Can The Appropriate Measures For The Management Of Securities And Futures Investors Turn The Tide?

China's stock market is a typical "retail market" and "policy market", and the two are mutually causal and interdependent.

The investor structure with retail investors as the main body is precisely the forced and helpless government's efforts to strengthen market control.

Therefore, the retail market is the root of the policy market, and the policy market will inevitably prevent or impede the marketization and rule by law reform process.

Therefore, the appropriate management of investors is not only conducive to promoting the process of "retail organization", but also finally breaking the "policy market" constraint, and this is also conducive to the stability of the financial market and better protection of investors' interests.

In 2009, the Shenzhen Stock Exchange gem was born, and the first investor in China's securities industry was accompanied by appropriate management rules.

Later, with the emergence of market, product or business such as financial futures, margin trading, stock pfer system, private investment fund and so on, we launched a series of independent investors' appropriateness system successively. Although all these played a positive role, they also produced obvious results. But these systems were scattered and independent, and did not cover some high-risk products. Moreover, the requirements put emphasis on setting up barriers for entry, and the obligations of operating agencies were not systematic and clear.

On the basis of summing up practical experience, the SFC has formulated a uniform investor management system, which is suitable for securities futures investors.

The financial innovation in 1970s has opened up a new era of financial derivatives, and all kinds of financial futures and options products are emerging. These products are characterized by structural, leveraged and derivative features. They are highly professional and complex. They increase the risk of investors and increase the difficulty of investors' understanding of products.

Especially with the rapid advance of bank asset securitization in the late 1990s, the risk of financial derivatives began to spread to tradition.

This has attracted the attention of regulators and international regulatory cooperation agencies all over the world.

As early as 1982, the US SEC issued the D Ordinance (RegulationD), which referred to the concept of "AccreditedInvestors". In 1988, the US SEC promulgated Rule144A, and clearly defined the "qualified institutional buyer" (QualifiedInstitutional Buyers). Its purpose is to establish investor suitability rules by distinguishing the types of investors, supervise the self-discipline of financial intermediaries, and make special protection to ordinary investors to prevent them from participating in high-risk products or businesses that exceed their risk tolerance and recognition ability.

In 2008, a joint forum composed of the Basel Committee, the International Securities Regulatory Commission and the International Association of insurance supervisors issued a deep analysis report on customer appropriateness in the retail process of financial products and services. The report covered three industries, including banking, securities and insurance, and explained the risks caused by improper sales of retail financial products by regulators and practitioners.

In 2009, the IOSCO Technical Committee (TC) issued a summary report on unregulated financial markets and products. The report specifically pointed out that the definition of investors' appropriateness and the definition of mature investors should be assessed, and such requirements should be strengthened, as appropriate, according to relevant market conditions.

In 2012, the International Securities Regulatory Commission issued a document entitled "appropriateness requirements for the sale of complex financial products".

It defines "complex financial products" as "financial products" which are difficult to be understood by ordinary retail customers compared with traditional or ordinary securities products. Generally, they have complex structure and require professional technology or system to carry out valuations. The two level market liquidity is very poor.

Generally included, but not limited to, the following products: structured instruments, credit linked notes, mixed bonds, stock linked notes, securities related to market parameters, asset backed securities (ABS), mortgage-backed securities (MBS), secured debt securities and other financial derivatives (including credit default swap and reserve warrants).

The document also defines "improper sales", which generally refers to the sale of financial products that are not suitable for customers by financial intermediaries.

The term "appropriateness" refers to the standards and regulations that financial intermediaries should abide by in the process of selling financial products, and accordingly evaluates whether the products sold are in line with the customers' financial conditions and requirements.

Sales activities include providing investment advice to customers, managing personal portfolios and recommending publicly issued securities.

Market reform requires, on the one hand, to play the role of "market determination", and on the other hand, to protect investors well.

In the past, we used to restrict financial innovation through administrative means, and artificially curbed excessive speculation or intervened in the market fluctuation by means of administrative control. For example, using administrative orders to suspend IPO, forcing IPO pricing, adjusting stamp duty and commission frequently, raising the margin ratio, limiting the number of opening or trading, and limiting the short sale, etc., these regulatory means or measures are often easy to be labeled as "protecting investors" and "stabilizing the market", and give investors the impression of "excessive" supervision or over administrative intervention, thus forming a market expectation and psychological dependence, which ultimately leads to a vicious circle of administrative regulation and investor dependence: once the market volatility or risk amplification is made, investors are not self protecting but looking for.

Therefore, the government was forced to take administrative control to save the market in order to stabilize the market.

However, today, when we have established a unified management mechanism for investors' appropriateness, the market regulation and administrative control will be separated from each other, which will help restore the basic role of market decision.

In fact, the appropriateness management of investors in the new three board and stock index futures market is quite effective, especially the setting of the 5 million yuan entry threshold for the new three boards. It not only makes the "filing system" fully demonstrate the remarkable market efficiency and huge inclusiveness of the new three boards, but the number of listed company will be able to break through in three years. And no matter the market has gone up or down, the new three board investors have shown a calm and calm risk tolerance. No one has been looking for the government, nor has anyone called for bailout.

This is the agreement and resonance between investors' appropriateness management and the decisive role of the market.

"Seller is responsible" and "buyer is conceited". It embodies the principle of integrity and the spirit of contract in modern financial pactions.

The motivation of interbank competition and performance appraisal often leads to sellers or sellers of financial products making profits, or even covering up the risk of financial products unscrupulously, exaggerating the rate of return on products and inducing ordinary investors to buy high-risk financial products. This is an act of dishonesty and a lack of professional ethics, which will inevitably encroach on the interests of investors. Under such circumstances, the "buyer's conceit" is unfair and unfair.

The so-called "seller responsibility" means that the seller of financial products must put the requirements of investors' appropriateness in the first place, and objectively and objectively disclose the risk of products in accordance with the law. In the process of financial product development, design, marketing and service, the income / risk level should be distinguished, and investors should be categorization, so that simple and low-risk financial products should be served by ordinary investors, so that complex and high-risk financial products should be served by professional investors.

Only when financial intermediaries comply with the principle of "seller's responsibility" in advance, can we ask investors to abide by the spirit of "buyer's conceit".

Therefore, in this sense, investors' appropriateness management is an important way to realize "sellers' responsibility" and "buyer's conceit".

In order to make bigger and stronger direct financing and encourage private capital to participate in social investment and financing, the Securities Investment Fund Act, which was introduced into China in 2013, has given the legal status of private equity funds for the first time, which has made the private market grow rapidly and brought about the "barbaric growth" of Internet Finance and third party financial management. Various financial products and asset management businesses are springing up like mushrooms, and all kinds of structured, leveraged and derivative financial products have broken the dividing line of separation supervision for the first time. It constantly challenges and tests the wisdom and ability of regulators. The design and development of a product may span the securities, insurance, banking and trust industries, and even the participation of Internet finance. After the outbreak of the financial crisis,

In fact, the emergence of such cross-border financial products has increased the ability of the financial risks to spread and permeate, and also increased the difficulty of supervision and the cost of supervision.

However, as long as we strengthen investor's appropriateness management from the source, we can take preventive measures and reduce the blindness of investors' investment choices.

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Before the rise, China's financial market is only a single public offering market, for example, stock market, bond market, money market and so on.

In the days of undeveloped financial markets, in order to stabilize the society and encourage investors to participate, we actually used part of the government credit, giving the credit backing of "rigid payment" and "guaranteed capital commitment" to the debts of banks and state-owned enterprises, which also formed a market expectation and investors' dependence.

However, this is not in line with market trading rules.

The reason is that we still do not have the conditions to establish an appropriate management mechanism for investors.

Today, when we really establish the rules of investor's appropriateness management, we must prohibit rigid payment and prohibit guaranteed capital commitment so as to become a bottom line for the supervision and regulation of financial products.

On the one hand, the end of retail market depends on the growth of institutional investors, especially the growth of public funds and private pension. On the other hand, it depends on the prosperity and development of various asset management businesses and their collective products.

Since the financial crisis, with the relaxation of financial innovation and financial regulation, asset management businesses of various kinds of bank financial products, securities and futures business institutions, insurance asset management products and trust products have springing up. They have not only implemented the investor's appropriate management spirit, but also expanded the scale of the third party financial market through setting up the investor access threshold.

From the threshold of investor access, a low risk product with a starting point of 50 thousand yuan, and a low risk product with a starting point of 100 thousand yuan, of course, has 1 million, 2 million yuan, 3 million yuan, and even more than 10 million yuan starting point of high-risk products. This is not only the classification of financial products, but also the subdivision of investors.

This will not only provide investors with more abundant and diversified investment options, but also help guide investors to diversify investment and portfolio investment, especially for investors to voluntarily pfer their wealth to the third party trusteeship, which is conducive to guiding the "decentralized mechanism" in the investment market. This is also the inevitable process of "retail market" moving towards "institutional market".