of m88 casino bonus code units, and providing inquiry services for m88 casino bonus code trading accounts. Compared with the existing regulations, the Administrative Measures explicitly include both “opening m88 casino bonus code trading accounts” and “providing inquiry services for m88 casino bonus code trading accounts” in the scope of m88 casino bonus code distribution activities.

3. m88 casino bonus code Distribution Agencies and m88 casino bonus code Service Institutions

No institution or individual may engage in m88 casino bonus code distribution business without registration. Pursuant to the Administrative Measures, m88 casino bonus code distribution agencies include (i) commercial banks, (ii) securities companies, (iii) futures companies, (iv) insurance companies, (v) insurance brokerage companies, (vi) insurance agencies, (vii) securities investment advisory institutions, and (viii) independent m88 casino bonus code distribution agencies, all of which shall have obtained the qualifications for m88 casino bonus code distribution and the License for Conducting Securities and Futures Business (“License”). Unlike the Consultation Paper, the Administrative Measures do not deem insurance brokerage companies, insurance agencies, and securities investment advisory institutions that engage in m88 casino bonus code distribution business as a type of “independent m88 casino bonus code distribution agency”. Besides, although the m88 casino bonus code distribution agencies enumerated above do not include m88 casino bonus code managers distributing products managed by themselves, Article 62 of the Administrative Measures specify that m88 casino bonus code managers and securities and futures operating institutions distributing products managed by themselves shall also be subject to the Administrative Measures in terms of their business norms, internal control and risk management.

A “m88 casino bonus code service institution” refers to an institution that engages in the services of payment, m88 casino bonus code unit registration, provision of information technology systems and other services related to m88 casino bonus code distribution.

On the foregoing basis, the Administrative Measures clarify the standards for the performance of duties by m88 casino bonus code distribution agencies and m88 casino bonus code service institutions.

II. Registration, Cancelation, and Renewal of Licenses

1. Preparation-After-Approval

The Administrative Measures and Implementation Provisions adjust and optimize the registration procedures for m88 casino bonus code distribution agencies by implementing a “preparation-after-approval” system, and the application procedures are set forth as follows:

(1)If an institution wants to apply for the registration of the m88 casino bonus code distribution qualification, it shall first submit application materials in accordance with the rules of the CSRC;

(2)The institution shall complete the preparation work for the m88 casino bonus code distribution business within six months after completing the registration, as well as complete relevant company registration formalities (if necessary);

(3)m88 casino bonus code institution shall apply to m88 casino bonus code local bureau of m88 casino bonus code CSRC for onsite inspection and approval;

(4)After passing m88 casino bonus code onsite inspection and receiving approval, m88 casino bonus code institution may apply to m88 casino bonus code CSRC for m88 casino bonus code License.

An applicant may begin conducting the m88 casino bonus code distribution business only after obtaining the License.

All types of applicants (including independent m88 casino bonus code distribution agencies) shall apply to the local bureau of the CSRC in their place of domicile for m88 casino bonus code distribution registration and the License.

2. Registration Requirements

For one thing, the Administrative Measures clarify the registration requirements for all m88 casino bonus code distribution agencies, and unify the conditions required for financial institutions engaging in m88 casino bonus code distribution business. And for another, the Administrative Measures distinguish the requirements between financial institutions and independent m88 casino bonus code distribution agencies engaging in m88 casino bonus code distribution business.

(1)Compared to the current regulations, the Administrative Measures raise the registration thresholds for m88 casino bonus code distribution agencies, but moderately lower the same thresholds as compared with the Consultation Paper. For example, the Administrative Measures require that an applicant (i) has not been subject to major administrative supervisory measures within the past one year for engaging in similar businesses as m88 casino bonus code distribution; (ii) is not currently in the rectification period due to major violations of laws or regulations, or being investigated by regulatory authorities due to suspected major violations of laws or regulations; and (iii) has no less than twenty personnel who have obtained m88 casino bonus code practitioner qualifications.

(2)Article 8 of the Administrative Measures integrates and unifies the conditions that must be met to engage in m88 casino bonus code distribution business for commercial banks, securities companies, futures companies, insurance companies, insurance brokerage companies, insurance agencies, and securities investment advisory institutions. It is worth noting that the Implementation Provisions specify that the subsidiaries of a securities investment m88 casino bonus code management company (FMC) that specialize in m88 casino bonus code distribution business must also meet the requirements under Article 8, from which it can be inferred that subsidiaries of FMCs that specialize in m88 casino bonus code distribution business are not deemed a type of “independent m88 casino bonus code distribution agency”.

(3)The Administrative Measures further raise the registration thresholds for independent m88 casino bonus code distribution agencies. For example, under the Administrative Measures, an independent m88 casino bonus code distribution agency is required to have net assets of no less than RMB 50 million rather than have a registered capital of no less than RMB 20 million. Meanwhile, the Administrative Measures clarify the requirements for shareholder holding more than 5% equity, controlling shareholder and foreign shareholder of an independent m88 casino bonus code distribution agency.

For shareholders holding 5% or more equity of an independent m88 casino bonus code distribution agency, the Administrative Measures adjust and refine the requirements from the Consultation Paper. Specifically:

(a)Regarding requirements for m88 casino bonus code capital strength of legal person shareholders or shareholders in m88 casino bonus code form of unincorporated organizations, m88 casino bonus code Administrative Measures reduce m88 casino bonus code net assets of no less than RMB 100 million, as stipulated under m88 casino bonus code Consultation Paper, to RMB 50 million, but furm88 casino bonus coder require that m88 casino bonus code shareholding structure of such shareholders shall be clear and describe every level of ownership through to m88 casino bonus code ultimate beneficial owners;

(b)Regarding work experience requirements for natural person shareholders, the Administrative Measures are more relaxed than the Consultation Paper, reducing the number of years of experience needed: more than five years (instead of ten years) of experience as management personnel of the securities and m88 casino bonus code department or more than three years (instead of five years) experience as a senior executive of the securities and m88 casino bonus code industry.

In terms of m88 casino bonus code controlling shareholders, m88 casino bonus code Administrative Measures raise m88 casino bonus code requirements for m88 casino bonus code capital strength and work experience of controlling shareholders:

(a)For a legal person shareholder or a shareholder in m88 casino bonus code form of unincorporated organizations, m88 casino bonus code Administrative Measures add several new requirements, namely, such shareholder shall (i) be consecutively profitable for m88 casino bonus code most recent three fiscal years, (ii) have net assets of no less than RMB 200 million, and (iii) have a good financial status and capital replenishment capabilities, as well as sound internal control;

(b)For a natural person shareholder, the Administrative Measures require them to have (i) personal financial assets of no less than RMB 30 million; and (ii) more than ten years of work experience as a management personnel of the securities and m88 casino bonus code business department, or more than five years of work experience as a senior executive of the securities and m88 casino bonus code industry.

Notably, the Administrative Measures impose a three-year lock-up period on controlling shareholders. Article 13 of the Administrative Measures prohibit independent distribution agencies from changing their controlling shareholders or de facto controlling relationships within three years from the date of obtaining the qualifications for m88 casino bonus code distribution.

In addition, the Administrative Measures also clarify the governance requirements for a controlling shareholder, namely, a controlling shareholder is required (i) to formulate a reasonable and clear business plan for investing in an independent m88 casino bonus code distribution agency, (ii) to have practical plans for improving the governance structure of the independent m88 casino bonus code distribution agency, maintaining the independence of the independent m88 casino bonus code distribution agency with respect to its operation and management, and promoting the long-term development of the independent m88 casino bonus code distribution agency, as well as (iii) to formulate reasonable and effective risk disposal plans for the circumstances where the independent m88 casino bonus code distribution agency is likely to be exposed to risks that may prevent it from normal business operation.

We note that the foregoing requirements for controlling shareholders to some extent align with the requirements for major shareholders of FMCs, which demonstrates a prudent attitude of the CSRC over the registration of independent m88 casino bonus code distribution agencies.

With respect to foreign shareholders, the Administrative Measures for the first time list out the requirements for the foreign shareholders of an independent m88 casino bonus code distribution agency, namely, (i) the foreign shareholder shall be a financial institution established and legally existing in accordance with the laws of the country or region where it is located, with experience in financial asset management or investment advisory business; and (ii) the securities regulatory authority of the country or region where the foreign shareholder is located has entered into a regulatory cooperation memorandum with the CSRC or other institutions recognized by the CSRC, and maintain an effective regulatory cooperation relationship with the CSRC.

3. Mechanism for Canceling Registration

The Administrative Measures, as authorized by the Securities Investment m88 casino bonus code Law, improve the mechanisms for cessation of m88 casino bonus code distribution business and revocation of m88 casino bonus code distribution licenses, and specify that m88 casino bonus code distribution agencies shall bear the obligation to cooperate with m88 casino bonus code managers in properly handling the relevant businesses including investors’ redemptions and transfer of custody in case that their m88 casino bonus code distribution licenses are cancelled or they have lost the capacity to operate.

4. License Renewal

The Administrative Measures draw on mature regulatory experience and implement license renewal arrangements for m88 casino bonus code distribution agencies newly registered after the issuance of the Administrative Measures, while simultaneously providing that m88 casino bonus code distribution agencies under any of the following circumstances shall not renew their m88 casino bonus code distribution licenses, namely, (i) failure to meet basic conditions required for conducting m88 casino bonus code distribution business, (ii) serious lack of compliance and internal control, and (iii) not engaging in public m88 casino bonus code distribution business in substance. According to Article 52 of the Administrative Measures, the validity period of the license shall be three years from the date of issuance; if the license expires and the m88 casino bonus code distribution agency does not fall under any of the foregoing circumstances prohibited from renewal, the license shall be renewed; the validity period for each renewal shall be three years.

III. Independent m88 casino bonus code Distribution Agency

1. Business Scope of m88 casino bonus code Distribution Agency

Different from the Consultation Paper, the Administrative Measures adjust the restrictions on the business scope of independent m88 casino bonus code distribution agencies by allowing m88 casino bonus code distribution agencies to distribute private securities investment m88 casino bonus codes in addition to public m88 casino bonus codes; meaning that, after the official release of the Administrative Measures, independent m88 casino bonus code distribution agencies may only engage in the distribution of public and private securities investment m88 casino bonus codes, and shall distribute neither other types of private m88 casino bonus code than private securities investment m88 casino bonus codes such as private equity-type investment m88 casino bonus codes, nor private asset management plans issued by securities and futures operating institutions. Independent m88 casino bonus code distribution agencies that currently distribute products in violation of the foregoing requirements shall make rectifications.

2. “One Minority, One Control”

Pursuant to Article 12 of the Administrative Measures, the shareholders of independent m88 casino bonus code distribution agencies, and the controlling shareholders and de facto controllers of such shareholders shall invest in no more than two independent m88 casino bonus code distribution agencies, of which at most one independent m88 casino bonus code distribution agency can be controlled by such shareholders and de facto controllers.

3. Special Regulatory Requirements on Independent m88 casino bonus code Distribution Agencies

Part 4, Section 2 of the Administrative Measures puts forward specific requirements on the internal control and risk management of independent m88 casino bonus code distribution agencies in terms of risk control, branch management, business scope, and operation of self-owned m88 casino bonus codes, reflecting the prudent regulatory attitude towards independent m88 casino bonus code distribution agencies.

IV. Key Take-Aways for Regulation of m88 casino bonus code Distribution

1. Compliance and Risk Management

The Administrative Measures introduce a new dedicated section, titled “Internal Control and Risk Management”, which requires all m88 casino bonus code distribution agencies to establish, improve and effectively implement internal control and risk management systems for m88 casino bonus code distribution business in accordance with the principle of prudent operation. The Administrative Measures also require m88 casino bonus code distribution agencies to designate specific compliance and risk control personnel to review the operation of the m88 casino bonus code distribution business, internal systems, m88 casino bonus code marketing and promotional materials, new products, new business plans, etc., to ensure the independence and effectiveness of compliance and risk control personnel in performing their duties, as well as to strictly prohibit compliance and risk control personnel from concurrently holding positions that conflict with their compliance duties.

2. Private m88 casino bonus code Distribution

The Administrative Measures use an entire section to strengthen the management and control of risks with respect to private m88 casino bonus code distribution in terms of investor due diligence, product due diligence, risk disclosure, and management of conflicts of interest. It is worth noting that, compared with the Consultation Paper, the Administrative Measures further require a m88 casino bonus code distribution agency to establish a special identification, evaluation and prevention mechanism for conflicts of interest in the private m88 casino bonus code distribution business. m88 casino bonus code distribution agencies shall implement a strict conflict of interest assessment mechanism for private m88 casino bonus code managers and private m88 casino bonus codes that have related party relationships with the m88 casino bonus code distribution agencies; if the assessment indicates that relevant conflicts cannot be effectively prevented, the m88 casino bonus code distribution agencies shall not distribute relevant products.

At present, some m88 casino bonus code distribution agencies in the market provide investors with asset allocation services by distributing m88 casino bonus codes managed by affiliated private m88 casino bonus code managers. The above restrictions may have certain impact on such business model. Accordingly, m88 casino bonus code distribution agencies must demonstrate that they can effectively prevent conflicts of interest by establishing a comprehensive conflict of interest prevention mechanism, which as a consequence places higher requirements on the internal control of m88 casino bonus code distribution agencies.

3. Restrictions on Online m88 casino bonus code Distribution

Regarding the practices where m88 casino bonus code managers and m88 casino bonus code distribution agencies cooperate with third-party online platforms that do not hold financial licenses to distribute m88 casino bonus code products, the Implementation Provisions clarify the business boundaries and bottom-line requirements for cooperation between m88 casino bonus code distribution agencies and third-party online platforms.

According to the Implementation Provisions, “third-party online platforms” refer to portals, applications and other online service platforms operated and managed by third-party institutions other than investors, m88 casino bonus code managers and m88 casino bonus code distribution agencies. The Implementation Provisions support m88 casino bonus code managers and m88 casino bonus code distribution agencies to conduct business through third-party online platforms, subject to the following requirements:

(1)The investors shall be clearly informed of the entity providing the m88 casino bonus code distribution services (i.e. the m88 casino bonus code manager or the m88 casino bonus code distribution agency);

(2)Third-party institutions shall only provide information technology services and shall not intervene in any stage of the m88 casino bonus code distribution business;

(3)Third-party institutions shall not collect, transmit or retain any m88 casino bonus code trading information of investors;

(4)m88 casino bonus code managers and m88 casino bonus code distribution agencies are the parties responsible for the provision of m88 casino bonus code distribution services to the investors.

The Implementation Provisions require third-party institutions to file with the CSRC in accordance with the Securities Investment m88 casino bonus code Law and the Administrative Measures on the Information Technology of Securities and m88 casino bonus codes Operating Institutions, and also clarify the filing requirements for m88 casino bonus code managers and m88 casino bonus code distribution agencies engaging third-party institutions.

4. Cap on Client Maintenance Fees

The Implementation Provisions for the first time put a cap on client maintenance fees, that is, for the number of m88 casino bonus code units distributed to individual investors, the agreed ratio between client maintenance fees and m88 casino bonus code management fees shall not exceed 50%; for the amount of m88 casino bonus code units distributed to non-individual investors, the agreed ratio between client maintenance fees and m88 casino bonus code management fees shall not exceed 30%.

Client maintenance fees, i.e. trailing commissions, act as an incentive for m88 casino bonus code distribution. In current practices, m88 casino bonus code managers heavily rely on third-party agencies for distribution. The proportion of trailing commissions varies according to the capabilities of distribution channels, and the trailing commissions of some distribution channels (e.g., banks) may be as high as 70-80% of the m88 casino bonus code management fees, which puts a lot of pressure on small and medium-sized FMCs. We expect that this time by putting a cap on trailing commissions, the pressure on FMCs arising from excessive trailing commissions may likely be eased to some extent.

5. m88 casino bonus code Marketing and Promotion

The Administrative Measures abolish the pre-filing requirements for marketing and promotional materials, and change it to an internal review and archival mechanism implemented by m88 casino bonus code distribution agencies. The Provisions on Marketing and Promotional Materials, which were issued along with the Administrative Measures, detail the provisions on m88 casino bonus code promotional materials in terms of performance data, shareholder information, and preparation of special promotional materials. It is worth noting that Article 15 of the Provisions on Marketing and Promotional Materials expressly provide that m88 casino bonus code marketing and promotional materials shall not use content prohibited by the Advertising Law, the Anti-Unfair Competition Law, and the Anti-Monopoly Law. It follows that if the m88 casino bonus code marketing and promotional materials violate the foregoing rules, in addition to the regulatory measures taken by the competent regulatory authorities, the CSRC may also take corresponding administrative regulatory measures.

It is noteworthy that although the new regulation eases the burden to some extent of filing and approval imposed on m88 casino bonus code distribution agencies, but imposes more strict regulatory requirements on m88 casino bonus code marketing and promotional materials. m88 casino bonus code managers and m88 casino bonus code distribution agencies are still advised to strictly review the promotional materials to avoid relevant compliance risks.

6. Mandatory Provisions for Distribution Agreement

The Implementation Provisions specify the mandatory provisions of a distribution agreement. In addition to the provisions regarding the continuous services for m88 casino bonus code investors and the division of responsibilities with respect to anti-money laundering, the Implementation Provisions also insert provisions on the division of obligations and responsibilities between a m88 casino bonus code distribution agency and a m88 casino bonus code manager with respect to information disclosure services, and performance of due diligence obligations regarding anti-terrorist financing and non-resident financial account tax-related information, and explicitly require the distribution agreement to provide for the continuous service arrangements for m88 casino bonus code investors when the business of the m88 casino bonus code distribution agency terminates.

7. m88 casino bonus code Risk Level

The Implementation Provisions clearly stipulate that when a m88 casino bonus code distribution agency promotes a m88 casino bonus code product to investors, the m88 casino bonus code risk level referred to by the distribution agency shall not be lower than the m88 casino bonus code risk level determined by the m88 casino bonus code manager. We believe such requirement will solve the investor suitability problem caused by the inconsistency in the m88 casino bonus code risk level of the same product as respectively determined by the distribution agency and the m88 casino bonus code manager.

8. Distribution Services for m88 casino bonus code Portfolios

We notice that the Administrative Measures remove the provisions under the Consultation Paper that allow m88 casino bonus code managers and m88 casino bonus code distribution agencies to provide m88 casino bonus code portfolio distribution services to m88 casino bonus code investors. We understand that m88 casino bonus code portfolio distribution services are by nature the same as the m88 casino bonus code investment advisory services which are currently in a piloting stage, and thus shall be subject to the relevant provisions of the Administrative Measures on Securities and m88 casino bonus code Investment Advisory Services (Consultation Paper).

Apart from the foregoing provisions, the Administrative Measures put emphasis on the bottom-line requirements for m88 casino bonus code distribution behaviors, refine the requirements for disclosure of m88 casino bonus code distribution expenses, continuous service for clients and other investor protection and service requirements, and promote a long-term evaluation mechanism for m88 casino bonus code distribution business. The Administrative Measures, as a whole, demonstrate a regulatory trend of strict supervision and prioritization of investor protection.

V. Grace Period

In order to ensure m88 casino bonus code successful implementation of m88 casino bonus code New Distribution Regulations, m88 casino bonus code Implementation Provisions specify m88 casino bonus code grace period for some regulatory requirements:

1. Two-year grace period granted under either of the following circumstances (1) when shareholders of an independent m88 casino bonus code distribution agency do not comply with the Administrative Measures, and (2) when an independent m88 casino bonus code distribution agency engages in distribution businesses other than distribution of public m88 casino bonus codes or private m88 casino bonus codes. With respect to the latter circumstance, an independent distribution agency shall reduce existing businesses in an orderly manner prior to expiration of the grace period, and once the grace period expires, it is only allowed to continue services with respect to such existing businesses for m88 casino bonus code units that have already been acquired by investors.

2. One-year grace period granted for matters such as staffing, information technology systems or distribution documents that a m88 casino bonus code distribution agency shall rectify according to the new regulation.

We will continue to monitor m88 casino bonus code situation and keep our clients apprised of any important developments.