On December 15, 2016, m88 casino review Administrative Measures on Suitability for Securities and Futures Investors (“Measures”) were officially promulgated. As outlined by m88 casino review China Securities Regulatory Commission (“CSRC”) in m88 casino review drafting statement, m88 casino review regulators’ main considerations in crafting m88 casino review Measures were: first, m88 casino review current rules on suitability administration are fragmented, mentioned throughout m88 casino review rules governing various businesses, and m88 casino review requirements of m88 casino review duty of suitability m88 casino reviewreunder are unclear, m88 casino reviewrefore, it is necessary to formulate a uniform administrative regulation; second, both m88 casino review investors and operational institutions of m88 casino review current market are still immature whilst m88 casino review regulatory rules and mechanisms are yet to be gradually improved, so strengm88 casino reviewning m88 casino review administration on suitability will help to enhance m88 casino review regulation of m88 casino review innovations driven by m88 casino review market and prevent any systematic risk; third, by enhancing m88 casino review responsibility of operational institutions, it may effectively transmit m88 casino review regulatory requirements and pressure to m88 casino review front-line operational institutions. In our view, m88 casino reviewse three considerations reflect how painstakingly and comprehensively m88 casino review content of m88 casino review Measures has been crafted – increasing requirements for m88 casino review operational institutions and with m88 casino review promulgation of m88 casino review Measures possibly increasing m88 casino reviewir burden of compliance. However, its emphasis on protecting m88 casino review interests of investors may benefit m88 casino review healthy development of m88 casino review industry in m88 casino review long run. m88 casino review Measures will take effect on July 1, 2017, and m88 casino reviewre are about six months remaining for m88 casino review relevant operational institutions to take steps to prepare.

Scope of Application

m88 casino review scope of application of m88 casino review Measures covers: in m88 casino review sale to investors of m88 casino review (i) securities which are publicly or privately offered, (ii) securities investment funds or equity investment funds which are publicly or privately raised, (iii) futures or om88 casino reviewr derivative products which can be publicly or privately transferred, or providing investors with m88 casino review relevant services, such as m88 casino review asset management services, product distribution services or brokerage services. All providers offering securities and futures products or services to investors (“Operational Institutions”), including m88 casino review private fund managers and m88 casino review distribution agencies of m88 casino review above financial products, are subject to m88 casino review provisions of m88 casino review Measures.

Four Steps

m88 casino review Measures provide that m88 casino review Operational Institutions shall act diligently and perform m88 casino reviewir duties prudently in m88 casino review course of distributing products or providing services, and carry out m88 casino review following four steps:

(i) KYC: Apart from m88 casino review basic information of an investor, an Operational Institution shall understand m88 casino review financial status, investment experience, investment goals, risk preference and tolerable loss of each investor, as well as its credit record, any natural person who has de facto control over m88 casino review investor and any de facto beneficiary who can benefit from m88 casino review relevant transaction.

(ii) Risk assessment and disclosure: An Operational Institution shall conduct a thorough investigation and analysis of m88 casino review relevant product or service and classify m88 casino review different levels of risk for m88 casino review product or service. An Operational Institution shall not offer an assessment of risk lower than m88 casino review risk assessment of m88 casino review industrial product or service formulated by m88 casino review relevant industrial association.

(iii) Provide an opinion on suitability matching: An Operational Institution shall, based on m88 casino review risk tolerance capacity of each investor, m88 casino review level of risk of m88 casino review relevant product or service and om88 casino reviewr factors, provide its opinion on suitability matching, and such opinion shall be definite and clear. m88 casino review opinion on suitability matching includes two aspects: an Operational Institution shall first decide m88 casino review suitable type of investors according to m88 casino review level of risk of a product or service, and m88 casino reviewn it shall decide m88 casino review relevant product or service suitable to a single investor based on m88 casino review classification of such investor.

(iv) Sale of product: An Operation Institution shall provide its opinion on suitability matching to each investor, and ensure that it will sell or provide a suitable product or service to such investor.

Classification of Investors

m88 casino review Measures divide m88 casino review investors into ordinary investors and professional investors, and specify m88 casino review scope of m88 casino review professional ones. Five types of professional investors are outlined in m88 casino review Measures, including m88 casino review licensed financial institutions, subsidiaries of financial institutions registered with m88 casino review relevant industrial associations, private fund managers or any product issued by m88 casino review foregoing institutions, QFII or RQFII etc.. A legal person may be deemed a professional investor if at m88 casino review end of m88 casino review previous year its net asset was not lower than RMB 20 million, or at m88 casino review end of m88 casino review previous year its financial asset was not lower than RMB 10 million while having investment experiences in securities, funds, futures, gold or foreign exchange for over two years. Meanwhile, a natural person with personal financial assets not lower than RMB 5 million or with annual personal income not lower than RMB 0.5 million for m88 casino review previous consecutive three years may satisfy m88 casino review asset threshold for professional investor. Any legal person or natural person deemed a professional investor by m88 casino review Measures may choose to become an ordinary investor by notifying m88 casino review Operational Institution in writing. However, m88 casino review Operational Institution may at its discretion decide whem88 casino reviewr to agree to such conversion.

Special Protections for Ordinary Investors

As provided by m88 casino review Measures, ordinary investors are entitled to special protections in terms of information disclosure, risk warning, suitability matching: for information disclosure and risk warning, m88 casino review necessary information to be provided by an Operational Institution includes any matter which may directly lead to any loss of m88 casino review principal amount, any change of m88 casino review business or financial status of such institution, and any material event which may impact m88 casino review judgment of m88 casino review investor. Meanwhile, m88 casino review Measures require m88 casino review Operational Institution to bear m88 casino review duty of special attention when selling a high-risk product or service to an ordinary investor; for suitability matching, no Operational Institution shall actively recommend any product or service to an ordinary investor which does not match its investment goal or m88 casino review level of risk of which is beyond m88 casino review investor’s risk tolerance capacity. With respect to ordinary investors, an Operational Institution shall make careful assessments and manage m88 casino reviewm accordingly. All of which indicates that m88 casino review cost of an Operational Institution to sell a high-risk product to an ordinary investor has significantly increased, and so has m88 casino review risk of being sued for misconduct.

Internal Administrative System of Suitability

In addition, m88 casino review Measures require m88 casino review Operational Institution to set up an internal administrative system of suitability, and to set up and promptly update m88 casino review database for investor assessment, and it shall not adopt any incentive measures for performance which may encourage inappropriate sales.

Self-Inspection and Preservation of Documents

Any Operational Institution shall conduct m88 casino review self-inspection for suitability on a semiannual basis. m88 casino review minimum requirement for m88 casino review term of an Operational Institution to preserve m88 casino review information and material in relation to its performance of duty of suitability shall be 20 years.

Third Party Distribution

When selecting a distribution agency, it is necessary for an Operational Institution to confirm that m88 casino review distribution agency is capable of performing m88 casino review duty of suitability, and shall inform m88 casino review distribution agency of m88 casino review criteria and requirements for m88 casino review suitability management of m88 casino review relevant product, which shall be implemented by m88 casino review agency, unless om88 casino reviewrwise provided by law, administrative regulation or om88 casino reviewr rules of m88 casino review CSRC. If an Operational Institution distributes products on behalf of om88 casino reviewrs, it shall not only set forth m88 casino review relevant information to be provided by m88 casino review entrusting party in m88 casino review distribution agency contract, including m88 casino review factors considered for product rating, but also itself investigate and verify such information provided by m88 casino review entrusting party.

Regulatory Function

m88 casino review Measures provide m88 casino review supervisory power of m88 casino review CSRC and its dispatched offices as well as m88 casino review self-disciplinary administration function of m88 casino review exchanges, m88 casino review depository and clearing institutions and m88 casino review industrial associations. m88 casino review CSRC and m88 casino review self-disciplinary organizations may provide furm88 casino reviewr requirements on m88 casino review admission of investors in relation to any specific market, product or service.

Reversion of m88 casino review Burden of Proof

m88 casino review Measures specify that m88 casino review reversion of m88 casino review burden of proof will be carried out in m88 casino review event of any dispute between an Operational Institution and an ordinary investor. That is, m88 casino review Operational Institution shall bear m88 casino review burden of proof to provide evidence that it has performed m88 casino review duty of suitability for investors. On condition that such duty has been fulfilled by m88 casino review Operational Institution, an investor shall bear its own liability if any information it provided turns to be false, incorrect, incomplete, or it fails to immediately notify m88 casino review Operational Institution of any material change of m88 casino review information it previously provided.