Four Authorities Jointly Act to Prevent Misconduct in Finance Sector Mobility

Where to begin

On July 31, news from the financial front revealed that, according to the official website of the National Financial Regulatory Administration, to implement the guiding principles of the 20th National Congress of the Communist Party of China, its plenary sessions, and the Central Financial Work Conference, and to accelerate the establishment of a modern financial enterprise system with Chinese characteristics to promote high-quality financial development, the National Financial Regulatory Administration, the People's Bank of China, the China Securities Regulatory Commission, and the Ministry of Finance have jointly released the "Implementation Opinions on Improving the Governance of Financial Institutions" (hereinafter referred to as the "Implementation Opinions").

The document outlines 22 measures across nine sections, covering areas such as strengthening Party leadership, improving shareholder governance, enhancing the operational effectiveness of governance entities, bolstering internal governance, strengthening and refining supervision, and fostering a healthy financial ecosystem.

Why this matters

The Implementation Opinions emphasize the need to enhance supervisory effectiveness. This includes strictly controlling the entry of directors and senior management, elevating their professional ethics and competence, and rigorously preventing individuals who have violated laws or regulations from "moving with their problems" within the financial industry. Enhanced inspection and investigation efforts will be pursued to penalize financial institutions, shareholders, actual controllers, directors, senior management, and financial personnel who engage in illegal or non-compliant activities. Strict actions will be taken against unauthorized fund usage, illegal financing or guarantees, and unauthorized asset transfers. Audit, accounting, and other intermediary agencies found to have violated rules will have their cases promptly referred to the relevant industry authorities, with severe issues subject to lifelong accountability in accordance with laws and regulations.

Furthermore, state-owned financial institutions are urged to establish a supervision system led by internal Party oversight, coordinated with investor supervision, audit supervision, and employee democratic supervision. The initiative also calls for strengthening "supervision of supervisors," with improved and enforced accountability mechanisms for oversight.