On May 7th, Wu Qing, Chairman of the China Securities Regulatory Commission, stated at a press conference of the State Council Information Office that he will vigorously promote the entry of medium and long-term funds into the market. While guiding listed companies to improve governance and performance, and continuously enhance investor returns, greater efforts should be made to "attract long-term capital", collaborate with all parties to continue to increase the scale and proportion of various medium - and long-term funds entering the market, and urgently issue and implement the "Action Plan for Promoting High quality Development of Public Funds", better reflecting the shared joys and sorrows, common development, and mutual achievements of fund managers and investors, and striving to form a virtuous cycle of "increased returns, capital inflow, and market stability". On the same day, the China Securities Regulatory Commission issued the above-mentioned action plan to implement the decision and deployment of the Central Political Bureau meeting on September 26, 2024 to steadily promote the reform of public funds. The action plan adheres to the comprehensive leadership of the Party over the public fund industry, highlights the political and people-oriented development of the industry, adheres to the development concept of putting investors first, takes strong supervision, risk prevention, and promoting high-quality development as the main line, and explores the establishment of a new model for the development of public funds that is suitable for China's national and market conditions; Adhere to problem oriented and goal oriented approaches, propose a series of reform measures in response to market and social concerns, and focus on urging industry institutions such as fund companies and fund sales agencies to shift from "heavy scale" to "heavy return", forming a "turning point" for high-quality development of the industry. The key focus of the reform is the "Four Highlighting". Wu Qing introduced at the press conference that the main focus of this public fund reform is the "Four Highlighting". Specifically, Wu Qing emphasized the need to strengthen the binding of interests with investors. The key is to reform the fund operation mode and urge the industry to return to the origin of "entrusted and managed by clients". Optimize the charging model of active equity funds, and those with poor performance must be charged less management fees. Through a floating management fee collection mechanism, reverse the phenomenon of fund companies' "guaranteed income during droughts and floods". At the same time, indicators that directly affect the interests of investors, such as whether the performance outperforms the benchmark and the profit and loss situation of investors, should be included in the assessment system of fund companies and fund managers, urging fund companies to shift from "heavy scale" to "heavy return". In addition, it is necessary to increase the ratio of bonuses used by fund company executives and fund managers to invest in their own products, and moderately extend the lock up period to make these "key few" more aligned with the interests of investors. Highlight the enhancement of stability in fund investment behavior. In response to issues such as "style drift" and "mismatched products" in funds, it is required to set clear performance comparison benchmarks for each fund product as a "ruler" to measure the true performance of the product, avoid product investment behavior deviating from the name and positioning, and ensure that investors see what they get as much as possible. At the same time, a comprehensive incentive and restraint mechanism will be established and improved around forging the long-term investment board, including regulatory departments, self regulatory organizations, evaluation agencies, and the company itself. Fund companies will be supervised to fully implement long-term assessments, with a clear weight of no less than 80% for assessments over three years. This will reduce the phenomenon of fund managers chasing gains and selling losses, and improve long-term product returns. Highlight the ability to enhance investor services. Guide fund companies and fund sales institutions to optimize resource allocation for investment research, product design, risk management, and better serve investors. Urgently introduce regulations on the management of public fund investment advisors, promote standardized development, and provide investors with suitable asset allocation portfolios. At the same time, accelerate the launch of institutional investor direct sales service platforms to facilitate the participation of various institutional investors in fund investment. Highlight the work orientation of developing and strengthening equity funds. Equity investment is the key to public funds creating unique value for investors. Next, we will strengthen regulatory guidance, optimize the classification evaluation mechanism for fund companies and fund sales institutions, and promote the increase in the issuance and sales of equity funds. Actively promote product innovation, continuously enrich index funds and active funds that are in line with national development orientation and more conducive to creating long-term returns for investors. On the basis of establishing a fast registration mechanism for stock ETF within 5 working days in the early stage, the registration efficiency of actively managed equity funds and other fund products that meet certain equity investment ratio requirements has been further significantly improved. ”Wu Qing said. The reform will also comprehensively promote strong supervision, risk prevention, and high-quality development. The China Securities Regulatory Commission stated that on the one hand, the action plan proposes to firmly guard the bottom line of risks and enhance the inherent stability of industry development. For example, the introduction of operational guidelines for public funds participating in swap facilitation business, clarifying the business norms for public funds to cope with liquidity risks through swap facilitation business. Revise the "Supervision and Management Measures for Risk Reserves of Public Funds", optimize the industry risk reserve management system, reasonably set the provision ratio based on the classification evaluation results and risk status of fund companies, and dynamically adjust it, and study the expansion of the investment scope and use of risk reserves. On the other hand, the action plan is clear, strengthening supervision and law enforcement, and implementing the "long teeth with thorns" policy. For example, strict control over the admission of fund companies and fund sales institutions, strengthened shareholder qualification review, continuously strengthened penetration verification of the equity structure and sources of investment of the investing entities, and severely cracked down on illegal behaviors such as equity proxy holding, private transfer of equity, and investment with non self owned funds. Urgently introduce the "Management Measures for Securities Investment Fund Custody Business" and raise the entry threshold for custody institutions. Improve the management system for senior management positions in fund companies, raise performance requirements, include executives who violate laws and regulations in their integrity files in accordance with the law, and apply relevant business prohibitions. Industry insiders say that the action plan aims to improve long-term institutional mechanisms, strengthen incentive and restraint effects, urge and guide industry institutions such as fund companies and fund sales agencies to return to their original mission, and strive to enhance investors' sense of gain. According to industry insiders, the previously released "Opinions on Strengthening the Supervision of Securities Companies and Public Funds and Accelerating the Construction of First Class Investment Banks and Institutions" proposes to establish a "textbook style" regulatory model and industry standards within three to five years, and promote the formation of a new trend where high-quality leading institutions lead the high-quality development of the industry. The reform of public funds will be roughly synchronized with the implementation of the Opinions, and the overall reform work will be completed in about three years. Considering the numerous policy measures, strong efforts, and wide scope involved in this reform, the China Securities Regulatory Commission will adhere to the principle of seeking progress while maintaining stability and establishing first before breaking through, distinguish priorities, and promote the implementation of various tasks in an orderly manner in stages. Grasp the pace of reform promotion well. The China Securities Regulatory Commission has formulated a timetable for the implementation of various policy measures one by one, and will mature and launch one in the future. In the process of promotion, we will combine the actual situation of the industry, distinguish the increment of stock, and implement it prudently according to the size of the company, giving industry institutions sufficient adjustment time; After the specific measures are launched, the China Securities Regulatory Commission will timely evaluate the relevant implementation situation and optimize and improve it. Develop supporting regulations. Many reform measures proposed in the action plan need to be refined and implemented through supporting regulations. After preliminary sorting, more than 20 measures are involved. In the process of formulating or revising relevant regulations, the China Securities Regulatory Commission will fully listen to the opinions and suggestions of investors and industry institutions, ensure that reform measures are in line with the actual situation of the industry, and better achieve the original intention of promoting high-quality development of the industry through reform. Strengthen policy coordination. Some measures in the action plan involve external commissions, while others involve non-financial institutions such as shareholder units. Relevant opinions have been solicited in the early stage. Next, the China Securities Regulatory Commission will continue to coordinate with relevant parties, strengthen work synergy, and ensure that all policy measures in the action plan achieve practical results. (New Society)