Name: Consultation Draft of “Trial Measures on the Futures Investment Consultancy Business of Futures Companies” (《期货公司期货投资咨询业务试行办法》(征求意见稿),the “Draft Measures”)
Issuing authority: China Securities Regulatory Commission
Consultation period: Ends on 25 February 2011
Subject: Futures investment consultancybusiness
In March 2007, the State Council promulgated the Administrative Regulations on Futures Trading, which introduced futures investment consultancy businessas a separate category of business of futures companies, distinct from and additional to their primary business of futures brokerage business. The CSRC began its efforts to formulate detailed rules to regulate futures investment consultancy businesses back in 2009 and the Draft Measures, released on 11 February 2011, now set out detailed provisions relating to qualification requirements, risk management and other conduct of business rules for futures investment consultancy businesses of futures companies.
Highlights
- Futures investment consultancy businessrefer to the following services provided by futures companies to customers for a fee: (i) risk management consultancy services; (ii) research and analysis on futures; (iii) futures trading consultancy services; and (iv) other business prescribed by the CSRC.
- Futures companies conducting futures investment consultancy business must be licensed by the CSRC. Companies need to meet the following requirements: have a minimum registered capital of RMB100million and a minimum net capital of RMB80million,be in compliancewith regulatory requirements on risk supervisory indicators, such as net capital ratios, in the preceding six months, and have qualified senior management personnel and professionals.The relevant professionals must also be licensed by the CSRC to carry out futures investment consultancy services.
- The provision of consultancy and training services to brokerage clients as an ancillary service to brokerage services does not require a separate licence.
- Futures companies are required to have in place policies for preventing conflicts of interest between their futures investment consultancy business and other businesses, for example establishing information barriers and segregating front office and back office functions such as execution and finance.
- The Draft Measures leave open the possibility of securities companies being permitted to conduct futures investment consultancy business, an area which may therefore be regulated in due course by further regulations to be introduced by the CSRC.
If you would like to discuss anything regarding this Alert please contact Fang Jian (Shanghai), Nicola Mayo (Shanghai), Simon Poh (Shanghai), or Betty Yap (Hong Kong).
