“Recently, some fund managers have begun direct sales with external institutions or individuals. The external parties are responsible for introducing new clients, while fund managers will pay a certain amount of “client services fees” to them,” the official Securities Times reported yesterday, quoting a regulatory note by the China Securities Regulatory Commission (CSRC).
Fund houses are now not permitted to go through the direct sales process with a new client introduced by a third-party. Some of the third parties do not even have licenses to sell funds, the report said.
The kickback fee does not meet regulatory requirements and could easily induce illegal activities such as bribes, the CSRC note said.
All types of so-called “direct agent services” that involve kickbacks will be stopped and fund houses are required to report these businesses to the regulator’s bureau, according to the report.
The practice follows the trend of more institutional clients, such as banks and insurers, outsourcing more capital and mandates to asset managers, the report stated.
In the same regulatory note, the CSRC also imposes stricter rules on “independent fund sales companies”.
For example, they are not allowed to name themselves with terms including “asset management”, “investment consultant”, “investment advisory”, etc., according to another media report from the Guangzhou-based 21st Century Business Herald.
Their business scope is strictly limited to selling mutual funds and regulated financial wealth management products, it added.
According to the CSRC data (in Chinese), there are 107 independent fund sales firms in the mainland as of end-September.
As for online fund sales service platform, such as Tencent’s qian.qq.com, which only assists in services such as account openings, online transactions and payment clearing — but without the third-party fund sales license — the regulator said it will discuss the matter with the industry.
