The China Securities Regulatory Commission (CSRC) will ease restrictions on fund sales, allowing more financial institutions to transact fund products while also clearing the way for online fund investment, according to announcements issued Saturday by the commission.
Specifically, futures brokers and insurers can apply to offer collective investment products as of June 1. At present, fund transactions in China are confined to commercial banks, fund investment companies, securities firms and independent fund sales organizations.
Meanwhile, the CSRC also issued interim rules, effective immediately, permitting authorized fund sales institutions to sell their products via third-party e-commerce platforms, including taobao.com and 360buy.com.
By carving out more sales channels, regulators are again showing their commitment to breaking up the banking sector's monopoly on the fund market, which has long been blamed for stalling the development of emerging fund companies, Wang Qunhang, a senior fund analyst, told the Global Times.
According to Wang, roughly 60 percent of Chinese fund sales are conducted through commercial banks, although some small fund companies rely on banks to sell 90 percent of their products. In return, most fund companies have to hand over 70 percent of their major income source - commission fees - to banks, said Wang.
"In some extreme cases, companies pay 100 percent," Wang said.
"Such high percentages of shared revenues have hurt the profits of fund companies and are threatening their very survival, especially now that investors are so down on fund products due to the lingering weakness in the broader financial market," Wang said.
Over the past two years, the CSRC has been working to give fund companies more opportunities to connect with investors. In October 2011, the commission expanded the market by clearing five investment consulting firms as well as 19 independent fund providers to join the country's pool of approved fund product sellers. In December 2012, regulators also offered a preliminary draft outlining online fund sales guidelines.
"With these new channels, fund companies may be able to keep more commission fees," Wang said.
Yet, it is still too early to say whether such policies will translate into more sales for fund companies, Qiu Yanying, chief investment officer with China Fortune Securities, told the Global Times.
"Although the CSRC has approved other institutions to sell funds, I think most customers will still prefer to buy from banks due to safety concerns," Qiu said. "For channels new to customers, such as independent fund sellers and online platforms, it will take years to build up enough creditability to compete with banks."
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