China's securities regulator issued guidelines late yesterday requiring risk assessments be conducted on mutual funds before they go on sale to prevent irrational investors from buying into fund products hurriedly.
Fund ventures can conduct the evaluations themselves or invite independent ratings agencies to compile risk reports on their products, the China Securities Regulatory Commission said in a Website statement.
A fund product should be graded on at least three levels in terms of risks: low, middle and high, the guideline said, adding the result must be made available to retail investors in a timely manner, according to the statement.
The risk assessments are expected to take a string of elements into consideration, including a fund's investment scope and the investment proportion placed into each type of securities products, the statement said.
The guidelines also demand fund companies investigate and evaluate investors' risk appetite and review their investment qualifications and real identities to avoid money laundering, according to the statement.
Nearly a dozen new funds that invest in yuan-denominated A shares went on the market in July and August, raising more than 60 billion yuan (US$7.93 billion), according to industry data.
The stock regulator, however, halted approving new A-share mutual funds early in September as it acted to facilitate a program to encourage fund firms to launch products to invest in overseas securities.
Mainland fund managers raised 193 billion yuan through 24 mutual funds in the first half of this year, against 195 billion yuan from 49 products a year earlier, as the watchdog controlled the pace of issuance to prevent overheating.
The CSRC in August issued an internal notice ordering fund management firms not to sell their products through a pre-registration mechanism to take advantage of strong investor sentiment in the stock market.
(Shanghai Daily October 19, 2007)
