2018-3-22
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"15 Articles" for Brokerage Innovation Issued, SRC Promotes Innovation with Three Measures
Release Date:2014-06-05 14:54:49

To implement the "Opinions on Further Promoting Healthy Development of Capital Market by State Council", improve competitiveness of securities futures service sector, and promote innovation and development of intermediary institutions, China Securities Regulatory Commission recently issued "Opinions on Further Promoting Innovation and Development of Securities Business Institutions", which clarifies general principles, main tasks and specific measures for promoting innovation and development of securities business institutions in the period ahead, from three aspects of building modern investment banks, supporting product innovation and promoting regulatory transformation.

The “Opinions” proposes that the overall principle for innovation and development of securities business institutions is that it should adhere to services for real economy, focus on actual needs of real economy for promotion of business and product innovation, support the development of small and micro enterprises, and enhance the ability and level of securities business institutions to serve real economy; it should adhere to promoting the development of modern service industry, enhancing the core competitiveness of securities industry, promoting coordinated development of financial services, and creating financial services industry with full features, professional division of labor and good quality; it should adhere to securities business institutions as the principal of innovation, exploiting the role of market mechanism, respecting the creative spirit of securities business institutions, stimulating innovative vitality, and implementing innovative responsibility; it should adhere to preventing systematic and regional financial risks, with compliance management and risk control throughout the whole process of innovation and development; it should also adhere honesty and client interests to earnestly safeguard the legal interest of investors.

The “Opinions” clarifies main tasks and specific measures for promoting innovation and development of securities business institutions from three aspects.

First , to build modern investment banks. It supports securities business institutions enhancing their overall financial service ability, improving fundamental functions, expanding financing channels, developing cross-border business and improving compliance risk control level to promote the formation of modern investment banks with international competitiveness, brand influence and systemic importance.

Second , to support business product innovation. It promotes the development of assets management business, supports the businesses of fixed returns, foreign exchange and commodities, supports finance business innovation, and steadily carries out derivative business and counter business, and supports independent creation of private equity products.

Third , to promote regulatory transformation. It changes regulatory way, deepens approval reform, relaxes industry access, and implements business license management.

Attached with the full text of "Opinions on Further Promoting Innovation and Development of Securities business institutions":

SRC Issuance [2014] No.37

China SRC’s assigned institutions, exchanges, subordinate units, associations and departments of SRC:

To implement the relevant requirements of "Opinions on Further Promoting Healthy Development of Capital Market by State Council" (Guo Fa [2014] No. 17) to improve the competitiveness of securities futures service sector and promote innovation and development of intermediary institutions, the Commission studies the issues on further promoting innovation and development of securities business institutions, based on extensive comments. The overall principle is that for innovation and development of securities business institutions, it should adhere to services for real economy, focus on actual needs of real economy for promotion of business and product innovation, support the development of small and micro enterprises, and enhance the ability and level of securities business institutions to serve real economy; it should adhere to promoting the development of modern service industry, enhancing the core competitiveness of securities industry, promoting coordinated development of financial services, and creating financial services industry with full features, professional division of labor and good quality; it should adhere to securities business institutions as the principal of innovation, exploiting the role of market mechanism, respecting the creative spirit of securities business institutions, stimulating innovative vitality, and implementing innovative responsibility; it should adhere to preventing systematic and regional financial risks, with compliance management and risk control throughout the whole process of innovation and development; it should also adhere honesty and client interests to earnestly safeguard the legal interest of investors. For further promoting innovation and development of securities business institutions, we hereby make the following comments.

First, to build modern investment banks

(I) To improve the overall financial service ability . Support securities business institutions to further deepen and enhance the brokerage, proprietary, assets management, underwriting and sponsorship and other traditional business, with active use of network information technology innovation, business and trading way, to explore new Internet financial business. Encourage securities business institutions to carry out management innovation, implement differentiated, professional and characteristic development, and to promote the formation of modern investment banks with international competitiveness, brand influence and systemic importance.

(II) To improve fundamental functions. Support securities business institutions to expand fundamental functions such as investment and financing, sales transactions and asset custody, and carry out innovation of sales transaction to meet client demand for non-standardized products. Encourage securities business institutions to carry out market-making and other trading services for large transactions, private equity products, OTC derivative and other financial products. Support securities business institutions to carry out asset custody business. Promote construction of platform for unified securities account to establish the account system adaptable to private funding market, Internet securities and other business. Standardize the payment system of securities industry, and do research on the construction of payment platform.

(III) To expand financing channels. Support securities business institutions in stock equity and debt financing, listing in domestic and foreign exchanges, listing in the national share transfer system of medium and small enterprises, issuing preference shares and corporate bonds, and carrying out mergers and acquisitions. Encourage securities business institutions to explore new financing channels and instruments. Support securities business institutions to carry out gains voucher business pilot.

(IV) To develop cross-border business. Support securities business institutions in providing financial consultancy, underwriters, custody, settlement and other intermediary services for cross-border listing, issuing bonds, mergers and acquisitions of domestic enterprises. Support securities business institutions to "go abroad", and set up subsidiaries in Hong Kong, Macao, Taiwan and other overseas market, through new establishment, mergers and acquisitions. Support securities business institutions to provide relevant services for qualified overseas enterprises to issue RMB bonds in China, and actively participate in trading interoperability mechanism pilot in Hong Kong and Shanghai stock markets, and rely on the mechanism and policy of finance reform pilot area such as Shanghai Free Trade Zone to provide investment and financing services for domestic and foreign individuals and institutions.

(V) To enhance the level of compliance risk control. Optimize the risk control index system of securities business institutions with the core of net capital and liquidity risk prevention. Implement the risk management responsibility of securities business institutions to improve the overall risk management mechanism. Promote the full compliance management of securities business institutions, and strengthen the construction of compliance forces and performance guarantee. Supervise securities business institutions in insisting on client interests for adhering to the bottom line of morality and profession, fulfilling industry, market and social responsibility.

Second, to support product innovation

(VI) To promote business development of assets management. Securities business institutions shall innovate and improve assets management process enhance professional level of product sales, product design, investment operations, and after-sale services. The qualified securities business institutions can develop cross-border and cross-market products, which cover different asset categories and adopt diversified investment strategies and differentiated charge structure and level. Study the establishment of institutional system for real estate investment trust funds (REITs) and the corresponding product operation pattern and programs. Expand the investment scope of collected assets management plans, with permission of investment in stock equity, debt and other property rights not transferred through security exchanges.

(VII) To support the implementation of constant returns, foreign exchange and commodities business. Accelerate bond product innovation and improve market maker trading mechanism. Develop asset securities business of receivables, finance lease creditor and infrastructure returns right and actively explore and carry out securities business of credit assets. Carry out futures and spot trading of commodities and foreign exchange according to the law.

(VIII) To support financing business innovation. Improve rules related to financing and securities business, and expand sources of funding and securities for financing and securities and refinancing business. Carry out secured financing-based business innovation of agreed repurchase, stock (equity) pledged repurchase, and extend the scope of funders for agreed repurchase and stock pledged repurchase.

(IX) To steadily carry out derivative business. Support securities business institutions to participate in domestic futures market transaction and credit risk mitigation instruments, interest rate swaps, options and other derivative transactions. Further improve the master agreement and related supportive documents for derivative transaction. Study centralized billing and transaction information reporting system for derivative transactions. Adapt to the needs of risk management in capital market for stable and orderly development of related financial derivative products. Allow qualified institution investors to use futures derivative tools for the purpose of hedge risk.

(X) To develop counter business. Expand counter transaction pilots of securities business institutions. Accelerate the construction of private raising product pricing and service system between institutions to provide various services such as private business project butt and online transfer for institution investors. Steadily develop inter-institution market and promote interoperability. Encourage securities business institutions to participate in regional stock equity market from multiple facets. Study and establish the industry trust-increase institution and standardize the management of financing guarantee institutions.

(XI) To support independent creation of private equity products. In the principle of classified regulation, post-filing is gradually adopted for the private raising product independently created by securities business institutions. Post-filing is directly adopted for private raising product created in the counter market of securities business institutions or inter-institutional pricing and service system. Support securities business institutions to establish buyout funds, mezzanine funds, industry funds and other direct investment funds.

Third, to promote regulatory transformation

(XII) To change the regulatory way. Improve the regulatory mechanism, uniform regulatory standards, and make changes to strengthen onward and afterward regulation from emphasizing prior approval. Support securities business institutions to legally and independently carry out business and product innovation, to independently identify, evaluate, and bear innovation risk. Strengthen onward supervision and dynamic monitoring and control as well as risk and issue-oriented on-site inspection. Strengthen afterward supervision and law enforcement, and improve joint enforcement mechanism between daily supervision institution, regulatory enforcement authorities and self-disciplinary organization.

(XIII) To deepen approval reform. Screen and clean up approval filing items for securities business institutions. Further cancel and adjust administrative approval items; further adjust non-administrative licensing approval and gradually abolish it; except the statutory administrative approval items, the administrative approval is prohibited to be implemented(or in disguise)under any name or in any way. Cancel any prior filing and report items of different departments of SRC not regulated by laws and regulations, if really necessary to reserve, it shall be changed to post-filing. Standards, processes, deadlines and way should be published for all approval filing items, which should not be implemented without publication.

(XIV) To relax industry access. Support various qualified market subjects such as private capital and professionals to invest in establishing securities business institutions, and further relax conditions for foreign capital access to securities business institution. Support state securities business institutions to carry out the reform of mixed ownership. Support social insurance funds, enterprise annuities and other long-term funds to entrust professional institutions for investment and operation or establishment of professional securities business institutions. Support securities business institutions and other financial institutions to explore comprehensive management in the way of mutual holding and shares participation under the premise of controlled risks, and improve the policy of "one shares participation and one shares holding".

(XV) To implement business license management. Establish an open and transparent securities futures business license management system with orderly entry and exit. Under the premise of promoting the revision and improvement of relevant laws and regulations, support securities companies, funds management companies, futures companies and securities investment advisory companies for cross-licensing, support other qualified financial institutions to apply for securities business license on the basis of risk isolation. Encourage the qualified securities companies to apply for public raising funds management license and trust business license. Timely expand the business scope of securities joint venture.