Regulator refines requirements for managing research-related expenses of brokerages and funds: prohibits disguised compensation, requires refund of excessive spending, and bans paying for expenses beyond limits or regulations.

Title context: Text: In early October of this year, regulators issued a concentrated notice on the inspections and handling of violations related to overseas research activities by investment research personnel at five securities firms and fund companies. The reporter learned that regulators have recently been tightening detailed requirements on securities firms and fund companies regarding the use of commissions, and plan to include commission usage in the key points of annual on-site inspections, with strict handling of any violations to highlight the regulatory direction. Based on information from multiple sources, the regulatory focus is on compliance control over institutional expense usage: research activities must not use trading commissions to transfer payments for expert consulting, research intermediaries, conferences, tickets, and airfare/hotel expenses that should be borne by the institutions themselves; and must not use fictitious expense items or other means to circumvent rules and provide financial support for excessive, non-compliant, or illegal activities. It was also made clear that fund companies must not indirectly compensate securities firms for related expenses by raising commission allocation ratios, increasing branch allocation points, or committing to trading volumes. Regulators emphasized that securities firms and fund companies should earnestly conduct self-inspections and self-corrections, return excessive or improper expenditures, and strictly pursue internal accountability for related issues. At present, both the research organization methods of sell-side research institutes and the expense review processes of buy-side institutions will be re-examined.