Sino-US Comparative Analysis Of Banking Suitability Rules

In 2005,China Banking Regulatory Commission(CBRC)took the lead in formulating the appropriate rules,aiming at supervising and regulating the improper sales behavior in the personal financial management business of commercial banks,so as to protect the legitimate rights and interests of investors.However,in recent years,the normative documents on the content of appropriateness rules promulgated intensively by the CBRC have not achieved ideal results in practice.Financial institutions have frequent disputes over the obligation of appropriateness,of which the number of financial disputes between commercial banks and customers is the majority.By sorting out and analyzing judicial precedents over the years,we can find that the causes of disputes lie in the absence of substantive binding norms of conduct,which are divided into two parts: one part is that the system of appropriateness rules has the defects of low legislative level and decentralization of norms;the other is that the content of appropriateness rules itself has deficiencies,which are mainly manifested in the absence of the duty of reasonable prudence and the lack of clear appropriateness.The lack of sexual matching criteria and the obligation to inform and explain.Therefore,it is necessary to re-examine the appropriate obligations of commercial banks to customers in the existing norms.As the birthplace of appropriateness rules,the United States has abundant theoreticalbasis.The system of appropriateness management of broker’s recommendation behavior is more perfect and comprehensive,and its specific operational rules and regulatory framework are more mature.Through the comparative analysis of the existing banking appropriateness rules in China and those in the United States,this paper provides some ideas for the regulation of improper sales behavior of commercial banks in China.This text is divided into four chapters:The first chapter mainly discusses the theoretical basis of the rule of appropriateness.The appropriateness rule was conceived in the financial reform period after the Great Depression in the 1930 s.The traditional concept of "buyer’s self-confidence" has changed to that of "seller’s responsibility".The rule of appropriateness originates from the fiduciary obligation in the equity law,which gives equitable relief to investors in the disadvantaged party based on the existence of the trust relationship and the protection of the trust interests.Based on Fiduciary duty,the Securities and Exchange Commission of the United States extends agency theory,special case theory(fiduciary duty theory)and signboard theory,which provide the applicable legitimacy basis for regulating the appropriateness rules of broker-dealer’s improper sales behavior.Due to the different legal systems between China and the United States and the lack of perfect fiduciary obligation system in China,the transplantation of the appropriate rules of the United States based on fiduciary obligation can not provide a reasonable basis for the application of the applicable rules of our country.Therefore,we should combine the existing legal system to find a strong support for the application of the rules of appropriateness-the principle of good faith.The essence of the principle of good faith agrees with the existence of trust relationship emphasized by American duty of faith and the core concept of protection of trust interests.Therefore,the principle of good faith provides a reliable bridge for transplanting the rule of appropriateness for our country.The obligation of appropriateness is the concrete expression of the principle of good faith in the process of marketing andpromotion of financial products.As a legal principle,the principle of good faith plays a role in various specific obligation norms,and these obligations will be combined with different departmental laws to form obligations under departmental laws.According to the Contract Law of our country,the obligation of appropriateness can be interpreted as a pre-contract obligation.Therefore,the breach of the obligation of appropriateness is not only a breach of the principle of good faith,but also a breach of the pre-contract obligation.The second chapter mainly discusses the comparative analysis of the legislative system of the Chinese and American appropriateness rules.The U.S.Appropriateness Rule was founded in the United States Securities Industry Self-Discipline Organization.Its main scope of application is limited to members of the industry self-disciplined organization.Its content has developed from the initial general provisions to the specific requirements for the performance of broker’s appropriateness obligations,that is,the appropriateness on a reasonable basis,the appropriateness of specific customers,and the appropriateness on a quantitative basis.The Securities and Exchange Commission of the United States extended the subject of the appropriateness rule to all brokerage dealers through directives and supervision,and provided specific operational procedural norms for brokerage dealers.By defining more financial products as "securities" regulated by the Federal Securities Act,the U.S.courts expand the subject of application of the appropriateness rule,that is,all financial institutions recommending or purchasing "securities" of an investment nature should be bound by the appropriateness rule.In addition,the U.S.courts further supplement and improve the content of the appropriateness rule.The banking appropriateness rules in China are mainly formulated by the CBRC.Since 2005,the provisions on the obligation of appropriateness have been scattered in the departmental regulations and normative documents promulgated by the CBRC.In the current normative documents,there are no relevant provisions directly related to the expression of appropriateness,and the provisions on appropriateness are made in the form of implied.China’s banking associations have not directly formulated norms related to appropriateness within their industry.Their more role is to assist the CBRCin the supervision of commercial banks,focusing on the selection of bank staff and education and training.They have not directly regulated the improper sales behavior of commercial banks.The third chapter mainly discusses the comparative analysis of the main contents of the Chinese and American appropriateness rules.The appropriateness rules of the United States require brokers to know their customers and understand their customers is the prerequisite for the application of the appropriateness rules.FINRA requires brokers to be responsible for reasonable and prudent appropriateness obligations in the process of understanding customers.There are two aspects: one is the integrity of access to information;the other is the necessity of screening information;the broker’s duty of reasonable prudence has played a substantial binding role in its implementation and understanding of customers.American brokers evaluate the appropriateness of their clients in accordance with the principle of "case facts and environment".American brokers must inform customers of their reasonable reasons for making appropriate recommendation.The existence of reasonable reasons constitutes a strong constraint on brokers’ appropriate evaluation behavior.Most of the obligations of American brokers to inform about appropriateness are confirmed by the SFC and American courts.The obligation of appropriateness of notification can be divided into two parts: one is that the United States establishes an important standard to judge whether the content of the broker’s notification is important;the other is that the broker should be informed and explained in a way that the customer understands.China’s banking appropriateness rules require commercial banks to introduce investment products to customers only on the basis of understanding their customers.In the process of understanding customers,commercial banks in our country usually obtain customer information through the form of "Risk Tolerance Assessment Questionnaire".The level of customer risk tolerance assessed by the Risk Tolerance Assessment Questionnaire is the main basis for China’s commerce to promote its products.Our banking appropriateness rules emphasize the obligation of information disclosure of commercial banks.The content of information disclosure should fullyreflect the important facts of the product,and explain to its customers in plain and understandable language.The comparative analysis of the main contents of the Chinese and American appropriateness rules mainly focuses on the understanding of customer obligations,appropriateness assessment and the content and manner of notification.Thus,in the comparative analysis,we find the deficiencies of the content of the banking appropriateness rules in our country.Chapter IV Suggestions on Perfecting the Appropriateness Rules of China’s Banking Industry.Through the comparative analysis of the legislative system and main contents of the Chinese and American appropriateness rules,in order to make our banking appropriateness rules have substantial binding force on commercial banks,rather than mere formality.The appropriateness rule of the United States provides a blueprint for reference.The perfection of the banking appropriateness rules in China should be carried out simultaneously from the external legislative system and the internal main contents.In order to improve the system of banking appropriateness rules in China,we should improve the level of legislation and integrate unified norms.Suggestions for perfecting the main contents of the banking appropriateness rules in China include:first,establishing a reasonable duty of prudence for commercial banks,requiring commercial banks to verify or substantially examine the information provided by investors within a reasonable scope,and preventing commercial banks from evading their understanding of customers’ obligations by using the form of customers’ own responsibility or risk Confirmation signed by customers.Perform.Secondly,we should clarify the appropriate matching criteria,combine quantitative analysis with qualitative analysis,especially give full play to the professional skills of commercial banks,and combine professional judgment with objective testing,so as to provide reasonable suggestions for customers.Thirdly,we should standardize the obligation of commercial banks to inform and explain,emphasizing that the content of informing and explaining should be targeted.At least,it should inform and explain the basic situation of financial institutions,the characteristics and risks of financial products,the rights enjoyed by customers and the reasons for exemption of financial institutions.In addition,it is emphasized that commercial banks should combine the educational level and investment experience of customers,so as to fulfill the obligation of informing and explaining in a way that customers can understand.