Some investment consulting agencies in Shanghai have been reported for seven major issues

Shanghai Securities News (China Securities Network) (Reporter Liu Yuxi, Xu Wei) — On February 24, the Shanghai Securities Association released a report on the on-site inspection of self-regulatory standards for investment consulting agencies in the Shanghai area in 2025. The report shows that some investment consulting agencies in Shanghai face seven major issues during their operations, involving internal control systems and compliance management, suitability management, client complaints, marketing and advertising, client follow-up, employee conduct, and office management.

1. Inadequate internal control systems and poor compliance management. The inspection found that the inspected agencies lacked sound internal control systems, with weak actual implementation and compliance awareness. They did not effectively manage compliance during business operations. For example, compliance personnel are generally insufficient, with some agencies having only 1.9% of staff as compliance officers; the ratio of investment advisors to clients is severely unbalanced, with some agencies having only 11.4% of staff as advisors and an average of 2,383 clients per advisor; training for staff on compliance is infrequent, and the content is not closely related to actual business, affecting training effectiveness.

2. Incomplete suitability management systems and training. Some inspected agencies have not established suitability management policies; they do not classify and grade products on sale; they do not conduct risk assessments of products or services or determine their risk levels; they do not perform regular self-checks on the implementation of suitability policies; some clients have repeatedly modified risk assessments on the same day to achieve a specific risk level.

3. High client complaint rates and frequent refund disputes. Some agencies have high complaint rates, with refund ratios reaching about 40%. Many lack comprehensive refund mechanisms, and there is a general focus on marketing over product quality, with a serious mismatch between the number of advisors and compliance staff and clients, as well as cumbersome refund procedures.

4. Misleading marketing and exaggerated claims. Some agencies promote materials without proper compliance review; they engage in exaggeration or inducement; they overstate past performance of products or services; they use inappropriate language suggesting no risk (such as “safe,” “guaranteed,” “promised,” “insured,” “hedged,” “high return,” “risk-free”); and some use client testimonials as advertising content.

5. Failure to conduct client follow-up according to regulations. Some agencies only send electronic surveys for follow-up; there are no dedicated personnel for follow-up; no measures are in place for abnormal follow-up cases; the follow-up process does not cover the entire service cycle; and the procedures, content, and requirements for client follow-up are not clearly defined.

6. Loose employee management. The inspection revealed violations by some staff, with some agencies failing to establish sound risk deposit systems, and penalties for violations are superficial. For example, some securities practitioners opened accounts illegally; there is no record of employee mobile phone number reporting upon hiring; periodic checks on employees’ illegal account openings and part-time work are lacking; some marketing staff lack securities qualifications, and even personnel without investment advisor qualifications are recommending stocks illegally.

7. Unstandardized office management. The inspection found that some agencies’ business licenses or operating permits list addresses different from their actual business locations.

In fact, the inspection report for Shanghai is just a microcosm of the ongoing rectification of the investment consulting industry. Since 2026, regulators have issued administrative regulatory decisions against seven agencies, including Shenzhen Qifu Securities Investment Advisory Co., Ltd., Ceniu (Shenzhen) Technology Development Co., Ltd., Shanghai Jiufang Cloud Intelligent Technology Co., Ltd., and Shanghai Kaishi Securities Investment Consulting Co., Ltd. The violations mainly involve misleading advertising, inadequate suitability management, compliance failures, unregulated social media and live broadcast operations, and unlicensed advisors recommending stocks illegally.

Several financial legal experts told reporters that the industry is currently entering a phase of “strict regulation and strong accountability.” Since the beginning of this year, regulators have intensively disclosed administrative measures to clarify the direction of high-quality industry development and purify the market environment.

An employee from an investment consulting firm in Shanghai stated that the industry is facing multiple development challenges: limited licensing boundaries leading to homogenized profit models, conflicts between traditional marketing-driven approaches and suitability management, and external risks from unregulated social media development. “Strict regulation is forcing industry reshuffling, which is painful but also the best opportunity for investment consulting companies to strengthen their internal capabilities and actively embrace transformation.”