Key Takeaways:
China’s securities regulator has issued sweeping new rules designed to rein in excessive risk-taking and short-termism in the brokerage industry, mandating bonus clawbacks for departed staff and imposing performance reviews of at least three years for key employees. The move aims to foster long-term stability and align compensation with sustained performance rather than immediate revenue.
The updated "Guidelines for Securities Companies to Establish a Sound Remuneration System," were released by the Securities Association of China (SAC). The association stated the goal is to implement the vision of the new "National Nine Articles" (国九条) by creating a compensation framework that balances incentives with constraints, efficiency with fairness, and long-term goals with short-term performance.
Under the revised guidelines, brokerages must implement long-term assessments for key personnel, including the chairman, senior management, and heads of major business units. These assessments must include performance indicators spanning three years or more. Furthermore, deferred bonus payments for staff in roles with direct influence on risk must now begin no earlier than the second year after the performance year, a structure known as "T+2."
These regulations represent a significant tightening of oversight for China's financial sector, forcing firms to overhaul compensation structures and potentially increasing compliance costs. The rules are designed to curb the kind of high-risk behavior that could lead to systemic instability, a core focus for Beijing. For major brokerages like CITIC Securities, Huatai Securities, and CICC, this means fundamentally rethinking how they reward top talent to ensure alignment with the country's long-term economic strategy.
A critical update in the guidelines explicitly states that bonus clawback and accountability measures now apply to employees who have left their firms or retired. The rules require that these former employees must cooperate with internal investigations and return performance-based compensation linked to any subsequent findings of misconduct or excessive risk exposure.
"The clawback provision now applies to both departed and retired personnel, and the relevant individuals are expected to cooperate," the SAC directive clarifies. This closes a loophole where employees could previously avoid financial penalties for long-tail risks by simply resigning or retiring. The guidelines also mandate that any violations be recorded in the industry's professional reputation database, potentially impacting an individual's future career prospects in the financial sector.
The SAC is also taking direct aim at compensation models that it views as encouraging excessive risk. The guidelines explicitly prohibit firms from using "independent assessment" methods, such as paying staff a direct percentage of the revenue from projects they originate or manage. This practice, common in investment banking and trading, is seen as a key driver of short-term, high-risk behavior.
The rules state that companies must not "implement excessive incentives through independent assessment methods such as direct proportional sharing" and must not "directly link the compensation of employees to the income of the projects they undertake or solicit." This forces a shift toward a more holistic evaluation process, incorporating compliance, risk control, and contributions to long-term company value, rather than just top-line revenue generation. The regulations apply to all securities companies and their subsidiaries, ensuring broad implementation across the industry.
This article is for informational purposes only and does not constitute investment advice.
