China Proposals for Brokers to Manage Individual Client Assets

Christopher Owen

29 January 2008

The China Securities Regulatory Commission has published draft rules to permit Chinese brokerages to manage assets for individual clients for the first time. The changes, announced yesterday, will make Chinese securities firms less reliant on trading income and will enable them to compete for funds with asset management companies and banks to manage cash, bonds, asset-backed securities, mutual funds, stocks and financial derivatives. "This is a huge market potentially," Victor Wang, a Hong Kong-based analyst at UBS, told Bloomberg. "Brokerages are the first to be able to design a wealth management product for a single client." The CSRC is seeking comments from the public on the set of draft rules. Clients' net asset value must meet the regulator's minimum requirement, it said without elaborating, and clients can include people who are legal representatives of companies and organisations. Individual clients' wealth management accounts must be separate and reported to the CSRC before trading can commence, according to the new rules. Brokerages are required to provide an investment management report to clients every month on asset allocation and change in net values. Securities companies must not make promises of principal-guarantee or of minimum investment returns to clients, the draft rules said. Clients should bear all the investment risks. China has $2.4 trillion yuan in household savings and $1.9 trillion yuan in company savings.