The China Securities Regulatory Commission (CSRC) will not allow unregulated platforms to promote funds to retail investors going forward.
Without a fund investment advisory licence, firms will be prohibited from providing fund recommendations, demonstrating the performance of fund portfolios, or giving asset allocation suggestions, according to mainland China media reports.
During the past few days, many asset managers in China have received a “notice on regulating fund investment recommendation activities” from local regulators. The notice gave detailed guidelines to further regulate fund managers’ investment advisory business.
The notice also said that all institutions, starting from 1 November 2021, are not allowed to organise marketing campaigns to recommend fund portfolios or attract investors, unless they are fully compliant with the latest regulations.
As a result, several popular fund investment and distribution platforms, including Ant Group’s Alipay, have suspended the sales of several funds.
The notice was initially issued by CSRC’s Guangdong branch at the beginning of November. Days later, CSRC’s Shanghai and Beijing branches sent out notices with the same content.
Crackdown on social media influencers
Financial institutions have also received an “institutional regulatory status bulletin” recently, which prohibits them from hiring social media influencers and bloggers to give investment suggestions, recommending funds or pushing stocks to potential investors.
Legal action will be taken if “live-streaming” marketing activities are found to be linked with market manipulation or insider trading, the bulletin said.
Social media influencers and bloggers have been recommending fund products to retail investors for quite some time by “live-streaming” on different platforms, and this channel has gained popularity among asset managers.
According to meeting minutes published by the Asset Management Association of China (Amac) in May 2021, due to the impact of covid, “the original, traditional marketing model [for mutual funds] cannot be carried out normally [… ], fund managers had to carry out marketing activities through various online modes such as voice conferences, video roadshows and live-streaming”.
The Amac meeting said that a mutual fund is a type of “inclusive finance” and has become one of the go-to financial products for many newcomer investors. Live-streaming to talk about mutual fund products is an effective way of interacting with them, it concluded.
But Amac also reminded fund managers that they should comply with Chinese regulations when it comes to live-streaming, and stressed that if the hosts or speakers are not licensed fund practitioners, they should not be introducing, answering questions or commenting on any specific products.
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