China Securities Association Issues Bond Advisory Rules: 25% Single-Bond Cap, Effective Feb 5, 2027

The China Securities Association has issued the Management Rules for Bond Investment Advisory Business of Securities Companies, aiming to strengthen self-regulatory management of securities firms' bond investment advisory business, standardize business conduct and service methods, and prevent conflicts of interest and operational risks. The rules were approved at the fourth meeting of the association's eighth council and filed with the China Securities Regulatory Commission before publication. A six-month transition period is set, with formal implementation on February 5, 2027. The rules comprise six chapters and 44 articles, covering general provisions, business management, risk and compliance management, personnel management, and self-regulatory management.

Specifically, the rules set out the eligibility conditions for securities firms to conduct bond investment advisory business, requiring sound internal control systems, dedicated personnel, and information technology systems, ensuring that organizational structures match compliance and risk control levels. Firms and their business personnel must adhere to principles of honesty, good faith, and loyalty to client interests, and are prohibited from controlling or operating client accounts on their behalf. The rules also strengthen full-process management, defining industry standards for client admission, business promotion, agreement signing, bond trading price inquiry, investment advice provision, and client follow-up.

In terms of risk and compliance management, securities firms must incorporate bond investment advisory business into their comprehensive risk management systems, with clear requirements for concentration management, deviation management, transaction monitoring, and internal inspections. They must also establish "firewalls" between advisory business and bond trading, sales, and asset management operations, and specify prohibited behaviors in promotional and advisory service processes, reinforcing primary responsibility.

Regarding personnel management, individuals involved in bond trading price inquiry must obtain relevant qualifications required by the bond trading market and be publicly disclosed in accordance with regulatory rules. Securities firms should strengthen performance assessment management, enhance transparency and market oversight, and protect clients' right to know. During the drafting process, the association considered fostering an industry ecosystem of "compliance, integrity, professionalism, and prudence," establishing an internal control mechanism covering the entire business process, including pre-engagement due diligence and admission, in-process approval and record-keeping, and post-event monitoring and inspection.

In recent years, the bond investment advisory business of securities firms has developed rapidly, with rising demand from institutional investors for professional and customized bond investment strategies, and business scale and client coverage expanding year by year. At the same time, rapid growth has brought challenges such as insufficiently refined compliance management and the need to improve conflict-of-interest prevention mechanisms. Going forward, the association will strengthen self-regulatory management of bond advisory business, promote the establishment and improvement of management mechanisms by securities firms, leverage capital market functions, and provide high-quality financial products and services.