Ashley Ding (L), Joe Zhou,  Zhang Xiaohong

China’s dynamic finance industry has been evolving rapidly in the past year or two in the face of increasing regulatory scrutiny as well as the growing impact of technology. Legal department heads say that while the current landscape poses certain challenges, it also brings with it a number of distinct opportunities that in-house teams are helping their companies take advantage of.   


ALB: The financial markets have seen frequent and significant policy and regulatory changes since the second half of 2020. What are some of the newly enacted policies and regulations that have reshaped the business model of your company, as well as the industry generally?

“The emerging new products and new business models are breaking away the traditional perception, and the accelerating pace of change in knowledge is driving us to constantly broaden the sphere of our expertise and learn extensively from other professions.”

—Ashley Ding, Aegon THTF Life Insurance

Ashley Ding, general counsel, Aegon THTF Life Insurance: The numerous regulations issued by regulatory authorities mainly apply to Internet business, investment with insurance funds, and corporate governance. In terms of Internet business, the Measures for the Regulation of Internet Insurance Business sets out sweeping normative requirements for insurance companies and licensed insurance intermediaries in their Internet-based insurance underwriting business, prompting us to examine all internal business channels against our business models.

With respect to investment with insurance funds, the Notice of the China Banking and Insurance Regulatory Commission on Matters Concerning Financial Equity Investment with Insurance Funds allows an insurance institution the discretion to choose the industry sectors in which it employs insurance funds. As far as Aegon THFT is concerned, I believe we can take advantage of this new regulation and have more strategically positive thinking to further explore the use of equity investment to achieve our strategic objectives.  

Finally, as to corporate governance, in the second half of 2020, the CBIRC clarified the corporate governance priorities of the banking and insurance industries in the next three years, which was followed up by new rules governing corporate governance, the performance of duties by directors and supervisors, etc. in such institutions in 2021. Many foreign-funded companies in the industry, particularly those where the Chinese and foreign shareholders each have a 50% equity stake, have started to ramp up corporate governance efforts as required under the new rules.

Joe Zhou, managing director and head of the legal department of legal and compliance, China International Finance Corporation Hong Kong Securities Limited (CICC): Chinese regulatory authorities have been very busy since the second half of 2020, promulgating an array of new rules and important policies. Two of them have significant impact on CICC: the first is the more stringent management introduced by the State Council in relation to financial holding companies; the second is the revision by the CSRC to the Administrative Provisions on the Equity of Securities Companies in March 2021, which loosened the eligibility requirements on major shareholders of securities companies. Further, the CSRC also tightened regulation in light of the reputation incidents of some securities brokers on self-media.

Looking at the domestic financial market as a whole, the full-scale roll-out of a registration-based IPO system on the ChiNext market and STAR market in 2020 brought life to the primary market, particularly the stock market. Meanwhile, the CSRC made repeated calls for improving the quality of listed companies for purpose of raising the quality of the financial market. Further, the exchanges and the CSRC issued new disclosure rules in response to the risk incidents on the bond market last year. To comply with the new requirements on due diligence and information disclosure as part of the registration-based IPO reform initiative, CICC has optimized its internal structure and procedures.

Changes in overseas regulatory rules should not be overlooked.  Hong Kong, as an international financial centre, is very representative when it comes to regulatory trends on its financial market. As an increasing number of US-listed Chinese companies head home to relist, Hong Kong Stock Exchange (HKEX) published a consultation paper this March seeking views on reforms to the listing regime for overseas issuers. At the same time, the HKEX studied a listing regime for special purpose acquisition companies (SPACs). In addition, with the digital economy thriving, Hong Kong’s Securities and Futures Commission (SFC) granted its first license to a crypto trading platform in 2020, the first step to regulate platforms that trade bitcoins and other virtual assets.

Zhang Xiaohong, general counsel, China National Investment and Guaranty Corporation: China National Investment and Guaranty Corporation, as China’s first national guaranty agency, has witnessed and been deeply involved in the evolution of how China’s legal system for guaranty. The Civil Code and its supporting judicial interpretations enacted in the past year have made substantial amendments to China’s existing guaranty regime, and many new regulations are substantively different from the annulled Guaranty Law and the Property Right Law, posing a profound impact on our business. Developments in the past year that are closely related to our bond guaranty business include the implementation of the revised Securities Law, the roll-out of the registration-based IPO reform, the promulgation of the Minutes of the National Courts Symposium on the Trial of Bond Disputes, as well as a notable increase of risk incidents in the bond market. Our in-house team focused efforts on basic research, searched for bond dispute cases and distilled key disputes by looking at our business model and legal issues, and proposes pertinent solutions to prevent legal risks on this ground.

ALB: Financial institutions are quickening their pace of product and business innovation in response to regulatory changes. What innovative products or business models have your team supported recently and what challenges have you faced?

Ding:  First, as the market is having heated discussions on high-net-worth individuals and wealth inheritance, our in-house team worked with sales department to evaluate the insurance + trust business model. From a compliance perspective, the biggest challenge was how to effectively promote a product to avoid causing confusion between an insurance product and a banking or wealth management product, and how to fully protect the rights and benefits of clients and properly integrate insurance and trust features in one product. 

In addition, in light of the new regulations on Internet insurance business activities, the in-house team got involved in designing a new business model that enables the use of traditional offline channels to market and promote Internet insurance businesses. The biggest challenges there were how to differentiate online processes from offline ones; and if such differentiation is impossible, how to put in place management measures to meet the requirements of both online and offline business activities.

Secondly, as regulatory authorities have broadened the scope of industries in which insurance funds may invest, we have been constantly exploring opportunities for the insurance + pension business model. If we are to invest insurance funds in elderly care housing projects, we will be subject to extensive compliance requirements, which must be set out in relevant contracts. The in-house team also needs to assist the investment department in project oversight and post-investment management.

To conclude, the emerging new products and new business models are breaking away the traditional perception, and the accelerating pace of change in knowledge is driving us to constantly broaden the sphere of our expertise and learn extensively from other professions.

Zhou: In CICC, the in-house team has always been bolstering business innovations. In 2020, due to the COVID-19 pandemic, some domestic companies were faced with operational challenges and became so-called zombie companies. Against this backdrop, CICC stepped up corporate reorganization services, which involved the restructuring of the bonds issued by such companies overseas. The in-house team was directly and actively involved in such business activities.

China also kicked off reforms on real estate investment trusts (REITS) in the past year and published new policies in this area. CICC, having a sense of the massive potential in this field, has made a lot of preparation, aiming to become a forerunner in this market segment.

CICC has also attempted many innovations in products and services by taking advantage of its unique strength. The in-house team was actively involved in the design of such new products and services, issuing reminders of and controlling potential legal risks associated with such products and services. In particular, as both domestic and overseas regulations must be followed when it comes to novel cross-border business activities, legal and regulatory compliance is of paramount importance.

In addition to active involvement in all business stages, the in-house team also took part in regulatory and policy research initiated by domestic regulatory authorities. After new regulations are promulgated, the team will, as soon as practical, discuss with the front office the impact of such regulations on CICC's business.

Zhang: Over the past year, our in-house team faced three major challenges. The first was how to deal with and resolve emerging legal issues in fintech-related business areas. To that end, by consulting external professionals and carrying out thematic studies, the team managed to resolve the pain points and difficulties in the areas of data compliance, AI-based compliance, information protection, intellectual property rights and e-signature, providing strong support for business innovation. The second was how to lessen the COVID-19 disruption to business operations. The third was how to raise the efficiency of legal review without compromising quality. To address this concern, our team made constant efforts to standardize contract review procedures, including by establishing and updating the template library and identifying essential elements of contract review, effectively alleviating conflicts between the growing demand for legal services as a result of business expansion and the limited size of the in-house team.

ALB: COVID-19 has accelerated the rise of the digital economy, and technologies are reshaping the financial sector. As general counsel, how do you help the business strike a balance between digital innovation and financial security?

Ding: Given the fast-accelerating digital economy, both the legislature and regulatory authorities are paying close attention to risks arising from fintech products and emerging technologies, particularly risks related to personal information protection. A general counsel needs to ensure everyone in the company attach greater importance to the security of clients’ personal information. This means I must fully communicate with business functions and back-office functions, and add relevant contents in sales scenarios and business documents so that clients' information is gathered pursuant to the law and the rights and benefits of consumers are protected. As general counsel, I also have to remind the IT department to implement enhanced safety and security measures.

Zhou: The COVID-19 pandemic greatly quickened the pace of digitalization. CICC not only focuses on the adoption of technological means, but also places more emphasis on having a digital mindset or even strategic perspectives. With digitalization being one of its strategic focuses in 2021, CICC aims to make considerable headway towards “digital banking”. In essence, finance is simply about efficiently bridging the supply and demand of funds, and what CICC needs to resolve is how to use technology to make this happen.

On the business front, CICC has set up a number of agile groups to fix pain points in business operations. As these groups possess the corresponding authority, they can be agile in providing solutions and revising or iterating such solutions subsequently. So far, agile group members are mainly from front-office functions, including sales functions and IT staff such as programming experts and data experts. We plan to include legal staff in the agile groups going forward.

In terms of investment strategies, China Capital Investment Group, a subsidiary of CICC, has invested heavily in fintech firms, and some of them are now listed, realizing investment returns for CICC. Besides, CICC keeps a close eye on the technology products developed by such firms, with a view to adopting them in future business processes. 

The in-house team will get more involved in CICC’s digitalization journey and stay abreast of the latest developments in business and product innovations, to better serve the strategic objective of digital transformation.

“During the pandemic, contactless digital reform has become an irreversible trend for financial institutions. However, fintech products maintain features and risks that are peculiar to the finance sector, and to some extent, include new risks and demonstrate clustering effects of risk behaviors.”

—Zhang Xiaohong, China National Investment and Guaranty Corporation

Zhang: During the pandemic, contactless digital reform has become an irreversible trend for financial institutions. However, fintech products maintain features and risks that are peculiar to the finance sector, and to some extent, include new risks and demonstrate clustering effects of risk behaviours. Against this backdrop, I asked my team to stay on top of regulatory developments and stick to the bottom line of compliance.  

To be specific, this means we must strike the right balance between business growth and risk management, and between ex-ante risk prevention, interim risk control and ex-post remedy. As to the former, financial institutions and practitioners bear the responsibility of maintaining financial security, and they should push ahead with fintech innovation prudently under the premise of comprehensive and effective risk management. For the latter point, an effective risk management framework must be forward-looking. Take petty-sum and scattered online transactions as an example. The contracts should include a service clause that facilitates payment collection and a clause that provides convenient dispute resolution methods.

ALB: Over the past year, has your team adopted new technology tools to increase productivity and update the team's operations? 

Ding: In 2020, the completion of the iteration of the company's anti-money laundering risk control system greatly improved the productivity of the in-house team. The team also embedded a contract management module into the integrated online co-working platform in 2020, thus achieving full process management online and raising contract review efficiency at the company level.

In the past year, we also launched promotional events and training courses by using new media tools such as WeChat mobile platform, H5 pages, short videos, promotional flyers and posters, mobilizing all staff to get involved in compliance promotion campaigns.

Zhou: CICC's in-house team started using the iManage system last year. Given remote working/working-from-home arrangements, the team also adopted virtual phone and cloud hosting tools. We started using the corporate WeChat platform for internal communication to meet regulatory requirements on whole process traceability.  Recently we have spoken with PwC to understand NewLaw, a legal technology platform it developed, and will select features on the platform that are suitable for our in-house team.

For the next steps, we will examine AI-based contract review tools. Then we will consider connecting contract management to CICC’s in-house unfavourable views monitoring system. Finally, some large law firms or data companies are developing judgment analysis systems. In such a system, when encountering a case, an in-house counsel may enter the relevant information into such a system and retrieve relevant precedents by using AI-enabled comparison, thus greatly benefiting the in-house teams in their daily work.

“We are planning to establish a legal operations team. To promote and even popularize the use of new technology tools, the team will have data experts to help us with AI-based management and constant monitoring of contracts.”

—Joe Zhou, China International Finance Corporation Hong Kong Securities 

In addition, we are planning to establish a legal operations team. The in-house team has so far collected a massive volume of information. Going forward, we intend to use technology tools to collect such information and set up a system to monitor legal costs. To promote and even popularize the use of new technology tools, the legal operations team will have data experts to help us with AI-based management and constant monitoring of contracts.

Zhang: China National Investment and Guaranty Corporation leads the guaranty industry in terms of new technology adoption. Firstly, with an in-house technology team, we have established a mechanism for most online transactions to be signed off electronically, making full use of the digital signature and electronic seal technology to ensure security and validity in contract signing procedures. Secondly, we are increasingly leveraging IT means to optimize and nail down contract review procedures and formalities and using IT tools to increase productivity in contract review. Also, the team relies on external information consulting and search tools to improve work efficiency and quality, so that it could share the latest legal news and developments with all staff. Lastly, the company has started to build an integrated management platform to accommodate online business activities, and a data processing and risk control system that meets risk management requirements.

ALB: Where are some of your focus areas in2021? How do you plan to build an even better team centering around these focus areas?

Ding:  I will continue to focus on corporate governance, anti-money laundering, related-party transactions and cybersecurity in 2021. These areas require the team to be more forward-looking. Apart from legal expertise, the team must have knowledge of many other different fields and be capable of employing technologies to better perform their fundamental duties.

Zhou: Going global is on CICC’s top agenda for 2021. Given the current international political landscape, Chinese enterprises going global would rattle the nerves of many. Thus, the top priority for the in-house team is to control risks while CICC grows its business. It is a pressing challenge to structure an in-house team that fits CICC’s quick pace of internalization, to equip the team with the right talents and to train them on corporate culture, so that the in-house team can help the headquarters manage risks associated with its subsidiaries in various regions. Capability building of the in-house team involves not only extensive application of technologies, but more importantly, the acquisition of exceptional talents. It is also a challenge to recruit talents who not only identify with CICC's corporate culture but also have strong professional backgrounds and capabilities.

Zhang: National economic situations and the guaranty industry landscape are changing constantly. The company likewise has different strategic goals and makes different strategic choices in different stages of development. However, as general counsel, I believe the following ways and thoughts of legal work stand the test of time: to keep sharpening legal skills, stay abreast of legislative updates and ramp up extensive legal research; to persevere in reinforcing the compliance culture; and, to perform legal duties to empower corporate strategies and actively contribute to the rule of law. I will guide my team members to review their departmental objectives and performance from these three perspectives.

After all, ways of working are merely tools. The area of my focus will always be on the people that use such tools. I believe a great in-house team should consist of professionals who are both passionate and humble about the law, and who have a sense of mission to study and resolve legal issues and help the company mitigate legal risks.


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