europeanbaccarat| Heavy! The latest regulatory announcement!

Source: China Fund Daily

Fang Li, Lu Huijing, reporter of China Fund News.

The strong supervision of the securities fund industry continues to advance.

Recently, the Securities Regulatory Commission issued a new issue of "Institutional Supervision Bulletin" (hereinafter referred to as "Circular").EuropeanbaccaratIn recent years, the CSRC has implemented "penetrating supervision and full-chain accountability", continuously strengthened institutional supervision, and participated in structured bond issuance violations aimed at the private equity management business of securities fund operating institutions. 19 institutions and 90 employees have been dealt with, and the related violations have been significantly reduced.

The Bulletin reveals that a fund company is suspected of violating regulations in corporate governance and private equity management business, involving products being reduced to channels and participating in structured bond issuance. The supervision shall take administrative supervision measures to order the fund company to correct, suspend the filing of new private equity management products for three months, and take regulatory measures for senior executives and relevant special account product investment managers as well.

The CSRC said that it will resolutely implement the spirit of the Central Financial work Conference and the requirements of the new "National Nine articles", comprehensively strengthen the supervision of securities fund management institutions, and put "long teeth with thorns" into practice. All industry institutions should focus on strengthening internal governance and cultural construction, strictly implement the requirements of laws and regulations, earnestly perform their active management duties, strictly prohibit participation in various alienated and deformed structured bond issuance, and firmly adhere to the bottom line of compliance risk control.

Report the violations of a fund company

Involving participation in structured bond issuance, etc.

The above regulatory "circular" specifically informed the violations of a fund company, including private equity management business and corporate governance and other aspects.

After investigation, in the private equity management business, a fund company has problems: first, the product is reduced to a channel. Single Asset Management Plan A was established in January 2023 with Zhang as its principal. The investment consultant is recommended by the client, and the investment is made according to the advice of the investment advisor. There is a situation in which "substantive investment suggestions such as issuing investment instructions or providing specific investment targets are issued by the client or his designated third party". In violation of the measures for the Management of Private assets of Securities and Futures institutions (hereinafter referred to as the measures for the Management of Private assets) Article 47 the requirements of fund managers to effectively perform their duties of active managementEuropeanbaccarat;

The second is to participate in structured bond issuance. Collective Asset Management Plan B was established in December 2021 and its clients are two private equity investment funds. After verification, the sources of funds after the penetration of the two private equity funds are related to the issuers of the bonds invested in the asset management plan. Fund companies do not pay attention to the real sources of funds of the two private equity funds, it violates the requirements of Article 3 of the regulations on the Operation and Management of Private Asset Management plans of Securities and Futures operating institutions (hereinafter referred to as the regulations on the Operation of Private Capital Management) to effectively identify the actual investors and the final sources of funds.

In the direction of corporate governance, a fund company has problems: failing to report changes of senior executives to the regulatory authorities on time. On December 25, 2022, the board of directors of the company approved the resignation application of the former general manager, but it did not put it on record with the Securities Regulatory Bureau until February 13, 2023. It violates the requirements of Article 41 of the measures for the Supervision and Administration of Directors, Supervisors, Senior managers and employees of Securities Fund operating institutions that changes in senior executives of the company should be put on record within 5 working days.

The above situation comprehensively reflects the weak internal control of the private equity management business and corporate governance of the above-mentioned fund companies. it violates Article 17 of the measures for the Supervision and Administration of Public offering Securities Investment Fund managers (hereinafter referred to as the measures for Public offering managers) that internal controls should be kept sound and effective. In accordance with Article 68 of the measures for Public offering managers, Article 78 of the measures for the Administration of Private Placement, and Article 46 of the provisions on the Operation of Private Placement, the CSRC shall take administrative regulatory measures to order the fund company to correct and suspend the filing of new private equity management products for three months, and to take regulatory measures on the company's senior executives and relevant special account product investment managers.

Put the "long teeth with thorns" into practice

According to the Bulletin, in recent years, the CSRC has implemented "penetrating supervision and full-chain accountability", continuously strengthened institutional supervision, and aimed at securities fund operators' private equity management business to participate in structured bond issuance violations. 19 institutions and 90 employees have been dealt with in total, and related violations have been significantly reduced.

According to the Circular, the Central Financial work Conference stressed the need to comprehensively strengthen financial supervision, strengthen institutional supervision, behavioral supervision, functional supervision, penetrating supervision, continuous supervision, strict law enforcement, dare to shine the sword, and effectively improve the effectiveness of supervision. The new "Nine articles of the State" proposes that strict words should be given priority to ensure that supervision is "tusk with thorns" and angular.

The CSRC will resolutely implement the spirit of the Central Financial work Conference and the requirements of the new "National Nine articles", comprehensively strengthen the supervision of securities fund management institutions, and put "long teeth with thorns" into practice. All industry institutions should focus on strengthening internal governance and cultural construction, strictly implement the requirements of laws and regulations, earnestly perform their active management duties, strictly prohibit participation in various alienated and deformed structured bond issuance, and firmly adhere to the bottom line of compliance risk control.

A number of organizations have previously participated

Structured bond issuance is subject to regulatory penalties

In recent years, the risk of illegal participation of private equity management business in structured bond issuance has been the focus of regulatory attention.

In its recent regulatory newsletter, Hebei Securities Regulatory Bureau pointed out that securities fund operators' illegal participation in structured bond issuance means that private equity management plans directly or indirectly accept entrustment from issuers or their related parties to centrally hold issuer bonds and, through bond pledge and repurchase, assist issuers with difficulties in normal bond financing to achieve bond issuance and leveraged financing.

The asset management plan participates in the structured bond issuance business in various forms, and gradually changes from "explicit" to "implicit", distorts the issue pricing and disturbs the market order, which is widely concerned by public opinion.

The main risks are as follows: first, it belongs to the channel business that deviates from the origin of asset management and helps issuers to evade regulatory requirements. From the perspective of business purpose, the purpose of the relevant asset management plan is not "financing on behalf of people", but "financing on behalf of people", which objectively helps enterprises that do not have the conditions for issuance to obtain financing. From the point of view of business operation, it belongs to the channel business in which the investment target and business model are designated by the client, the operating organization transfers the active management responsibility, assists the issuer to evade the regulatory requirements and deviates from the source of capital management.

Second, it is easy to trigger repurchase default and lead to risk transmission. The asset management plan focuses on holding bonds from a single issuer with poor qualifications and provides highly leveraged repurchase financing. Once the bonds held are at risk or market liquidity tightens, repurchase defaults can easily be triggered.

In fact, many institutions have previously been subject to regulatory penalties for participating in structured bond issuance. On May 15 this year, the Fund Industry Association announced six warning cases of private equity funds involved in structured bond issuance, further warning employees, standardizing the behavior of industry institutions, and purifying industry order.

On May 6, the Shaanxi Securities Regulatory Bureau reported that in April 2022, as the manager of the relevant single asset management plan, Open Source Securities failed to fully perform its proactive management duties and failed to effectively prevent issuers from subscribing for the bonds it issued through the asset management plan. In violation of relevant laws and regulations, it was decided to take administrative supervision measures to order corrections against Open Source Securities.

As early as November 18, 2020, the Association of Dealers made a self-disciplinary decision on Jinggong Group, confirming that Jinggong Group used the financing platform it actually controlled, Zhongfu Company, to entrust relevant asset management plans to lead its "18 Jinggong SCP004" bond issuance. Xinhua Fund also defaulted on the Jinggong Group bonds it participated in, and was sued by the investor Qichun Agricultural Commercial Bank for assisting in the illegal issuance.

On November 30, 2020, the Association of Dealers issued an announcement stating that during its self-discipline investigation of relevant companies, the Association of Dealers learned that Donghai Fund was suspected of providing convenience for issuers to illegally issue debt financing instruments, and was suspected of manipulating the market and other violations. In accordance with the "Self-discipline Rules for the Inter-bank Bond Market", the Association of Dealers conducted a self-discipline investigation into the Donghai Fund.