Quick Take: Brokers Told to Beef Up Controls Over Investment-Banking Risks

Photo: Visual China
Photo: Visual China

China’s securities regulator proposed new guidance to beef up oversight of investment-banking operation at brokerages, such as introducing deferred-bonus programs.

The proposal will supersede the current rules drafted in 2003, which the China Securities Regulatory Commission (CSRC) said Friday are no longer sufficient to guard against weaknesses in internal-risk controls in fast-growing investment-banking businesses.

The draft rules, which the public will be allowed to comment on until Sept. 25, focus on strengthening internal controls so that ideally, employees will be discouraged from taking on too much risk while underwriting new businesses.

Specifically, the CSRC proposed each brokerage set up its own internal unit that monitors risks at the investment banking arm. These control units should track, verify and inspect projects taken on by investment bankers and make sure they comply with regulatory rules. The employees who monitor risks should not be rewarded with bonuses tied to sales so that they won’t have any vested interest in drumming up sales.

Deferred-bonus programs, which became a common practice in developed economies following the financial crisis, is also a suggestion from the regulator. The CSRC proposed a three-year delay in issuing bonuses, saying the aim is to curb short-term risk-taking.

Contact reporter Dong Tongjian (

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