China Weighs Performance-Based Pay Rules for Mutual Fund Managers

China’s securities regulator has urged the country’s roughly 160 mutual fund houses to introduce performance-based pay structures under tightening China mutual fund pay rules, increasing oversight of an industry shaken by recent scandals and Beijing’s “common prosperity” drive to rein in excessive earnings.

Draft guidelines issued by the China Securities Regulatory Commission would allow fund performance to account for as much as 80% of managers’ annual pay, the official Securities Times reported, adding that regulators are seeking feedback and have yet to set an enforcement timetable.

Beijing last year pressed financial firms to cap finance-sector pay at RMB3m(USD0.42m) and claw back excess bonuses following public anger over outsized compensation.

Regulators have also moved against so-called “rat trading”, under which fund managers allegedly trade frequently using relatives’ accounts to generate private gains, reinforcing the tougher stance embedded in the evolving China mutual fund pay rules.