Xinhu Futures

Pilot Measures for the Futures Investment Consulting Business of Futures Company

Chapter I General Provisions 

Article 1 To regulate the futures investment consulting business of futures companies, improve the professional service skills of futures companies, protect the legitimate rights and interests of clients and make the futures market better serve the national economic development, these Measures are formulated pursuant to the Regulation on the Administration of Futures Trading and other relevant provisions. 


Article 2 For the purposes of these Measures, the “futures investment consulting business of futures companies” includes the following for-profit activities of futures companies as commissioned by their clients: 

1. Assisting clients in setting up risk management rules and operating procedures and providing risk management advice, special training and other risk management advisor services; 

2. Collecting and processing futures market information and other relevant economic information, researching and analyzing prices and other contributing factors on the futures market and relevant physical markets, and making and providing research and analysis report or information research and analysis service; 

3. Designing hedging, arbitrage and other investment schemes, drafting futures trading strategies and providing other transaction consulting services for clients; and 

4. Other activities as set forth by China Securities Regulatory Commission (CSRC). 

 

Article 3 To operate the futures investment consulting business, a futures company shall obtain a futures investment consulting business qualification from the CSRC. A futures company’s employees engaging in the futures investment consulting business shall obtain a professional qualification for the futures investment consulting business.Without obtaining the prescribed qualifications, a futures company and its employees shall not engage in the futures investment consulting business. 

 

Article 4 When engaging in the futures investment consulting business, a futures company and its employees shall abide by the relevant laws, regulations and rules and these Measures, stick to the principle of good faith, keep an independent and objective standpoint, equally treat clients, and avoid conflicts of interest. 

 

Article 5 The CSRC and its local offices shall supervise and administer the futures investment consulting business of futures companies and their employees.China Futures Association shall conduct self-regulatory management of the futures investment consulting business of futures companies and their employees. 

 

Chapter II Business Qualification of a Futures Company and Professional Qualifications of Employees 

Article 6 To operate the futures investment consulting business, a futures company shall meet the following conditions: 

1. Its registered capital is not less than 100 million yuan and its net capital is not less than 80 million yuan; 

2. Its risk regulatory indications have met the regulatory requirements for six consecutive months before the date of application; 

3. It has at least one senior manager who has at least three years of experience in the futures sector and a professional qualification for the futures investment consulting business, and has at least 5 persons who each have at least two years of experience in the futures sector and a professional qualification for the futures investment consulting business, provided that none of them has a bad credit record in the last three years, has received any administrative or criminal punishment or is under investigation by the competent authorities for any violation of law or regulation; 

4. It has complete management rules for the futures investment consulting business; 

5. It has not received any administrative or criminal punishment in the last three years for any violation of law or regulation in business operation and is not under investigation by the competent authorities for any gross violation of law or regulation; 

6. It has not been subject to any regulatory measure taken by the regulatory authority as mentioned in Article 59 (2) or 60 of the Regulation on the Administration of Futures Trading in the last year; and7. It meets other conditions as set forth by the CSRC under the principle of prudential supervision and administration. 

 

Article 7 To apply for a futures investment consulting business qualification, a futures company shall submit: 

1. an application form for a futures investment consulting business qualification; 

2. a resolution of the shareholders’ meeting on application for the futures investment consulting business; 

3. the risk regulation statements of the futures company for the six consecutive months before the date of application; 

4. a text of the management rules for the futures investment consulting business, which shall cover departmental and personnel management, business operations, regulatory compliance inspection, return visits to clients, complaints of clients, etc.; 

5. an explanation on the futures company’s regulatory compliance in business operations in the last three years; 

6. a list of senior managers and professional employees to engage in the futures investment consulting business, their resumes, post-holding qualifications and professional qualifications, and the credit compliance certificates issued by the company; 

7. a photocopy of the Business License for Legal Person Enterprise and a photocopy of the Futures Business Operation Permit, to which the official seal of the company shall be affixed; 

8. the financial report of the previous year audited by an accounting firm qualified for the relevant securities or futures business; and if the date of application is in the second half of the year, the audited financial report of the first half of the year; 

9. a legal opinion of a law firm regarding whether the futures company meets the conditions as set forth in items 3 and 5 of Article 6 of these measures and whether the resolution of the shareholders’ meeting is lawful; and 

10. other materials as set forth by the CSRC. 

 

Article 8 Within 2 months after accepting a futures company’s application for the futures investment consulting business qualification, the CSRC shall make a decision on approval or disapproval. 

 

Article 9 China Futures Association shall be responsible for the qualification test, accreditation, routine management, etc. of employees engaging in the futures investment consulting business, and the relevant self-regulatory measures shall be made by China Future Association. 

 

Chapter III Business Rules 

Article 10 A futures company and its professional employees shall use their professional skills to cautiously, diligently and dutifully provide futures investment consulting services for clients, keep the trade secrets of clients, and protect the legitimate rights and interests of clients.A futures company and their professional employees shall not disseminate false or misleading information on their futures investment consulting capabilities, nor deceive or mislead clients. 

 

Article 11 A futures company shall, according to the relevant provisions on open information, announce the business qualification of the company, the professional qualifications of its employees, the services provided, ways to file a complaint and other relevant information on its business premises and website as well as the website of China Futures Association. 

 

Article 12 When operating the futures investment consulting business, a futures company shall follow the specific operating procedures, make sure that its management ability, development level and staffing are suitable to the business, effectively execute the management rules for the futures investment consulting business, strengthen regulatory compliance inspection, and prevent business risks. 

 

Article 13 When providing futures investment consulting services, a futures company and its professional employees shall not: 

1. promise any profit to a client or agree with a client on sharing in profits or risks; 

2. provide futures investment consulting services for a client on the basis of false information, market rumors or inside information; 

3. use futures investment consulting activities to manipulate the futures trading prices or make insider dealings, or disseminate false or misleading information; 

4. collect service charges in the name of an individual; or 

5. commit any other conduct prohibited by a futures regulation or rule.When providing futures investment consulting services, a futures investment consulting business employee shall not conduct futures trading on behalf of a client. 

 

Article 14 A futures company shall know beforehand the identity, financial status, investment experience, etc. of a client, carefully evaluate a client’s risk appetite, risk tolerance and service demand, and keep the relevant information on a client in both written and electronic forms.A futures company shall reveal the futures market risks to a client according to the client’s actual demand for futures investment consulting services, and expressly inform the client that the client shall independently assume the futures market risks. 

 

Article 15 A futures company shall enter into a futures investment consulting service contract with a client to agree on the specific services, fee rate and other relevant matters.The guidelines on the futures investment consulting service contract and the format of the risk revelation letter shall be made by China Futures Association. 

 

Article 16 When providing risk management services, a futures company shall use its advantages in the field to make risk management rules or operating procedures for a client according to the client’s demand, and provide pertinent risk management advice or training, and shall not exaggerate the risk management function of futures.A futures company shall assess the effects of its risk management services and the feedbacks from clients on a regular basis to constantly improve its risk management service capability. 

 

Article 17 When providing research and analysis services, a futures company shall equally treat its clients, and take effective measures to ensure that researchers and analysts form their opinions and conclusions independently.A futures company shall establish mechanisms for reviewing, managing and using research and analysis reports and information, and conduct review and compliance inspection on the use of research and analysis reports and information.A futures company shall take effective measures to prevent researchers, analysts and other persons inside the company from using research and analysis reports and information to seek improper benefits for themselves and other parties of interest. 

 

Article 18 Researchers and analysts shall be responsible for the contents of their research and analysis reports as well as their opinions expressed therein, and ensure that the sources of information are in compliance with laws and regulations, the research methods are professional and prudential and the analysis conclusions are reasonable.A research and analysis report shall be made in an appropriate written or electronic form, stating the name and business qualification of the futures company, the name and professional certificate number of the researcher or analyst, the date of making, etc., as well as the sources of relevant information, the limitation of research and analysis opinions and a risk revelation to users.A research and analysis report made or provided by a futures company shall not infringe upon the intellectual property rights of others. 

 

Article 19 When providing transaction consulting services, a futures company shall expressly inform a client of any conflict of interest, and remind the client of potential market changes and investment risks, and shall not make any definitive judgment on the market.A futures company shall provide investment schemes or futures trading strategies mainly based on its own research reports, research reports legally acquired, information on the relevant sector and relevant open information.A futures company shall inform a client that the client shall make futures trading decisions independently and that the client shall be solely responsible for the consequences of futures trading, and shall not leak any information on a client’s investment decision or plan. 

 

Article 20 A futures company which provides transaction consulting services or services with similar functions through any futures trading software or terminal unit as a carrier shall comply with these Measures, and explain the basic functions and limits of the futures trading software or terminal unit as well as the sources of relevant data, and shall not disseminate false or misleading information on the use value or functions of the futures trading software or terminal unit. 

 

Article 21 A futures company shall conduct trail management of its futures investment consulting business operations, and according to the prescribed retention time and requirements of the CSRC, properly keep the relevant materials of its futures investment consulting business, including but not limited to the risk revelation letters, contracts, risk management opinions, research and analysis reports, trading advice, and instructions on futures trading software and terminal unit. 

 

Article 22 A futures company shall effectively implement the provisions of its futures investment consulting business management rules on return visits to clients and complaints of clients, specify the contents, requirements and procedures of return visits to clients and complaints of clients, and properly handle complaints of clients in a timely manner. 

Chapter IV Prevention of Conflicts of Interest 

 

Article 23 A futures company shall make management rules for preventing the conflicts of interest between the futures investment consulting business and other futures businesses, establish a sound information segregation mechanism, and keep independent offices and office equipment.Where any conflict of interest may arise between futures investment consulting activities, a futures company shall make necessary arrangements on independent positions, information segregation and disqualification of personnel.The chief risk officer of a futures company shall check and execute the matters as mentioned in the preceding paragraphs. 

 

Article 24 Where any conflict of interest may arise between a futures company or any of its professional employees and a client, it shall be handled under the principle of giving priority to the interests of a client. For any conflict of interest between different clients, it shall be handled under the principle of equal treatment. 

 

Article 25 A futures company shall set up an independent department in its headquarters to uniformly manage its futures investment consulting business.The business departments of a futures company shall provide futures investment consulting services under the uniform management of the headquarters of the company. 

 

Article 26 The futures investment consulting business employees of a futures company shall conduct the futures investment consulting business activities in the name of the futures company, and shall not personally provide futures investment consulting services for clients. 

 

Article 27 The positions and duties of futures investment consulting business employees shall be independent from those of trading, clearing, risk control, financial, technical and other personnel. 

 

Chapter V Supervision, Administration and Legal Responsibility 

Article 28 A futures company shall, according to the prescribed content and format requirements, submit information on its futures investment consulting business to the local CSRC office on a monthly basis. 

 

Article 29 The chief risk officer of a futures company shall be responsible for overseeing the making and execution of the management rules for the futures investment consulting business, regularly check the regulation compliance of the business, and legally perform his duties of urging rectifications and reporting.The chief risk officer of a futures company shall include the regulation compliance of the futures investment consulting business of the company and the related inspections and particularly an explanation on the prevention of conflicts of interests in his quarterly and annual reports filed with the local CSRC office. 

 

Article 30 The CSRC and its local offices shall regularly or irregularly inspect the futures investment consulting business of futures companies under the principle of prudential supervision and administration. 

 

Article 31 A futures company which operates the futures investment consulting business without obtaining the prescribed qualification or employs unqualified persons to engage in the futures investment consulting business shall be ordered to make correction; and if the circumstances are serious, be punished according to Article 70 of the Regulation on the Administration of Futures Trading. 

 

Article 32 Where a futures company or any of its employees falls under any of the following circumstances in operating the futures investment consulting business, the CSRC and its local office may, as the case may be, take corresponding regulatory measures according to Article 59 of the Regulation on the Administration of Futures Trading: 

1. The futures company or employee disseminates false or misleading information on its/his futures investment consulting capability or deceives or misleads clients; 

2. There is no senior manager or the employees of the business department fail to meet the prescribed requirements; 

3. The employee personally provides futures investment consulting services for clients; 

4. Article 13 of these Measures is violated; 

5. The futures company fails to establish management rules and mechanisms for preventing conflicts of interest; 

6. The management rules and mechanisms for preventing conflicts of interest are not effectively executed, and the mismanagement has caused the occurrence of a major event of conflict of interest; 

7. The employee seeks any improper benefit for himself or any other party of interest by using research reports or information; or 

8. Any other violation of these Measures.Where a futures company or any of its employees falls under any of the circumstances in the preceding paragraph, if the case is serious, it/he shall be punished according to Article 70, 71, 73 or 74 of the Regulation on the Administration of Futures Trading; and if it/he is suspected of any crime, the case shall be transferred to the judicial authorities. 

 

Chapter VI Supplementary Provisions 

Article 33 Futures companies providing consulting, training and other ancillary services to clients on the basis of futures brokerage shall comply with the relevant provisions of futures regulations and rules. 

 

Article 34 When conducting futures market analysis and other information dissemination activities via newspapers, periodicals, television, radio, network and other public media, a futures company and its employees shall obtain the futures investment consulting business qualifications and professional qualifications, comply with the relevant provisions on dissemination of financial information, and protect the intellectual property rights of others. Before conducting any futures information dissemination activity, a futures company and its employees shall file a report on the activity with the local CSRC office. 

 

Article 35 The qualification and regulatory requirements for securities business institutions to operate the futures investment consulting business shall be separately determined by the CSRC. 

 

Article 36 These Measures shall come into force on May 1, 2011. 

 

Referred from China Securities Regulatory Commission.


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