3. An example and analysis handled by the author

In 2019, the author handled a dispute on behalf of a client over a breach of suitability obligations by a bank-type "seller's institution", and the author noticed that the bank had different degrees of defects in investor risk tolerance testing, product introduction, risk disclosure and tips, and product after-sales management, such as: failing to conduct risk assessment of compliance and standard operations for customers before purchasing products, and failing to fully introduce the basic information and risk degree of products to customers. Different wealth managers have failed to properly manage the risk warning when there is a preliminary risk in the customer's product due to job adjustment, failed to take timely and effective measures to "timely stop loss" for the customer, etc., mainly due to the lack of specifications of the wealth manager in the product sales process, the bank's internal personnel and risk control management is not strict, the investor's product management is not timely, and the product risk warning is not in place.

Based on the above situation and the evidence materials provided by the client, the author divides the above dispute into two stages, namely, the investment product promotion stage and the product performance/disposal stage, and further provides a comprehensive dispute resolution legal service plan based on non-litigation negotiation and retaining important evidence in non-litigation negotiation for litigation resolution on the basis of fully considering the client's rights protection costs.

In the investment product promotion stage, the author fully emphasized in the negotiation and letter that the bank violated the suitability obligation of the sales agency, while in the product performance/disposal stage, the author emphasized more on the causal relationship between the bank's behavior and the customer's loss, that is, the bank's failure to timely inform and remind the customer when there was a preliminary risk, and various inactions when the customer's loss expanded, eventually led to the actual loss (principal and interest) of the customer.

Based on the law and facts, through the author's efforts before the issuance of the Minutes of the Nine People, the optimal dispute resolution result of the bank bearing all the principal and interest losses of the customer was finally achieved, and the customer and the bank achieved a settlement through a written understanding agreement, avoiding the economic pressure and energy cost of the customer due to the long litigation period and high cost.

4. Some enlightenment for banking "seller-side institutions" and financial consumers after the promulgation of the Minutes of the Nine People

After the promulgation of the Minutes of the Nine People, it undoubtedly released a favorable signal that judicial practice favored the protection of investors, and clarified the following:

The concept, scope and purpose of the "obligation of appropriateness"

In the process of introducing and selling high-risk financial products such as bank wealth management products, insurance investment products, trust wealth management products, brokerage collective wealth management plans, leveraged fund shares, options and other over-the-counter derivatives to financial consumers, as well as providing services for financial consumers to participate in high-risk investment activities such as margin trading, the New Third Board, ChiNext Board, Science and Technology Innovation Board, futures, etc., seller institutions must fulfill the requirements of Know Your Customers, Understand Products, The obligation to sell (or provide) appropriate products (or services) to suitable financial consumers. The purpose of the suitability obligation of the sell-side institution is to ensure that financial consumers can make their own decisions based on a full understanding of the relevant financial products, the nature and risks of the investment activities, and bear the resulting benefits and risks. In the field of promoting and selling high-risk financial products and providing high-risk financial services, the fulfillment of the suitability obligation is the main content of "seller's due diligence", and it is also the premise and basis of "buyer's own responsibility".

"Rules of Applicable Law"

The basic principles of the Contract Law, the Securities Law, the Securities Investment Fund Law, the Trust Law and other laws and regulations and the normative documents issued by the State Council shall be used as the main basis, and the relevant departments may apply the basic principles of the departmental rules and normative documents if they do not contradict them.

"Responsible Subject"

If the issuer, seller or service provider of a financial product fails to fulfill its obligation of appropriateness and causes financial consumers to suffer losses in the process of purchasing financial products, the issuer or seller of the financial product shall bear the liability for compensation.

"Allocation of the burden of proof"

Financial consumers shall bear the burden of proof for facts such as purchasing products (or receiving services) and suffering losses. The burden of proof is on the sell-side institution to prove whether it has fulfilled its obligation of appropriateness.

"Obligation to inform"

The court shall, based on the risks of the product and investment activities and the actual situation of the financial consumer, determine whether the seller's institution has fulfilled its obligation to inform and explain based on the objective criteria that a reasonable person can understand and the subjective standard that the financial consumer can understand, and if the seller's institution simply claims that it has fulfilled the obligation to inform and explain on the basis that the financial consumer has written content such as "I clearly know that there may be a risk of loss of principal", and cannot provide other relevant evidence, the people's court will not support its defense reason.

"Compensation for Damages"

The actual loss is the principal and interest of the loss, and the interest is calculated according to the benchmark interest rate of similar deposits for the same period issued by the People's Bank of China. If the seller's institution's conduct constitutes fraud, a request for compensation for the loss of interest on the total amount of money paid by the financial consumer is distinguished from different situations:

(1) If the contract text of the financial product specifies the expected rate of return, performance comparison benchmark or similar agreement, it can be used as the standard for calculating interest loss;

(2) Where the contract text stipulates the expected rate of return or performance comparison benchmark in the form of a floating range, and the financial consumer requests that the agreed upper limit be used as the standard for calculating interest losses, the people's court shall support it in accordance with law;

(3) Although the contract text does not contain an expected rate of return, performance comparison benchmark or similar agreement, but the financial consumer can provide evidence to prove that the expected rate of return, performance comparison benchmark or similar expression is stated in the advertising materials issued by the product, the publicity materials shall be made an integral part of the contract text;

(4) If the expected rate of return, performance comparison benchmark or similar expression is not specified in the contract text and advertising materials, it shall be calculated according to the loan market quotation rate announced by the National Interbank Lending Center.

"Reasons for Exemption" of the Selling Institution

(1) Financial consumers intentionally provide false information, refuse to listen to the advice of sellers' institutions, and other reasons that cause them to purchase products or receive services inappropriately;

(2) The seller's institution can provide evidence to prove that the violation of the suitability obligation has not affected the financial consumer's independent decision based on the previous investment experience, education level and other facts of the financial consumer.

As far as banking "seller-side institutions" are concerned, the author believes that the management of "adaptive obligations" can be strengthened in the following aspects to avoid liability for potential damages caused by violations of such obligations:

1. Conduct internal self-inspection of the performance of the "suitability obligation" of existing wealth management products, make statistics on non-compliance with relevant laws, regulations, rules or normative documents, and formulate rectification plans, especially standardize internal processes and standards in risk assessment, risk disclosure, product introduction, etc.;

2. Strengthen the audio and video recording work in the process of wealth management product promotion, regularly inspect the audio and video recording equipment, ensure that the whole process of the promotion process is clearly recorded, the video is clear, and there are traces of review, so as to avoid the adverse consequences of failing to provide evidence in the dispute process;

3. Increase the familiarity of financial staff with the product, not only should clearly indicate the risk level, possible investment risks, investment scope, type, investment ratio and other important information related to the product when introducing the product to customers, but also ask the customer whether they understand and whether they need to make further explanations, or take the initiative to make further introductions, and ensure that traces can be checked;

4. Improve the product management system, clarify the tripartite relationship between the issuer, seller and service provider of wealth management products, and the seller and service provider should learn more about the specific information and materials of the product and service from the issuer, and sign a written agreement that specifically reflects their respective responsibilities, so as to clarify the limits of the responsibilities of all parties in the event of a dispute and minimize losses;

5. Improve the incentive mechanism of financial staff, reduce the performance of "suitability obligations" caused by simple and crude sales models such as "task-based" and "sales assessment", and reduce the performance of "suitability obligations" by front-end sales personnel in order to complete tasks and performance, and incorporate the service specifications and after-sales management of wealth management products into the assessment system, so as to reduce the possibility of non-performance or improper performance of "appropriateness obligations" from the front end.

As far as financial consumers are concerned, the author believes that the risk of purchasing wealth management products can be reduced from the following perspectives and the strength of evidence in disputes can be increased:

1. Clearly state the demands and basic position of purchasing wealth management products when purchasing wealth management products, that is, clarify the acceptability of their own financial risks;

2. When purchasing wealth management products, take photos or leave traces of the seller's product introduction and promotional explanatory materials, so as to provide more sufficient proof of the amount of compensation in the event of a dispute;

3. When purchasing wealth management products, you can take the initiative to understand the basic situation and risk situation of the product, and appropriately purchase products that conform to your own financial management principles;

4. After purchasing wealth management products, regularly ask professional staff to check the operation of wealth management products, find risks as soon as possible, and reduce losses;

5. Properly keep the legal documents, introduction documents or communication records with the seller's institution on wealth management products, and leave traces and certificates;

6. Seek professional lawyer advice at the first time of risk occurrence to ensure that the problem can be solved in the first time and the loss can be reduced.

(This article is translated by software translator for reference only.)