The CSRC and eight other departments issue a plan to rectify illegal cross-border securities, futures, and fund activities

Source: China Securities Regulatory Commission

In order to further prevent and combat illegal cross-border securities, futures, and fund activities, safeguard the order of the financial market and the legitimate rights and interests of investors, recently, with the approval of the State Council, the China Securities Regulatory Commission, Ministry of Industry and Information Technology, Ministry of Public Security, People's Bank of China, State Administration for Market Regulation, State Financial Regulatory Administration, Cyberspace Administration of China, and State Administration of Foreign Exchange jointly issued the "Implementation Plan for Comprehensive Rectification of Illegal Cross-Border Securities, Futures, and Fund Activities" (hereinafter referred to as the "Rectification Plan"). The "Rectification Plan" focuses on banning illegal cross-border securities, futures, and fund activities, establishing a comprehensive, long-term mechanism for both tackling the root causes and addressing symptoms, which is conducive to purifying the capital market ecosystem, ensuring healthy development of the capital market, and guiding investors to conduct overseas investments through legal channels, protecting investors' legitimate rights and interests.

The overall requirement of the "Rectification Plan" is to carry out two years of concentrated rectification, fully ban illegal cross-border operations by overseas securities, futures, and fund institutions (hereinafter referred to as "overseas institutions"), and achieve the goal of "resolutely banning illegal activities and steadily clearing existing ones." First, the targets of rectification include overseas institutions illegally engaging in securities, futures, and fund business across borders, domestic related or cooperative entities assisting overseas institutions in illegal cross-border operations, illegal intermediaries soliciting domestic investors, internet platforms and online media publishing illegal or violating information. Illegal cross-border activities of overseas institutions will be banned according to law, and related entities violating laws and regulations such as foreign exchange management, anti-money laundering, cybersecurity, information management, and personal information protection will also be included in the scope of rectification. Second, measures to ban illegal cross-border activities include prohibiting overseas institutions from conducting marketing and solicitation activities related to securities, futures, and fund business within the country, providing related account opening, processing trading instructions, and fund transfer services. It also bans domestic entities from assisting overseas institutions in illegal marketing, trading services, and providing website development, trading software operation, customer service, etc. Third, measures to clean up illegal existing businesses include setting a concentrated rectification period of two years, during which overseas institutions are prohibited from providing illegal buy-in transactions and fund transfer services to existing investors within the country, allowing only one-way sell transactions and fund transfers out. After the concentrated rectification period, overseas institutions will fully shut down domestic websites, trading software, and supporting services, and are prohibited from providing illegal trading services to existing investors within the country.

The "Rectification Plan" clearly defines the main tasks: First, establish a normalized collaborative supervision mechanism, conduct comprehensive monitoring and investigation, report major clues, and promptly clean up and dispose of illegal cross-border activities involving internet platforms, advertisements, and information. Second, hold illegal cross-border overseas institutions accountable, urge them to strictly implement rectification requirements, conduct inspections and investigations of illegal cross-border institutions, and initiate criminal proceedings against suspected criminal entities. Properly handle the separation and disposal of illegal activities of domestic entities. Third, hold domestic banks providing account services for illegal cross-border securities, futures, and fund investments for domestic investors accountable, supervise domestic banks to strengthen compliance review of foreign exchange fund transfers, and crack down on underground banks and other illegal cross-border capital outflow channels. Fourth, strengthen cross-border regulatory cooperation to protect the property safety of domestic investors, properly handle investor complaints, carry out publicity and education, risk warnings, and policy guidance. Fifth, improve regulatory systems to guide domestic investors to conduct overseas investments through legal channels.

Next, the China Securities Regulatory Commission will work with relevant departments and local governments to advance the rectification work in a steady and orderly manner, strengthen cooperation with overseas financial regulatory authorities, severely investigate and punish illegal institutions, resolutely curb the risks of illegal cross-border financial activities, and effectively safeguard investors' property safety.