Mutual Fund Investment Consulting Business Comes
At the end of October, 2019, the Department of Fund and Intermediary Supervision of the China Securities Regulatory Commission (“CSRC”) promulgated the Notice on the Pilot Implementation of the Public Offered Mutual Fund Investment Consulting Business ( the “Notice”) and the mutual fund investment consulting business (“MF Consulting Business”) is officially put into pilot implementation. The Notice provides specific guidance on how to conduct the MF Consulting Business. Qualified Institutions are entitled to apply for the MF Consulting Business qualification in order to advise their clients on the mutual fund investment portfolios and strategies, and subscribe, redeem, convert or otherwise trade the mutual funds for and on behalf of their clients (which is similar to a “Discretionary Mandate”). Before the promulgation of the Notice, institutions may only issue wealth management products to manage the investments for their clients, and the underlying investments are held by the wealth management products, while the clients only own the shares of the wealth management products instead of the relevant underlying investments directly. Now, for the first time, the Notice enabled the “Discretionary Mandate” business model by allowing investment consultants to, under the authorization granted by the clients, operate the clients’ account(s) directly. Under this model, the clients will be documented as the direct holder of the underlying investments and there is no need for the relevant institutions to issue the wealth management products any more.