In order to thoroughly implement the comprehensive and strict requirements in accordance with the law, help investors understand the knowledge of securities and futures laws and regulations, enhance risk awareness and self-protection capabilities, and protect the legitimate rights and interests of investors, the securities industry-related cases are hereby released to help everyone recognize the usual topics of violations of laws and regulations. Deceive tricks and methods to enhance everyone's awareness of law-abiding and risk prevention.
Some securities practitioners in the market cheat the trust of customers by means of professional stock trading, guaranteed minimum returns, agreed revenue sharing, etc., so as to perform asset management for investors privately and conduct wealth management activities on behalf of clients in violation of regulations. However, when investment losses occur, conflicts and disputes often arise, and the fact that practitioners violate financial regulations on behalf of clients will also surface.
A former employee A (holding a securities broker practice certificate) of a securities firm’s business department privately signed a cooperative wealth management agreement with customer B of the business department, stipulating that he would conduct securities trading operations on the client’s account of 600,000 funds. The entrustment period was 12 months (2015 March 17th, 2016 to March 17th, 2016). During the contract period, if the account generates more than 20% profit, it enjoys 20% of the profit. If the profit does not exceed 20%, the profit belongs to the customer; if the loss exceeds 20%, the customer has the right to terminate the agreement or let it be free of charge Its services until profitability. Later, due to severe account losses, the two parties terminated the agreement early. Practitioner A has acknowledged the above-mentioned violation facts in writing to the local Securities Regulatory Bureau. A certain client engaged in securities investment and financial management without authorization and agreed to share investment income. His behavior has constituted an act of financial management on behalf of the client and violated the Securities Law, the Interim Provisions on the Management of Securities Brokers, the Practice Regulations for Securities Brokers (Trial) and The Code of Conduct for Securities Practitioners", the Securities Regulatory Bureau has adopted administrative supervision measures for issuing warning letters. The Securities Association of China has taken disciplinary measures against securities practitioner A in accordance with the relevant provisions of the "Rules for Handling Self-Discipline and Supervision Cases" and the "Measures for the Implementation of Self-Discipline Management Measures and Disciplinary Actions". Investor B, because he blindly believes in the commitment of practitioner A, eventually his property was violated.
Securities practitioners’ financial management on behalf of clients refers to the behavior of securities company employees who privately accept clients’ entrustment and act on behalf of clients in securities investment financial management without authorization.
Article 143 of the "Securities Law" stipulates that when handling brokerage business, securities companies shall not accept clients' discretionary entrustment to determine securities transactions, select types of securities, determine the amount of transactions or prices; Article 144 provides, Securities companies shall not make promises in any way for the proceeds from securities trading or compensation for losses in securities trading; Article 145 stipulates that securities companies and their employees shall not privately accept customer entrusted trading without going through their legally established business premises Securities.
Article 13 of the "Interim Provisions on the Administration of Securities Brokers" (hereinafter referred to as the "Interim Provisions") stipulates that securities brokers shall practise within the scope of Article 11 of these Provisions and authorized by securities companies, and shall not perform the following actions: (1) ) Handle account opening, cancellation, transfer, securities subscription, transaction or fund deposit and withdrawal, transfer, and inquiries on behalf of clients; ... (3) Agreement with clients to share investment income, gain from clients’ securities trading, or compensate for securities trading The loss is promised.
Article 20 of the "Regulations for the Practice of Securities Brokers (Trial)" stipulates that securities brokers shall practise within the scope of Article 11 of the "Interim Provisions" and within the scope authorized by the securities companies they serve. Acts prohibited by Article 32; Article 32 stipulates that employees of securities companies engaged in securities brokerage business marketing activities shall be implemented in accordance with the regulations.
Article 1 of the "Code of Conduct for Securities Practitioners" stipulates that practitioners should consciously abide by the "regulations of the institution where they work and the industry-recognized professional ethics and code of conduct".
From this case, we can see that investors must clearly distinguish between the asset management business of a securities company and the illegal financial management behavior of employees on behalf of clients. Pursuant to the provisions of Article 45 of the Regulations on the Supervision and Administration of Securities Companies, securities companies may engage in securities asset management businesses that accept clients’ entrustment and use client assets for investment in accordance with the “Securities Law” and these regulations. The profit generated by the investment shall be enjoyed by the client, and the loss shall be borne by the client, and the securities company may charge management fees in accordance with the agreement. Securities companies engaged in the securities asset management business shall sign securities asset management contracts with clients, stipulating the investment scope, investment ratio, management period, management fees and other matters. The securities asset management business is a corporate act, and the securities company is the main body and the investor signs the relevant asset management contract in writing. Practitioners’ financial management on behalf of clients is a personal behavior of practitioners, and generally involves privately signing relevant contracts or verbal agreement on relevant content between practitioners and investors. At present, securities companies strictly prohibit employees from engaging in illegal financial management activities on behalf of clients, have adopted a series of strict preventive measures, and have fully disclosed risks in the process of telephone return visits to investors. Under such circumstances, if the investor still privately entrusts a practitioner to manage his financial affairs, it is generally regarded as the personal behavior of the practitioner. Once the investor incurs a loss due to the violation of the financial management on behalf of the client, the investor can only claim rights to the practitioner.
Investors should not blindly believe in the illegal commitments of practitioners. They should maintain a rational investment philosophy and strive to improve their professional knowledge and experience. Only through continuous learning, understanding of various business rules and products in the securities market, analysis of market information, independent judgment, and continuous accumulation of investment experience can investors effectively prevent risks and obtain investment returns. (Source: SFC website)
