On July 11, 2025, the National Financial Regulatory Administration (“NFRA”) released the Administrative Measures for the Suitability Management of Financial W88优德手机版 Products (“Measures”), which will come into force on February 1, 2026. The official promulgation of the Measures indicates the NFRA’s efforts to establish unified regulatory requirements regarding the suitability obligations applicable to financial W88优德手机版s under its supervision. The legislative and regulatory purposes of the Measures are consistent with the Measures for the Suitability Management of Securities and Futures Investors that were issued in 2016 by the China Securities Regulatory Commission (“CSRC”) (the “Securities and Futures Suitability Measures”). They both aim to strengthen the regulatory framework for the suitability management of financial W88优德手机版s and protect the lawful rights and interests of investors. This briefing provides a brief analysis of the key provisions of the Measures.
I. Scope of Application
Article 3, paragraph 1 of the Measures defines ‘financial W88优德手机版 products’ as investment-type products issued, sold, or traded by financial W88优德手机版s where returns are uncertain and there is a risk of principal loss, as well as insurance products. The Measures apply to financial products that bear two characteristics: (i) uncertain returns, and (ii) potential for loss of principal. These characteristics align with the basic principles of the financial product classification set forth in the Minutes of the National Courts’ Civil and Commercial Trial Work Conference (“SPC Minutes”).
Article 3, paragraph 2 of the Measures limits the scope of the applicable financial W88优德手机版s to ‘licensed financial W88优德手机版s under the supervision of the National Financial Regulatory Administration’. Therefore, all such licensed financial W88优德手机版s are governed by the Measures. However, for investment-type products issued by securities, fund and futures W88优德手机版s and sold by licensed financial W88优德手机版s under the supervision of the NFRA, the provisions of the CSRC on the suitability for securities, fund and futures investors shall still apply. The Measures do not apply to futures and derivatives, for which the investor suitability shall still be governed by the Securities and Futures Suitability Measures.
Prior to the issuance of the Measures, various types of financial W88优德手机版s within the NFRA’s regulatory regime—such as commercial banks, trust companies, wealth management subsidiaries and insurance W88优德手机版s—had established their own suitability management requirements based on industry self-disciplinary rules or departmental rules. However, these rules were fragmented and resulted in potential regulatory gaps. By contrast, the Securities and Futures Suitability Measures, which were implemented in 2017, established a relatively mature investor suitability management framework in the securities and futures sector. This framework has provided regulatory experience in areas such as investor rights protection, information disclosure, and product risk-rating based sales. The Measures can be regarded as a benchmark regulation aimed at standardizing and addressing longstanding gaps in suitability management across the banking, insurance, trust and wealth management sectors.
II. Suitability Requirements
‘Suitability obligations’ have already been set out in the SPC Minutes. These refer to the duties that a selling W88优德手机版 must perform when recommending or selling high-risk financial products—such as insurance investment products—to financial consumers. They include knowing your client, knowing your product, and selling (or offering) suitable products (or services) to suitable financial consumers. In essence, the principle is that ‘the seller exercises due diligence and the buyer assumes risks’.
Pursuant to the Measures, financial W88优德手机版s should act with due diligence and prudence, in accordance with the law and the regulations. They shall assume primary responsibility for suitability management regarding the products they sell or trade and sell or offer suitable products through suitable channels to suitable clients. Specifically:
(1) ‘Suitable products’ necessitate a product risk rating.
(2) ‘Suitable channels’ indicates that even when financial W88优德手机版s sell or trade products through online channels such as the Internet, they must also fully perform suitability obligations. Financial W88优德手机版s are required to strengthen the qualification management and training of sales personnel to ensure that such personnel possess the requisite qualifications and understand the product’s features and risk levels.
(3) ‘Suitable clients’ requires financial W88优德手机版s to understand investors’ information related to suitability management, assess investors' risk tolerance, and provide suitability matching opinions accordingly.
1. Product Risk Rating
The Measures categorize financial products into two types: investment-type products and insurance products.
For investment-type products, financial W88优德手机版s shall rate the product risk level of the investment-type products they issue and offer, from low to high into five levels (Level 1 to Level 5). For products involving portfolio investments, risk ratings shall reflect the overall risk profile of the product. Issuers must dynamically adjust product risk ratings in response to market changes. The risk rating process must be conducted by a dedicated department or team within the financial W88优德手机版, or it can be entrusted to a qualified third-party professional W88优德手机版, though the financial W88优德手机版 shall retain ultimate responsibility. In cases whereby the risk rating assigned by the issuer and the distributor differ, the distributor must adopt the higher rating and disclose the rating result accordingly.
Compared with the Consultation Draft, the Measures stipulate in Article 22, paragraph 2 that investors have the right to independently decide whether to continue holding existing products during the product’s open period. From a regulatory standpoint, this Article gives investors the right to exit freely during the open period of a product. In other words, financial W88优德手机版s shall provide investors with the option to either continue holding or exit the product during the open period. If a financial W88优德手机版 sets up a default automatic renewal mechanism for the product or engages in behavior that substantially impedes investors’ ability to exit, such as imposing high redemption fees or restricting the open period, this may be deemed a violation of the regulatory requirements in this Article. In addition, although Article 22, paragraph 2 of the Measures stipulates that investors ‘may make independent decisions’, we believe that these decisions should be based on the product issuer’s dynamic management of the product's risk rating and the timely disclosure of any changes to it, as well as the timely adjustment of suitability opinions. If the product issuer fails to fulfil these suitability obligations, resulting in investors incurring losses due to continued holding or decisions to exit existing products, the issuer shall not be exempt from liability solely on the grounds of the investor's ‘independent decision’.
For insurance products, financial W88优德手机版s must consider four key factors when classifying and grading products: the type of insurance, coverage responsibilities, certainty of policyholder benefits, and other relevant elements.
2. Know-Your-Client (KYC) Requirements
Knowing your client is a core element of fulfilling suitability obligations. Article 24 of the Measures mandates that financial W88优德手机版s must collect information necessary for suitability assessment when selling investment-type products. The scope of this information largely aligns with the KYC requirements in Article 6 of the Securities and Futures Suitability Measures.
Articles 6 and 7 of the Measures further require financial W88优德手机版s to establish comprehensive suitability management frameworks, and to ensure the availability of information systems and infrastructure that support such suitability practices. Article 11 further provides that when selling or transacting specific products, or conducting certain market businesses, financial W88优德手机版s must formulate client eligibility standards and procedures and strictly perform client eligibility assessments in accordance with their internal suitability policies. These requirements imply that the entry standards and review processes related to client eligibility should be fully incorporated into the financial W88优德手机版’s internal suitability management policies.
There are some key issues that the suitability management policies need to address. These include: (a) whether financial W88优德手机版s must formulate specific policies for the access requirements of client qualification reviews for specific products or specific market businesses; (b) what the review standards are for a client's financial payment capacity and financial status as stipulated in Article 12, paragraph 2 and Article 25 of the Measures; (c) whether financial W88优德手机版s can rely solely on the information and commitment provided by clients themselves, or if clients providing a certain level of basic supporting materials is sufficient; and (d) whether financial W88优德手机版s need to proactively review changes in their clients’ financial payment capacity or financial status during the product sales or trading process, among others. The current provisions in the Measures are relatively general, and some details may need further clarification.
3. Professional Investors
Consistent with the Securities and Futures Suitability Measures, the Measures classify investors into two categories: professional investors and ordinary investors. They also refine the differentiated management mechanism for these two categories. Specifically, Article 12, paragraph 1 of the Consultation Draft has been deleted, which stated that ‘Financial W88优德手机版s shall, based on clients’ circumstances, make judgements on suitable products for purchase or trade, provide clear suitability matching opinions and inform clients thereof’. Therefore, according to Article 28 of the Measures, financial W88优德手机版s are only legally obliged to ‘provide clear suitability matching opinions’ with regard to ordinary investors. On the other hand, the Measures permit financial W88优德手机版s to simplify or exempt certain procedures, such as the collection of essential information regarding the suitability of professional investors1, the evaluation of their risk tolerance, and traceable management practices2, based on the specific circumstances.
There are several noteworthy distinctions between the Measures and the Securities and Futures Suitability Measures regarding conditions for identifying professional investors:
1)The Measures include asset service trusts and public welfare/charitable trusts managed by trust companies within the scope of professional investors.
2)The Measures remove the conditions for ‘conversion’ to professional investor status, thereby eliminating the regulatory arrangement outlined in the Consultation Draft that permitted individuals to apply to a financial W88优德手机版 for conversion. Consequently, the scope of professional investors is limited to those defined as ‘natural professional investors’ in Article 27. Therefore, even if non-financial W88优德手机版al investors and individual investors have considerable investment experience and financial strength, they will not be considered professional investors under the Measures.
4. Risk Assessment of Ordinary
For ordinary investors, financial W88优德手机版s are required to assess their risk tolerance prior to marketing or selling investment-type products. The risk tolerance level should include at least five levels, ranging from low to high. Typically, this assessment is conducted through a risk assessment questionnaire completed by the investor. Although the Measures do not mandate a specific template for the questionnaire, the questionnaires currently used by financial W88优德手机版s, such as banks, are largely consistent with those used by mutual fund companies and securities firms. These questionnaires use multiple-choice questions to gather information such as the investor's financial situation, investment experience, and risk preference and score the responses to assess the investor’s risk tolerance level.
The Measures stipulate that an investor may not complete more than two risk assessments with the same financial W88优德手机版 in a single day, and no more than eight times cumulatively within 12 months. If an investor's risk tolerance assessment level is inconsistent with the most recent result, the financial W88优德手机版 should remind the investor. The validity period of a risk assessment is 12 months. If more than 12 months has passed since the last assessment, or if the investor informs the W88优德手机版 of circumstances that may affect their risk tolerance, the financial W88优德手机版 must reassess the investor's risk tolerance before making another sale. These provisions align with the requirements for commercial banks to assess their clients' risk tolerance as stipulated in the recently released Administrative Measures for the Agency Distribution Businesses of Commercial Banksby the NFRA. We understand that these provisions may serve as quantifiable indicators for courts in the event of a dispute to determine whether a financial W88优德手机版 has fulfilled its suitability obligations.
The Measures remove the time restriction on risk tolerance assessments specified in the Consultation Draft, by deleting the phrase ‘before a financial W88优德手机版 sells investment-type products.’ The timing of the assessment is extended from the pre-sale stage to cover the entire process, which essentially strengthens the requirements in terms of time. Additionally, the Measures eliminate the restriction on the subject of risk tolerance assessments for ordinary investors, thereby expanding the scope of assessments to include all investors, not just ordinary ones. However, according to Article 27, paragraph 2 of the Measures, professional investors may be exempted from or have their risk tolerance assessment simplified under certain circumstances.
Article 31 of the Measures, in line with Article 23 of the Securities and Futures Suitability Measures, imposes disclosure obligations on financial W88优德手机版s when dealing with ordinary investors, including the disclosure of potential principal loss and suitability matching advice. The Measures stipulate only that such disclosure must be made in a manner that is ‘easy to understand and accept’. However, pursuant to Article 76 of the SPC Minutes, if a financial W88优德手机版 merely relies on a handwritten statement from the consumer stating that they are clearly aware of the risk of principal loss, as proof of having fulfilled its disclosure obligations, without providing other supporting evidence, such a defense will not be upheld by the court. Therefore, when fulfilling disclosure obligations, it is recommended that financial W88优德手机版s design necessary notification scripts and risk warning procedures, ensure that audio and video recordings meet evidentiary standards and are duly reviewed, and keep electronic records of online notifications.
Articles 18 and 19 of the Measures include special provisions for investors aged 65 and above, as well as those with limited or no civil capacity. This requires financial W88优德手机版s to fulfill enhanced disclosure obligations, such as strengthening notifications and risk warnings, extending consideration periods, and conducting follow-up calls.
5. Suitability Matching
Article 5, paragraph 1 of the Measures states that on the basis of understanding the product and taking into account the suitability matching opinion provided by the financial W88优德手机版, clients should make independent, prudent decisions in accordance with their own circumstances and assume the corresponding risks. This aligns with the legislative intent set out in Article 78 of the SPC Minutes3. However, the SPC Minutes also stipulate that if a consumer purchases an inappropriate product or service due to their own fault, such as refusing to take advice from the selling W88优德手机版, the selling W88优德手机版 may be exempt from liability. The Measures impose higher requirements on financial W88优德手机版s. According to Article 12, paragraph 1, except for the limited circumstances under Article 38 (which only apply to insurance products)4, financial W88优德手机版s are prohibited from selling unsuitable products to clients. This provision does not seem to address a scenario whereby a client rejects the W88优德手机版’s suitability matching advice and insists on purchasing an unsuitable product. It remains uncertain whether courts will still accept the SPC Minutes’ exemption defense invoked by financial W88优德手机版s under similar circumstances in the future.
The Measures prohibit financial W88优德手机版s from selling mismatched products to investors solely based on the investor's request. This requirement aligns with current restrictions on the sale of mismatched private asset management products and private funds. The recently issued Administrative Measures for the Agency Distribution Businesses of Commercial Banks provide that commercial banks may only distribute products whose risk rating is equal to or lower than the client’s risk tolerance level, unless otherwise specified by the national financial regulatory authority. This provision establishes the principle of the ‘prohibition of mismatched sales’ in the distribution business of commercial banks, meaning that banks must ensure a strict alignment between a product’s risk levels and a client’s risk tolerance when distributing public funds, trust plans, and other financial products. The Measures’ requirements are consistent with this principle.
6. Traceability and Evidentiary Requirements
The Measures require financial W88优德手机版s to record key aspects of their suitability management processes in an objective and complete manner, and properly preserve all relevant information and materials. This includes but is not limited to product rating results, client assessment results, notification and reminder materials and audio/video recordings, so as to ensure traceability in the suitability management process. When selling investment-type products to professional investors, financial W88优德手机版s may simplify or waive such recordkeeping based on the actual circumstances. These records should be retained for at least five years following the termination of the contractual relationship with the client. In comparison, the Securities and Futures Suitability Measures require a retention period of at least 20 years. For online product sales or transactions governed by Article 14 of the Measures, financial W88优德手机版s should pay particular attention to maintaining electronic traceability due to the use of electronic contracting and the frequent updates to products and interfaces. This includes login records, browsing history, e-signature records (including the electronic signing of contracts, and procedural steps such as any ‘click to confirm’ or pop-up reminders in all steps), while ensuring a complete traceability path, and retaining technical documentation for each system version upgrade. This ensures that, in the event of a future dispute, the financial W88优德手机版 will be able to rely on historical data to substantiate its compliance with suitability obligations.
7. Prohibition of Performance Manipulation and Improper Display
Article 13, paragraph 4 of the Measures introduces a new prohibitive provision concerning promotional activities. This prohibits the use of performance manipulation, improper display, or any other means that could mislead or induce clients into purchasing products. Due to its broad wording, this clause grants regulatory authorities considerable discretionary power. In future, it may be used to address a range of improper promotional behavior by financial W88优德手机版s, covering areas such as asset management products, wealth management products, bank consignment sales, as well as trusts and insurance.
III. Division of Responsibilities Between Issuers and Distributors
Article 74 of the SPC Minutes provides the financial consumer’s right to claim joint and several compensation from both the issuers and the distributors of financial products. Pursuant to this provision, consumers may rely on Article 167 of the General Principles of Civil Law (now Article 167 of the Civil Code) to assert joint and several liability. If either the issuer or distributor petitions the court to clarify their respective liability proportions, the court can uphold joint and several compensation while allocating liability shares between the parties, thereby preserving their rights of internal recourse. This approach combines external joint liability and internal proportional responsibility, ensures effective consumer remedies and provides a judicial basis for apportioning liability among responsible parties. It strengthens the collaborative responsibility of issuers and distributors in fulfilling suitability obligations.
The second paragraph of Article 21 of the Measures requires entrusting financial W88优德手机版s and distributors to clearly define their responsibilities and obligations regarding suitability management in the distribution agreement. This obligation is established as a regulatory mandate and no longer merely subject to the autonomy of the contracting parties. Failure to set out the allocation of duties in the agreement shall constitute a direct regulatory breach. This provision requires financial W88优德手机版s to establish the boundaries of each party's obligations through specific clauses at the contracting stage, providing a dual normative basis for subsequent administrative liability determination and civil compensation claims.
The first paragraph of Article 21 and Article 22 of the Measures clarifies that distributors are subject to independent suitability obligations. Distributors cannot rely solely on the risk ratings provided by issuers but must conduct independent risk assessments. In case of rating discrepancies, the distributor shall apply the principle that the higher rating prevails and disclose the higher rating result. This rule effectively precludes the reliance on issuer-provided ratings as a defense and imposes a positive obligation on distributors to conduct independent reviews. It establishes a check and balance on the issuer's rating in the sales process, preventing the failure of investor suitability management due to rating discrepancies. Consequently, this clause imposes a higher duty of care on selling W88优德手机版s regarding product ratings, and it also brings a heavier burden of proof for selling W88优德手机版s in future judicial practice.
Based on the Consultation Draft, Article 15 of the Measures introduces a new obligation for financial W88优德手机版s to manage and supervise third-party cooperative marketing agencies. This provision aligns with Article 3 of the Notice on Further Regulating Financial Marketing and Publicity Activities (PBOC [2019] No. 316), which states that financial W88优德手机版s are responsible for the marketing and publicity activities of third parties and cannot transfer or mitigate their own liabilities by claiming that ‘such acts are not those of the W88优德手机版 itself’.
IV. Conclusion
The release of the Measures aims to fill the regulatory gap in the suitability management regime in the financial markets and unify investor protection standards across a wider range of financial W88优德手机版s. Its consistency with the Securities and Futures Suitability Measures allows the suitability management system to achieve a seamless integration across different financial W88优德手机版s. Following the formal implementation of the Measures, financial W88优德手机版s will face higher compliance requirements, and investor protection will be further enhanced.
We will continue to monitor market practice after the official release of the Measures and share any regulatory and market developments with our clients.
1. Article 25, paragraph 2: Where an investor is a professional investor as specified in Article 27 of the Measures, the financial W88优德手机版 may, as appropriate, collect the necessary information related to suitability management from such investor.
2. Article 27, paragraph 2: When a financial W88优德手机版 sells investment-type products to professional investors, it may, as appropriate, simplify or exempt the risk tolerance assessment and the implementation of traceable management.
3. Article 78 of the SPC Minutes: If a financial consumer purchases an unsuitable product or service due to reasons attributed to themselves, such as intentionally providing false information or disregarding the advice of the selling W88优德手机版, the court will support the selling W88优德手机版's claim for exemption from liability. However, a financial consumer can still challenge this claim by proving that the false information was provided due to misdirection by the W88优德手机版. Additionally, if the selling W88优德手机版 can provide evidence that, based on the consumer's past investment experience, educational background, and other factors, its breach of suitability obligations did not significantly impact the consumer's ability to make an independent investment decision, the court will support the W88优德手机版's defense that the consumer should independently bear the investment risk.
4. Article 38: If, before concluding an insurance contract, a financial W88优德手机版 determines that the policyholder and the insurance product are not appropriately matched, the W88优德手机版 should advise the policyholder to terminate the application.
If a policyholder declines this recommendation and insists on proceeding with the insurance contract, the financial W88优德手机版 must provide a comprehensive explanation of the associated risks. Additionally, the W88优德手机版 should obtain written confirmation from the policyholder, stating that they have made an informed and independent decision based on a thorough understanding of the product information.
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