China's stock market regulator will allow brokerages to manage
assets for individual investors, a move to boost their sources of
revenue.
The China Securities Regulatory Commission published a set of
draft rules on its website late on Monday to seek public opinions
on the move, indicating the regulator will soon give the nod to
brokers to share the business with mutual fund companies.
"The market for individual wealth management, where there is
huge potential, has been luring brokers for a long time," said
Zhang Qi, an analyst with Haitong Securities Co. "The government's
business concession for brokers will help to diversify their
revenue sources and boost their income. Also, it creates
competition between brokers and mutual fund managers."
China's brokerages now mainly generate their earnings by taking
commissions from stock trading and share sales as well as from
proprietary trading.
Earlier this month, eight small and medium-size brokers revealed
that commissions from their brokerage business made up more than 80
percent of their profit last year.
China's mutual fund industry managed net assets worth 3.27
trillion yuan (US$454 billion) by the end of last year, nearly
quadrupling the 856.4 billion yuan in 2006.
When the rules take effect, brokers can manage cash, bonds,
asset-backed securities, mutual funds, stocks and financial
derivatives for individual clients.
The CSRC said individual clients should bear all the investment
risks, and brokers need to deliver a monthly report to clients and
seek their agreement for each investment. They also have to sign a
contract with clients to cover management fee, commission on the
profit and payment method.
The draft spells out that brokers can't make promises of
principal-guarantee or of minimum investment returns and every
individual asset account must be kept independent.
(Shanghai Daily January 30, 2008)
