Karl Zhang and Teresa Huang
On August 12, 2022, the China Securities Regulatory Commission issued the Decision on Amending and Repealing Some Rules of Securities and Futures, in which the Measures for the Suitability Management of Securities and Futures Investors (hereinafter referred to as the “Measures”) were amended, and the main contents of the amended Measures are as follows:
1. Scope of Application:
The Measures shall apply to the sale of publicly offered or non-publicly offered securities, publicly offered or non-publicly offered securities investment funds and equity investment funds (including venture capital funds, hereinafter referred to as “funds”), publicly or non-publicly transferred futures and other derivative products to investors, or the provision of relevant business services to investors. The investors referred to in the Measures include investors under the Securities Law, investors and fund unit holders under the Securities Investment Fund Law, and traders under the Futures and Derivatives Law, etc.
2. Main Contents of the Suitability Management:
Investors shall, on the basis of obtaining the information on products or services and soliciting the suitability opinions of business institutions, make prudential decisions based on their capabilities, and assume investment risks independently. The suitability matching opinions of business institutions do not represent their substantial judgments or guarantee on product or service risks and benefits.
A business institution that sells products or provides services to investors shall obtain the basic information, financial status, investment experience, investment objectives and risk appetite of investors. Investors are categorized into ordinary investors and professional investors. Ordinary investors shall enjoy particular protection in such aspects as information notification, risk warning and suitability matching.
A business institution shall, according to different risk degrees of products or services, make judgments on the types of investors suitable for selling products or providing services, and according to the different types of investors, make judgments on the products or services appropriate for purchase or receipt. Before selling products or providing services to ordinary investors, a business institution shall inform important information such as matters that may lead to loss of principal, loss in excess of the original principal and influence customers’ judgment.
A business institution shall develop an internal suitability management system, clarify the specific basis, methods and processes for investor classification, product or service grading, suitability matching, etc., classify investors and grade products strictly in accordance with the internal management system, regularly summarize the results of classification and grading, and provide matching opinions to each investor.
3. Legal Liability:
If a business institution violates the provisions of the Measures, the CSRC and its local offices may take supervision and administration measures such as ordering for rectification, regulatory interview and the issuance of a warning letter against such institution and its person(s)-in-charge who are directly responsible and other persons directly responsible, and may impose a fine, prohibition from access to the market and other measures on the relevant responsible personnel.
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