The Advance Notice Procedure for the Draft Amendments to Some Articles of the “Regulations Governing Responsible Persons and Associated Persons of Securities Firms” and the “Regulations Governing Responsible Persons and Associated Persons of Futures Commission Merchants” Have Been Completed, and the Amended Regulations Will Be Released Soon
2022-10-18
In order to strengthen the management of the operations of securities firms and futures commission merchants, and implement corporate governance, the FSC has planned to amend some provisions of the “Regulations Governing Responsible Persons and Associated Persons of Securities Firms” and the “Regulations Governing Responsible Persons and Associated Persons of Futures Commission Merchants” (hereinafter referred to as the “Regulations Governing Securities Firms and Futures Commission Merchants”). The advance notice period for the relevant amendments has lapsed, and the amended regulations will be promulgated and implemented in the near future. The key points of the amendments are as follows:
I. In order to enhance the chairman's professional abilities, it is stipulated that the chairman shall have good moral character, effective leadership and management capabilities, and shall have a certain degree of education and relevant work experience at securities, futures, financial or insurance institutions (Article 9-1 of the amended Regulations Governing Securities Firms and Article 7-2 of the amended Regulations Governing Futures Commission Merchants).
II. In order to strengthen the operation and management of securities firms and futures commission merchants, and implement corporate governance, it is added that the board of directors has the responsibility of selecting and supervising managers, and shall supervise the firm in implementing the accountability of managers and establishing the relevant systems (Article 11 of the amended Regulations Governing Securities Firms and Article 20-1 of the amended Regulations Governing Futures Commission Merchants).
III. In order to prevent the responsible person from holding concurrent positions and thus affecting the effective performance of his/her duties or causing conflicts of interest, it is added that securities firms and futures commission merchants shall regularly assess their responsible persons’ concurrent positions to serve as an important reference for approving of or reducing such concurrent positions (Article 11-1 of the amended Regulations Governing Securities Firms and Article 7-1 of the amended Regulations Governing Futures Commission Merchants).
IV. In view of the increasing popularity of the business model of domestic groups, of which the director and supervisor positions are mostly held by corporate shareholder representatives or their responsible persons, in order to control the conflicts of interest among financial institutions arising from such concurrent positions, the regulations on banking and insurance industries were referred to, and it is added that if a natural person or a corporate director (supervisor) of a securities firm or futures commission merchant or his/her related person concurrently serves as a director (supervisor) of another financial institution, it is presumed that there is a conflict of interest and therefore a violation of the requirements on conflicts of interest, and the person shall be dismissed if no adjustment is made before the deadline without any legitimate reason. However, the provisions above do not apply to the government, and the securities firms and futures commission merchants which the government directly or indirectly holds 100 percent of their shares (Article 11-3 of the amended Regulations Governing Securities Firms and Article 7-3 of the amended Regulations Governing Futures Commission Merchants).
V. In order to increase the flexibility of conducting on-the-job training for the associated persons of securities firms and futures commission merchants, and meet the firms’ respective business development needs, it is added that securities firms and futures commission merchants may apply to conduct on-the-job training on their own in accordance with the guidelines for on-the-job training operations prescribed by their respective trade associations (Article 15 of the amended Regulations Governing Securities Firms and Article 11 of the amended Regulations Governing Futures Commission Merchants).
The FSC said that the operation quality of securities firms and futures commission merchants substantially affects the rights and interests of investors, and the competence and responsibility of the responsible persons as well as the absence of conflicts of interest have been among the core supervisory concepts of the FSC. These amendments above can strengthen the corporate governance of securities firms and futures commission merchants as well as the accountability of managers, and will help enhance the operation and management of securities firms and futures commission merchants. In the future, the FSC will prudently adjust the regulations on relevant personnel to promote the sound and sustainable development of securities and futures industries based on their business development, external opinions and practical needs.
I. In order to enhance the chairman's professional abilities, it is stipulated that the chairman shall have good moral character, effective leadership and management capabilities, and shall have a certain degree of education and relevant work experience at securities, futures, financial or insurance institutions (Article 9-1 of the amended Regulations Governing Securities Firms and Article 7-2 of the amended Regulations Governing Futures Commission Merchants).
II. In order to strengthen the operation and management of securities firms and futures commission merchants, and implement corporate governance, it is added that the board of directors has the responsibility of selecting and supervising managers, and shall supervise the firm in implementing the accountability of managers and establishing the relevant systems (Article 11 of the amended Regulations Governing Securities Firms and Article 20-1 of the amended Regulations Governing Futures Commission Merchants).
III. In order to prevent the responsible person from holding concurrent positions and thus affecting the effective performance of his/her duties or causing conflicts of interest, it is added that securities firms and futures commission merchants shall regularly assess their responsible persons’ concurrent positions to serve as an important reference for approving of or reducing such concurrent positions (Article 11-1 of the amended Regulations Governing Securities Firms and Article 7-1 of the amended Regulations Governing Futures Commission Merchants).
IV. In view of the increasing popularity of the business model of domestic groups, of which the director and supervisor positions are mostly held by corporate shareholder representatives or their responsible persons, in order to control the conflicts of interest among financial institutions arising from such concurrent positions, the regulations on banking and insurance industries were referred to, and it is added that if a natural person or a corporate director (supervisor) of a securities firm or futures commission merchant or his/her related person concurrently serves as a director (supervisor) of another financial institution, it is presumed that there is a conflict of interest and therefore a violation of the requirements on conflicts of interest, and the person shall be dismissed if no adjustment is made before the deadline without any legitimate reason. However, the provisions above do not apply to the government, and the securities firms and futures commission merchants which the government directly or indirectly holds 100 percent of their shares (Article 11-3 of the amended Regulations Governing Securities Firms and Article 7-3 of the amended Regulations Governing Futures Commission Merchants).
V. In order to increase the flexibility of conducting on-the-job training for the associated persons of securities firms and futures commission merchants, and meet the firms’ respective business development needs, it is added that securities firms and futures commission merchants may apply to conduct on-the-job training on their own in accordance with the guidelines for on-the-job training operations prescribed by their respective trade associations (Article 15 of the amended Regulations Governing Securities Firms and Article 11 of the amended Regulations Governing Futures Commission Merchants).
The FSC said that the operation quality of securities firms and futures commission merchants substantially affects the rights and interests of investors, and the competence and responsibility of the responsible persons as well as the absence of conflicts of interest have been among the core supervisory concepts of the FSC. These amendments above can strengthen the corporate governance of securities firms and futures commission merchants as well as the accountability of managers, and will help enhance the operation and management of securities firms and futures commission merchants. In the future, the FSC will prudently adjust the regulations on relevant personnel to promote the sound and sustainable development of securities and futures industries based on their business development, external opinions and practical needs.
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2022-10-26