While disrupting daily lives and consumer behaviour, the covid-19 pandemic has also accelerated innovation of investment channels and approaches. Coupled with the constant upgrading of internet technology, investors are experiencing a new fintech era and landscape for financial product and services consumption.
This article reviews how participants in all aspects of asset management, product sales agencies, managers and auxiliary service providers are responding to the fintech revolution in their own way.
Certification of qualified investors and appropriate promotion of products have consistently been core issues of asset management products, especially in private placement. Simultaneously, operators must be wary of crossing the line of “proper promotion”, while taking into consideration the investors’ experience and ease of operation.
Accordingly, certain agencies have replaced “product details” with “product briefs” to improve the success rate of investor diversion, and identify qualified investors through “self-certification” or “certification assisted with other information”.
Reliance on self-certification, with an emphasis on form over substance, may still lead to compliance issues over imprudent know your customer (KYC) standards of financial institutions. On the other hand, certification assisted with other information such as social security and existing investment information may incur other issues of personal information compliance.
Under the Minutes of the National Working Conference on the Trial of Civil and Commercial Cases by Courts, issuers and sellers of financial products failing to fulfil their suitability obligations, resulting in losses of financial consumers of such products, will bear joint and several liabilities for compensation.
Therefore, it is particularly important for product managers and sales agencies to make prior agreements on operational matters and liability. A number of financial institutions have begun to pay attention to legal compliance of the content and form of their electronic interfaces – and regard financial compliance review as a necessary step before information release.
VIRTUAL CONTRACT SIGNING
Electronic signing and remote audio/video recording have come a long way in solving the problems of customers having to be physically present in traditional transactions – but they have also led to new challenges.
Verification of certificates, validity of contract signing and specific methods of audio/video recording may adversely affect financial institutions and lead to difficulties in financial consumers’ rights protection. Only a reliable electronic signature complying with provisions of the Electronic Signature Law can ensure that parties to legal documents can effectively control the risk of invalidation.
Common practices include where one party uploads the paper version and the other signs it electronically for confirmation; or that both parties sign in a way without certificate authority; or that the signature is deemed valid after displayed. Although they do not necessarily risk invalidation, they will to various degrees increase processing costs and uncertainty when disputes arise.
Both one-way recording of man-machine dialogue and two-way audio/video recording of two-party dialogue are important ways to confirm investors’ information and their true intentions – and to fully prompt investors about product risks. However, over-consideration of investor experience and shortening of the audio/video recording time leave the process little more than a formality. Technical issues making it impossible for multi-party online signing in complex financial product scenarios such as family trust further render audio/video recording insubstantial.
Different message delivery methods – from traditional paper mail to SMS, emails and private messages – cater to the needs of investors in different scenarios alongside technological development.
What follows is concern of financial institutions about whether the information is delivered effectively, whether the operation is easily accessible and convenient, and whether investors may find it bothersome?
In addition, as financial institutions themselves may not have relevant technical capabilities, such technological functions are often performed via outsourcing. A series of regulations on technology outsourcing of financial institutions have become important guidelines, especially requiring financial institutions not to outsource their responsibilities and risks.
Prevalent application of fintech demands a higher standard for protection of personal information, especially in group-based financial service systems. Key issues especially meriting the attention of all operators of widely accessible official websites, WeChat official accounts and apps are how to ensure that sharing and processing of personal information meets requirements of laws, regulations and national standards – and how to rationally apply automated decision-making.
While fintech helps usher financial products to a new generation, it also poses new challenges to the protection of financial consumers’ rights and interests, and provides diversified solutions to the problems. It should be noted that the subjects of inclusive financial product trading, including natural-person borrowers and business owners, are also important members of the financial service consumer community, whose rights and interests should also be duly protected.
In summary, the rise of fintech has posed challenges to all aspects of asset management, penetrating every step of the process, thus fundamentally impacting all financial products.
Therefore, with regard to products and services highly dependent on fintech, financial institutions must fully evaluate their security, stability and accuracy, and give sufficient risk warning and explanation to financial consumers.
From the perspective of financial innovation, when making full use of fintech, financial institutions also need to pay special attention to vulnerable customers, and carefully consider how to use fintech for “third distribution” with asset management, so as to fully achieve the goal of inclusive finance.
Li Kailun is a partner at Merits & Tree Law Offices