China’s securities regulator has released draft rules aimed at cutting trading commissions for mutual funds and addressing conflicts of interest between securities trading and fund sales businesses of brokerages. The proposed rules, which aim to protect investors and regulate the allocation of trading commissions by fund managers, come five months after the regulator urged mutual funds to reduce management fees and costs for investors.
If implemented, the new rules would benefit brokerages with strong trading and research capabilities. Trading commissions for both passive and active fund products would be reduced, with overall commissions estimated to be cut by a third. Additionally, fund managers would be prohibited from paying trading commissions for third-party services, and mutual funds’ sales teams would no longer be involved in selecting brokers and allocating trading commissions.
To ensure fairness, a mutual fund company would be prohibited from paying more than 15% of its total trading commissions to a single brokerage. The proposed rules aim to guide the brokerage business back to research, promoting transparency and accountability.
In addition to these rules, the regulator is expected to further tighten regulation on fund distribution fees in the next stage of reform. This move is in line with the government’s efforts to enhance the stability and sustainability of the financial sector.
Furthermore, the securities regulator has also published separate draft rules to tighten scrutiny of China’s private funds. The minimum investment threshold for qualified investors in private equity or venture capital funds would be increased to at least 3 million yuan. The aim is to reduce risk in the private fund sector, which plays a crucial role in innovation and economic growth in China.
Overall, the draft rules proposed by China’s securities regulator seek to create a more transparent, fair, and accountable mutual fund industry. By cutting trading commissions, addressing conflicts of interest, and tightening regulation on private funds, the regulator aims to protect investors and promote the stability and sustainability of China’s financial sector.
