CBIRC Proposes to Issue New Rules for Internal Control of Wealth Management Companies

The CBIRC (China Banking and Insurance Regulatory Commission) has proposed revised rules to improve the internal control of Chinese wealth management companies.

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According to CBIRC, the measures are refined from existing regulations in the financial industry, leveraging good regulatory practices from the asset management industry both domestically and overseas.

Since the CBIRC issued rules allowing commercial banks to establish wealth management subsidiaries that can directly invest in the stock market in 2018, a total of 29 wealth management companies have been approved for establishment, of which 25 have been approved to open for business.

By end-March 2022, the total balance of wealth management products of banks and wealth management companies was CNY 28.4 trillion (USD 4.3 trillion).

The new rules require wealth management companies to establish a “comprehensive, balanced, matched and prudent internal control management mechanism and organisational structure” and improve the hierarchical mechanism for investment management authorisation.

The rules seek to strengthen investment and transaction system processes – through requirements for wealth management companies to implement a centralised transaction record system so that investments and transactions are separated, and that transaction information can be traced back and checked.

The rules also specify how wealth management companies should manage personnel in key posts, strengthen related party transaction management, isolate risk, design products, and allocate responsibilities among their directors and senior management, internal control functional departments, and internal audit departments. 

According to CBIRC, the adoption of the rules will help to standardise regulatory requirements for asset management companies, and promote the establishment of internal control compliance management systems in companies based on their own business scale, characteristics, and risk scenarios.

"The measures serve as an important institutional guarantee for the financial management industry to move towards high-quality development," the CBIRC said.

The CBIRC also updates its regulatory requirements for wealth management companies in relation to information system management, network and information security management, accounting systems and performance appraisal.