China AMAC Issues Guidelines for Fund Houses to Manage Reputational Risk

AMAC (Asset Management Association of China) has issued new guidelines for fund houses on improving their organisational structure and their management of reputational risk.

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The guidelines are aimed at improving reputational risk monitoring, assessment, response and disposal mechanisms, and clarifying industry collaboration and self-discipline management measures to be taken in response to incidents.

Reputational risk is defined in the guidelines as referring to the negative evaluation of fund houses by investors and the public due to external events as well as the behaviours and remarks of the fund house or its staff. This includes incidents that could damage brand value, impact operations, or affect market and social stability.

Fund houses should cultivate employees' awareness of reputational risk, incorporate reputational risk management into their comprehensive risk management systems, proactively prevent and control reputational risk, and properly handle reputational incidents, the guidelines say.

Fund houses should company establish or designate special departments and teams to carry out reputational risk management work, and appoint a senior executive to be in charge of supervising reputational risk management, the guidelines say. The responsibilities and obligations of the board of directors, management, departments, and branches should also be clear.

The guidelines call for the establishment of a suitable management system for appointing designated press spokespersons, who should be familiar with the company's business and operating conditions, and have experience in handling emergencies.

AMAC has specified obligations for fund houses to consider how changes in senior management and core staff could impact reputational risk, a new addition from a draft of the guidelines issued in August 2021. 

Fund houses are also required to notify AMAC of reputational risks that arise, the countermeasures taken, and the incident handling results within ten working days of a major reputation event or behaviour that may trigger a major reputation event. Records on reputation risk events and how they were handled should be kept for a minimum of five years.

 AMAC will assess and inspect fund houses' implementation of the guidelines through on-site or off-site methods, and impose self-discipline management measures or disciplinary sanctions on staff for violations, depending on severity.

The requirements to manage reputational risk also apply to outsourced, seconded and other personnel.

Source: Regulation Asia