· Document Number：No. 153 [2017] of the Securities Association of China

· Area of Law： Securities

· Level of Authority： Industry Regulations

· Date issued：06-28-2017

· Effective Date：07-01-2017

· Status： Effective

· Issuing Authority： Securities Association of China

Notice of the Securities Association of China on Issuing the Implementation Guidelines for the Suitability Management of Investors in Securities Trading Institutions (for Trial Implementation)
(No. 153 [2017] of the Securities Association of China)
All securities trading institutions:
For the purposes of directing the implementation of the requirements for investor suitability management in the securities industry, and protecting investors' lawful rights and interests, the Securities Association of China (“SAC”) has organized the drafting of the Implementation Guidelines for the Suitability Management of Investors in Securities Trading Institutions (for Trial Implementation) (hereinafter referred to as the “Guidelines”), which were voted through at the 1st meeting of the sixth executive council of the SAC and granted recordation by the China Securities Regulatory Commission, are hereby issued and shall come into force on July 1, 2017. The relevant matters are hereby announced as follows:
I. The Guidelines are based on industry practice, fully absorb the reasonable suggestions of the industry and regulatory authorities, and provide procedural guidance for the performance of the suitability obligation in the industry. Since securities trading institutions have differences in such aspects as business nature, service capability, management level and internal control mechanism, all securities trading institutions may take the Guidelines as a reference in the course of implementation, and further specify and improve relevant procedures, methods, standards and flow in light of their actual circumstances, and effectively perform the suitability obligation.
II. The provisions of relevant self-disciplinary organizations shall apply, mutatis mutandis, to the fund and futures businesses of securities companies and their subsidiaries. If the securities company only executes the orders of clients' trading in stocks, funds, and bonds, among others, on the open market, it shall not conduct repeated suitability management.
III. All securities trading institutions shall strengthen system building, personnel assignment and technical preparation. Securities trading institutions shall, within six months after the issuance and implementation of these Guidelines, complete the reconstruction and upgrading of the technical system for suitability management.
IV. Where existing investors participate in securities and futures trading according to existing institutional arrangements, the implementation of the Guidelines for the Suitability Management of Securities and Futures Investors and the Guidelines shall give sufficient consideration into the actual circumstances, conduct differential treatment under the non-retrospective principle. The specific practice is: a securities trading institution that sells products or provides services to new clients, sells products or provides services higher than the former risk level to old clients, or sells products or provides services to old clients re-validating dormant accounts shall comply with the requirements of the Measures and Guidelines. The institution may continue selling products or providing services not higher than the former risk level to old clients, which shall not be affected. At the same time, securities trading institutions are encouraged to take the initiative to make appropriate arrangements on the suitability management of old clients according to actual circumstances and in light of such work as clients' return visit, self-inspection and assessment. Securities trading institutions shall, after the implementation of the Measures and the Guidelines, continuously summarize experience, and continuously optimize and improve suitability management rules.
V. The eight annexes the Basic Investor Information Form, the Professional Investor Application Form, the Professional Investor Notification and Confirmation Letter, the Assessment Questionnaire for Investors' Risk Tolerance, the Notification of Assessment Result of Investors' Risk Tolerance, the Catalogue of Product or Service Risk Levels, the Suitability Matching Opinion Confirmation Letter and the Product or Service Risk Warning and Investor Confirmation Letter are the reference model provided by the SAC to facilitate securities trading institutions' performance of the suitability obligation, and shall be adjusted and improved by all securities trading institutions in light of their circumstances.
VI. The SAC will continuously track and appraise the implementation of the suitability obligation by securities trading institutions. All securities trading institutions shall, in a timely manner, report the problems encountered in the implementation of the Guidelines to the SAC.
Tel.: 010-66575952/5651
Annex: Implementation Guidelines for the Suitability Management of Investors in Securities Trading Institutions (for Trial Implementation)
Securities Association of China
June 28, 2017
Annex: Implementation Guidelines for the Suitability Management of Investors in Securities Trading Institutions (for Trial Implementation)
Article 1 For the purposes of urging and directing the securities industry to effectively carry out suitability management requirements, and protecting investors' lawful rights and interests, these Guidelines are developed in accordance with the Securities Law, the Regulation on the Supervision and Administration of Securities Companies, the Measures for the Suitability Management of Securities and Futures Investors (hereinafter referred to as the “Measures”) and other relevant laws, administrative regulations and the provisions of the CSRC.
Article 2 These Guidelines shall apply to the sale of financial products to investors by securities companies and their subsidiaries and securities investment consulting institutions (hereinafter collectively referred to as “securities trading institutions”) and their provision of securities brokerage, investment consulting, margin trading and short selling, asset management, over-the-counter trading and other financial services for the purpose of investors' purchase of financial products.
Article 3 Securities trading institutions may obtain the basic information on investors prescribed by Article 6 of the Measures by multiple forms such as investors' entry of the Basic Investor Information Form.
Article 4 Securities trading institutions may require the investors meeting the conditions set forth in items (1), (2) and (3) of Article 8 of the Measures to provide the business license, the license for engaging in the securities, fund or futures business, the license for engaging in other financial businesses, the legal person registration certificate of the foundation, registration materials of the QFII, RQFII or private-offered fund management institution, and other identification materials, and in respect of wealth management products, the documents on the creation or recordation of such products and other certification materials shall also be provided. If an investor meeting the aforesaid conditions is verified to be true, the securities trading institution may directly determine the investor as a professional investor, and inform the determined result to the investor in writing.
Article 5 A securities trading institution may require an investor meeting the conditions set out in items (4) and (5) of Article 8 of the Measures to provide the following materials:
(1) Financial statements and financial asset certification documents of the last year and certification materials on the investment experience for two years or more, among others, provided by the legal person or the investor of any other organization.
(2) Financial asset certification documents provided by the natural person investor or the income certificate, investment experience, work certificate or vocational qualification certificate, among others, in the last three years.
Where an investor meeting the aforesaid conditions is verified to be true, the securities trading institution may directly determine the investor as a professional investor, and inform the determined result to the investor in writing.
Article 6 Where an ordinary investor applies to change into a professional investor, the securities trading institution may require the investor to provide the following materials:
(1) An application form of the professional investor for confirming the self-assumption of risks and consequences.
(2) Financial statements and financial asset certification documents of the last year and certification materials on the investment experience for one year or more, among others, provided by the legal person or the investor of any other organization.
(3) Financial asset certification documents or the income certificate in the last three years, materials proving one year or more investment experience or work experience, among others, provided by the natural person investor.
The securities trading institution shall also, after completing the verification of application materials, prudentially assess investors in accordance with Article 12 of the Measures. If an ordinary investor is changed into a professional investor, the institution shall state the differences of performance of suitability obligation by different types of investors to warn of possible investment risks, and inform of the examination result and reason in writing. If the ordinary investor does not meet the conditions for changing into a professional investor, the institution shall also inform the examination result and reason in writing.
The securities trading institution shall, in accordance with Article 25 of the Measures, make whole-process audio or video recordings of the notification of examination result and warning, or confirm in the electronic form required by any law or administrative regulation.
Article 7 Where a professional investor meeting the provisions of items (4) and (5) of Article 8 of the Measures applies for changing into an ordinary investor, the securities trading institution shall, in a timely manner, change it into an ordinary investor, comprehensively assess the investors' risk tolerance as required, determine their risk tolerance degree, and perform the corresponding suitability obligation.
Article 8 A securities trading institution shall, according to the information on ordinary investors, comprehensively assess their risk tolerance by such methods as their entry of the Assessment Questionnaire for Investors' Risk Tolerance. The design of the Assessment Questionnaire for Investors' Risk Tolerance shall be scientific, reasonable, comprehensive, concise and easy to understand.
Article 9 A securities trading institution may, according to the risk tolerance of ordinary investors, categorize them into at least five degrees, i.e. C1 (including investors of the lowest risk tolerance), C2, C3, C4 and C5 respectively, from low to high. It shall inform investors of the specific categorization standards, methods and the modification thereof.
The securities trading institution shall confirm with ordinary investors their risk tolerance degree result, and record the result in a written form for retention.
Article 10 The Basic Investor Information Form and the Assessment Questionnaire for Investors' Risk Tolerance shall be entered by the investor or the legal authorizer. A securities trading institution and its staff members shall not induce, mislead or cheat investors in an explicit or implicit form, which affects the entry result.
Article 11 A securities trading institution shall, in a timely manner, enter the investor information in the investor assessment database, and continuously assess investors' risk tolerance based on the updated information. The investor assessment database shall at least cover the following information:
(1) Investor information prescribed in Article 6 of the Measures and certification materials prescribed in these Guidelines.
(2) Content of previous Assessment Questionnaires for Investors' Risk Tolerance, assessment time, and assessment results, among others.
(3) The investor's application form for being a professional investor or changing into an ordinary investor, notification of the examination result, and warning, among others.
(4) Investors' investment trading records, including but not limited to products or services and their risk level, trading authority, and trading frequency.
(5) Investors' bad faith records in the securities trading institution.
(6) Other information required by the CSRC, the Securities Association of China (hereinafter referred to as the “SAC”) and the securities trading institution.
The aforesaid item (4) shall not apply to securities investment consulting institutions.
Article 12 A securities trading institution may take a natural person in C1 that falls under any of the following circumstances as an investor of the lowest risk tolerance:
(1) It does not have full capacity for civil conduct.
(2) It does not have risk tolerance or is unwilling to bear any investment loss.
(3) Any other circumstance prescribed by laws and administrative regulations.
Article 13 A securities trading institution shall, according to the factors prescribed in Articles 16 and 17 of the Measures, comprehensively assess products or services based on scientific and rational methods, and determine their risk level.
Article 14 A securities trading institution may categorize product or service risk levels into at least five degrees, i.e. R1, R2, R3, R4 and R5 respectively, from low to high. It shall inform investors of specific categorization methods, standards and the modification thereof.
The securities trading institution shall set out the list of corresponding products or services according to the Catalogue of Product or Service Risk Levels.
Article 15 Where the products sold or services provided by a securities trading institution to investors involve investment portfolios or asset allocation, the institution shall, according to the collective risks of investment portfolios or asset allocation, assess the risk levels of such products or services, and determine the risk levels thereof.
Article 16 Securities trading institutions that sell products or provide services to ordinary investors shall, under the premise of abiding by laws, administrative regulations, the provisions of the CSRC and investor access requirements, and according to the principles of matching investors' risk tolerance degree and the risk levels of products or services, offer suitability matching opinions to investors, and perform the suitability obligation.
Article 17 Securities trading institutions shall, in accordance with the actual circumstances of themselves and ordinary investors, determine the specific methods for matching their risk tolerance degree and the risk levels of products or services, and may determine the methods by reference to the following methods:
(1) Matching Grade C1 investors with Grade R1 products or services.
(2) Matching Grade C2 investors with Grade R2 or R1 products or services.
(3) Matching Grade C3 investors with Grade R3, R2 or R1 products or services.
(4) Matching Grade C4 investors with Grade R4, R3, R2 or R1 products or services.
(5) Matching Grade C5 investors with Grade R5, R4, R3, R2 or R1 products or services.
Professional investors may purchase or accept products or services of all risk levels, and if there are requirements for investors' access in any law, administrative regulation, the provision of the CSRC or the market, products or services, such provisions and requirements shall apply.
Article 18 A securities trading institution's suitability matching opinion on the investor does not represent the essential judgment or guarantee on the risks and return of products or services. The investor may, on the basis of the suitability matching opinion of the securities trading institution, make decisions in a prudential and independent manner based on their capability, and assume investment risks in an independent manner.
Article 19 Where, after the securities trading institution informs investors of relevant products inappropriate for purchase or relevant services inappropriate for receipt, if the investor actively requires the purchase of products of which the risk level is higher than its risk tolerance or the receipt of relevant services, the securities trading institution shall, after confirming that it does not fall under investors with the lowest risk tolerance, give a special written risk warning that the product or service risk is higher than its risk tolerance, and if the investor insists on the purchase of products or services, the institution my sell relevant products or provide relevant services to the investor.
Article 20 Where the investor's risk tolerance degree matches the risk levels of products or services, the securities trading institution shall sign to confirm suitability matching result with investors, and if it does not match, it shall sign to confirm risk warning with investors.
Article 21 Securities trading institutions that sell products and provide services shall sufficiently disclose to investors product or service information and other information that is conducive to investors' investment analysis and judgment. The disclosed information shall not contain any false or misleading statement or material omission, and shall not cheat investors.
Article 22 Securities trading institutions that sell products and provide services shall sufficiently disclose to investors the credit risks, market risks, liquidity risks and other major risks that may affect investors' rights and interests and the particular risks of specific products or services, and investors shall sign for confirmation.
Article 23 Securities trading institutions shall establish and improve the rules for investors' return visit, and select investors that purchase products or receive services that are not less than 10% of total investors that purchase products or receive services at the end of the last year (including investors of which the risk level of purchased products or received services is higher than the risk tolerance thereof, excluding investors of dormant accounts and trading suspension accounts). The content of return visit shall include but not be limited to:
(1) Whether the person that accepts the return visit is the investor himself or herself.
(2) Whether the person that accepts the return visit enters the Basic Investor Information Form, and the Assessment Questionnaire for Investors' Risk Tolerance, among others, according to the relevant provisions, and signs them as required.
(3) Whether the person that accepts the return visit is aware of product or service risks and the relevant risk warning.
(4) Whether the person that accepts the return visit is aware of the business rules for the purchased products or received services.
(5) Whether the person that accepts the return visit is aware of the risk tolerance degree thereof, the risk level of the purchased products or received services and suitability matching opinions.
(6) Whether the person that accepts the return visit is aware of the assumed expenses and possible investment loss.
(7) Whether the securities trading institution or any of its staff members has any prohibitive conduct prescribed in Article 22 of the Measures.
Article 24 Securities trading institutions shall, according to their actual needs, offer training on suitability management to personnel on relevant posts on a periodical basis or from time to time, so as to enhance the knowledge and skills required for their performance of the suitability obligation.
Article 25 Securities trading institutions shall include the performance of the suitability obligation and handling of clients' complaints and disputes, among others, by personnel on the relevant posts in the scope of performance assessment.
Securities trading institutions shall not adopt appraisal and incentive measures that encourage inappropriate sales or services.
Article 26 Securities trading institutions shall conduct the supervision and inspection of the performance of the suitability obligation by personnel on the relevant posts, and hold liable any person who violates investor suitability management provisions.
Article 27 Securities trading institutions and their staff members shall strictly keep confidential the basic investor information, the assessment result of investors' risk tolerance and other information obtained when the suitability obligation is performed, and prevent the divulge or inappropriate use of such information.
Article 28 Securities trading institutions shall appropriately handle investors' complaints and disputes arising from the performance of the suitability obligation, retain relevant records, analyze and summarize in a timely manner, and improve the relevant mechanisms and systems.
Article 29 Securities trading institutions shall, in accordance with Article 30 of the Measures, conduct self-inspection on suitability, including but not limited to the construction and implementation of suitability management rules, personnel training and examination, handling of investors' complaints and disputes, the problems found and the rectification thereof, and other information.
Article 30 Securities trading institutions may, according to relevant provisions, apply to the SAC for the mediation of disputes relating to suitability with investors.
Article 31 The SAC that performs the suitability obligation against securities trading institutions shall conduct self-disciplinary management, and in accordance with the law, take self-disciplinary punishment measures against securities trading institutions and personnel that violate suitability management provisions.
Article 32 For the purposes of these Guidelines, “written form” includes paper or electronic forms.
Article 33 These Guidelines shall be subject to interpretation by the SAC.
Article 34 These Guidelines shall come into force on July 1, 2017, and the Guidelines for Investor Suitability Rules of Securities Companies, and the Notice Issuing the Assessment Questionnaire for the Risk Tolerance of Individual Investors (Model for Trial Implementation) shall be repealed at the same time.
Annexes: 1. Basic Investor Information Form
2. Professional Investor Application Form
3. Professional Investor Notification and Confirmation Letter
4. Assessment Questionnaire for Investors' Risk Tolerance
5. Notification of Assessment Result of Investors' Risk Tolerance
6. Catalogue of Product or Service Risk Levels
7. Suitability Matching Opinion Confirmation Letter
8. Product or Service Risk Warning and Investor Confirmation Letter