CIRC Action against Illegal Sale m88 live casino Overseas Insurance Products

As China continues to open its economy to the rest m88 live casino the world, and there are an increasing number m88 live casino economic and trade interactions between Chinese residents and overseas players, various kinds m88 live casino cross-border activities emerge involving foreign financial products. Compared to mature markets, PRC laws and regulations governing the sales m88 live casino cross-border financial products are yet to be comprehensive and detailed enough to be able to handle the complicated situations that arise in practice. Therefore, financial regulators have had to continue improving their regulation and enforcement practices to guide market behaviors and take swift action to prevent illegal activities from spreading.

After m88 live casino China Insurance Regulatory Commission (“CIRC”) released the Risk Disclosure on the Purchase m88 live casino Hong Kong Insurance Products by Mainland Residents in April 2016, on May 11, 2016, the CIRC issued the Notice on Strengthening Regulations on Illegal Sales Activities m88 live casino Overseas Insurance Products (Bao Jian Shou Xian [2016] 46 Hao)(the “Notice”) to all local bureaus, and required local bureaus to take relevant enforcement actions with respect to those so called “resurgent” covert violations m88 live casino the sale m88 live casino overseas insurance products inside China. In fact, as far back as in 2004 and 2005, the CIRC had released notices addressing the illegal sale m88 live casino “underground insurance policies,” explicitly defining the scope m88 live casino illegal sale behaviors and the related targets m88 live casino law enforcement. However, this Notice focuses on methods m88 live casino covert illegal sales and determining whether domestic institutions or individuals have obtained illegal gains from overseas institutions.

Hazards m88 live casino Illegal Sales Behavior

The Notice first points out that there are four hazards with respect to the illegal sale m88 live casino overseas insurance products, i.e.: (i) disturbing domestic insurance market competition, (ii) disturbing the national foreign exchange administration order, (iii) leading domestic consumers to be misled and causing them to assume high costs for protection m88 live casino their interest, and (iv) possibly allowing illegal outbound transfers and obfuscation m88 live casino illegal properties involved therein.

Forms m88 live casino Illegal Sales Activities

The Notice requires local bureaus to proactively enforce rules on two kinds m88 live casino illegal promotional activities: first, domestic wealth management consultants, insurance agencies or similar intermediary institutions or individuals receiving benefit from overseas institutions while advertising and promoting their insurance products in product presentations, wealth management summits or money management knowledge lectures, etc., and secondly, these kinds m88 live casino institutions or individuals receiving benefit while intending to arrange for potential purchasers, who are seeking to buy insurance products, to purchase those products abroad. These two activities constitute illegal sale m88 live casino overseas insurance products by promotion and solicitation to facilitate a deal, and thus shall be banned and punished.

In addition to these two forms m88 live casino illegal sale m88 live casino overseas insurance products, the Notice not only requires the investigation and punishment m88 live casino the activities m88 live casino “signing (an insurance contract) and concluding (an insurance transaction) domestically,” but also requires special attention on the covert act m88 live casino the sale m88 live casino overseas insurance products by “introducing the insurance product domestically, signing (the insurance contract) and concluding (the insurance transaction) abroad.” The Notice additionally requires both the domestic insurance institutions and insurance industry practitioners organizing or assisting in the illegal sale m88 live casino overseas insurance products to be punished, and the punishments include blacklisting the individuals, imposing administrative penalties, and pursuing liabilities against the primarily responsible persons m88 live casino the relevant institutions.

Possible Enforcement Actions against Overseas Insurance Institutions

It is worth noting that the CIRC also requires the investigation m88 live casino the status m88 live casino all payments and benefits in whatever name received by domestic institutions or individuals for the illegal sale m88 live casino overseas insurance products from overseas insurance institutions. If the CIRC identifies this kind m88 live casino situation, it will determine whether such activity and circumstances constitute a de facto entrustment relationship between the overseas insurance institutions and the domestic institutions or individuals for the sale m88 live casino overseas insurance products inside China, and will penalize such overseas insurance institutions “through the relevant channels” according to the law.

Our Observations

Given the comparable features m88 live casino financial products, the Chinese financial regulators (including CSRC, CIRC or CBRC) may take the same or similar views in terms m88 live casino the promotion m88 live casino foreign financial products to the extent that such promotional activities are extended to the jurisdiction m88 live casino China, and may take law enforcement action accordingly. This also indicates that the compliance m88 live casino cross-border promotion and sales m88 live casino overseas financial products is likely to be one m88 live casino the priorities m88 live casino law enforcement for China’s financial regulators in the next stages.