China Cracks Down on Internet Sales of Financial Products, Use of Celebrity Promotions

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China’s top regulators have issued new rules to crack down on the use of online channels for the sale of financial products.

The People’s Bank of China (PBOC) recently lead the issuance of the draft version of the “Financial Products Online Sales Administrative Measures” (金融产品网络营销管理办法(征求意见稿)) for the solicitation of opinions from the public.

According to authorities the purpose of the new Measures is to “restrain financial product Internet sales malfeasance, better maintain the financial market order, and protect the lawful rights and interests of financial consumers.”

The Measures outline three key measures in particular, including:

  1. Prohibiting third party Internet platforms from abusing their position of market advantage, applying discriminatory or exclusionary measures in relation to cooperative behaviour, or blocking financial consumers from making inquiries or handling financial services via financial institution channels. The Measures target in particular efforts by Internet platforms to create monopolies and engage in excessive gathering of user data or infringement of user privacy rights.
  2. Prohibiting non-bank payments organisations from engaging in the sale of financial products including loans and wealth management products. Prohibiting such organisations from including financial products such as loans and asset management products as payments options on payments page interfaces.
  3. Prohibiting financial institutions from using the names or images of professional individuals or entertainment celebrities to promote financial products or provide testimonials.

State-owned media highlighted the proliferation of new and dubious sales techniques to spruik financial products following the spread of the Internet.

“The sales of some third party organisations have breached regulations to promote securities funds and wealth management products to the public, engaged in one-sided exaggerated promotions or even false promotions,” said a report from Economic Daily.

“A common phenomena is for online direct streaming platforms to use so-called experts or celebrities to serve as spokespersons for financial products, and it is not at all rare to see them mislead or even defraud consumers.

“If financial institutions are using direct streaming and other methods to engage in sales, the sales persons should be professionals from financial institutions with the relevant qualifications.”