SHANGHAI – China’s securities regulator has launched onsite inspections of some mutual fund companies as part of efforts to strengthen management of the industry, unnerving fund managers.
The securities watchdog, under newly appointed Chairman Wu Qing, vowed a week ago to set up a “textbook-style” supervision model to regulate China’s $3.8 trillion mutual fund industry.
The latest round of inspections, conducted without notice by branches of the China Securities Regulatory Commission (CSRC), covered daily operations, training, and strengthening internal Chinese Communist Party functions, the 21st Century Business Herald reported on Friday. It did not name the asset managers inspected.
In response to a Reuters query, CSRC said: “It’s regular on-site inspection that we conduct every year.” The CSRC branches inspected fund companies based outside their regions, which the article said can prevent local interference. Regulators have recently cracked down on computer-driven “quant” private funds.
“The industry is jittery and gun-shy,” said a mutual fund manager who spoke on condition of anonymity. The inspections could unearth scandals in an industry “that pursues too much short-term interest,” another fund manager said.
China’s mutual fund industry is crowded with 158 companies. The biggest players include E Fund Management Co, China Asset Management Co and GF Fund Management. The sector has also lured foreign asset managers including Fidelity International, BlackRock and Neuberger Berman.
BROKER BUTCHER Wu, nicknamed “broker butcher” after an earlier regulatory stint, was appointed CSRC chairman in early February as part of the government’s efforts to revive confidence in an ailing stock market.
In guidelines published last month, the CSRC vowed to toughen supervision of fund managers and brokerages, warning against money worship, extravagance, hedonism and “showing off wealth”. The sector was also urged to strengthen Communist Party cells embedded inside companies.
Regulators hope “the fund industry can beef up research, reduce reliance on star portfolio managers and product distribution, while further reducing costs,” said Ivan Shi, head of research at fund consultancy Z-Ben Advisors.
The latest inspections reflect the CSRC’s resolve toward iron-fisted regulation, the newspaper said. The CSRC has repeatedly said it would carry out supervision “with teeth and horns”.
