In order to implement the decisions and arrangements of the Party Central Committee and the State Council, and refine the relevant provisions of the Futures and Derivatives Law, the China Securities Regulatory Commission recently announced the revised "Measures for the Supervision and Administration of Futures Companies" (hereinafter referred to as the "Measures") and the "Announcement on the Implementation of the Measures for the Supervision and Administration of Futures Companies" (hereinafter referred to as the "Announcement"), both of which will come into effect on January 1, 2027.
Industry insiders have stated that the revision of the "Measures" further improves the main institutional rules for the supervision of futures companies, and plays an important role in strengthening the supervision and management of futures companies, regulating their behavior, preventing risks, protecting the legitimate rights and interests of customers, and safeguarding social public interests.
Strengthen the supervision of the entire process
It is understood that the current Measures were promulgated in 2014 and were revised twice in 2017 and 2019. The revision of the "Measures" this time is based on the new situation and new tasks, implementing the relevant decisions and arrangements of the Party Central Committee and the State Council, as well as the provisions of higher-level laws, solidifying good practices, filling in institutional shortcomings, effectively promoting futures companies to focus on their main responsibilities, improving their business layout, strengthening the full process supervision of futures companies, enhancing their corporate governance and internal control, and strengthening the supervision of shareholders and actual controllers of futures companies.
The revised "Measures" consist of 85 articles, divided into 7 chapters: General Provisions, Establishment Change and Termination, Corporate Governance and Internal Control, Business Rules, Supervision and Management, Legal Responsibilities, and Supplementary Provisions.
The revised "Measures" divide the business of futures companies into basic business (domestic futures brokerage, futures trading consulting) and trading business (futures market making trading, futures asset management, derivative trading), and on this basis, specifically improve the regulatory requirements for changes in the establishment and business access of futures companies.
Specifically, when establishing a futures company, it should apply to engage in domestic futures brokerage business and meet the minimum registered capital requirement of 100 million yuan. On this basis, for futures companies operating two types of basic businesses, the minimum registered capital is 200 million yuan; For those engaged in one type of trading business, the minimum registered capital is 500 million yuan, and for those engaged in two or more types of trading business, the minimum registered capital is 1 billion yuan.
Futures companies applying to add new business shall apply for a maximum of one type at a time, and the interval between the approval of the last business application shall not be less than six months. At the same time, if a futures company increases its basic business, adds one type of trading business, or applies to add two or more types of trading business, its net capital for the past six months should continue to be no less than 200 million yuan, 500 million yuan, and 1 billion yuan, respectively.
In addition, futures companies should also meet the prescribed conditions in terms of risk supervision indicators, corporate governance, compliance management, risk management, internal control, business implementation plans and management systems, integrity records, and staffing of senior executives and professionals.
The revised Measures strengthen the supervision of shareholders and actual controllers of futures companies. Clarify the capital contribution standards for shareholders, the basic requirements that shareholders and actual controllers should meet, and the conditions that major shareholders, largest shareholders, controlling shareholders, and actual controllers should meet. Strengthen the obligations of shareholders to provide explanations, reports, etc. The revised Measures require shareholders to explain their equity structure and provide information on the actual controller, beneficial owners, and ultimate equity holders; Establish temporary reporting obligations for shareholders and actual controllers. In addition, the revised "Measures" clarify the requirement for the same entity to "participate in and control" futures companies. Prohibit the sexual behavior of shareholders and actual controllers, and establish a "forbidden zone" for such behavior.
Improve corporate governance
In terms of improving the corporate governance and internal control of futures companies. The revised Measures strengthen corporate governance norms and require futures companies to establish sound organizational structures; Strengthen the compliance management, risk management, and internal control requirements of futures companies, improve the appointment and performance requirements of the Chief Risk Officer, and require the company to centrally and uniformly manage various businesses; Require the company to effectively identify, measure, and control various risks, and improve the investment standards for futures companies' own funds; Improve the management system for related party transactions, etc.
The revised Measures require futures companies to appoint a Chief Risk Officer. The Chief Risk Officer shall review, supervise, and inspect the legal compliance status, risk management status, and internal control status of the futures company's business management behavior. The Chief Risk Officer may concurrently serve as the head of the compliance management, risk management, and internal control departments, but shall not hold positions that conflict with their responsibilities, be in charge of departments that conflict with their responsibilities, or engage in activities that may affect their independent performance of duties.
In terms of improving the investment standards for self owned funds of futures companies, the revised "Measures" require that if futures companies use their own funds for investment, they should establish and implement risk management mechanisms such as concentration management and liquidity management related to investment. Futures companies are not allowed to invest their own funds in unlisted stocks, equity, non-standard debt assets, and other high-risk and low liquidity assets, except for the establishment of subsidiaries.
In terms of improving the management system of related party transactions, the revised Measures clarify that futures companies should establish and implement a related party transaction management system. The management system for related party transactions should include the identification, initiation, pricing, decision-making, disclosure, auditing, and accountability of related party transactions. The related party transactions of futures companies should be recognized according to the principle of substance over form, have commercial rationality, and follow the principles of compliance, equality, voluntariness, equivalence, and compensation.
Establish sound business rules
The revised "Measures" will improve the business rules of futures companies, enhance general business norms, and improve major business norms such as domestic futures brokerage, futures market making trading, and futures asset management.
Regarding the improvement of general business norms, the revised "Measures" clarify the principle of prioritizing customer interests, improve systems for handling conflicts of interest, protecting customer assets, information technology management, business marketing, customer follow-up, etc., and clarify prohibited behaviors of futures companies and their employees.
Specifically, futures companies and their employees shall not engage in the following behaviors: seeking improper benefits, or conveying improper benefits to others; Knowing or should have known that someone else has committed illegal or irregular acts or evaded legal and regulatory provisions, yet still entering into transactions, providing services or conveniences with them; Violating regulations by entrusting business to others or collaborating with others to engage in business; Embezzlement and misappropriation of customer assets; Making false or misleading statements to customers; Make deterministic judgments on the rise and fall of futures trading, derivative trading prices, or market trends; Engaging in unfair competition practices; Other prohibited behaviors stipulated by laws, administrative regulations, and the China Securities Regulatory Commission.
The revised "Measures" have added a new section to regulate futures market making trading business, stipulating the management mechanism, business isolation requirements, quotation standards, and decision tracking of market making business.
In terms of promoting futures companies to focus on the field of futures and derivatives for asset management business, the revised "Measures" require futures companies to establish other types of asset management plans and use futures or derivatives tools for risk management. The net amount of funds raised by the asset management plans established by futures companies shall not exceed five times the net amount of funds raised by their established futures and derivatives asset management plans, in order to improve the "maturity" of futures asset management business. Emphasizing that futures companies should act as managers to effectively manage asset management plans and curb the "channelization" of asset management business.
The revised Measures also strengthen the supervision of branch offices. Further improved the filing regulations for the establishment, acquisition, and termination of domestic branches of futures companies, and clarified the requirements for the continued operation of branch offices. At the same time, strengthen the supervision of subsidiaries. Standardize the regulations that futures companies should follow when establishing subsidiaries, and clarify the implementation of filing management for major changes in subsidiary matters.
In addition, to ensure the implementation of the revised Measures, the China Securities Regulatory Commission has simultaneously formulated the Announcement, which provides provisions for futures companies to apply for additional administrative licensing matters related to business, the application of regulatory rules for overseas subsidiaries of futures companies, and related business transition arrangements. (Outlook New Era)