Study On Legal Issues Of Wealth Management Product In Commercial Bank

Recently, with rapid development of China’s economy and sustained increase ofnational income, the demand for personal wealth management has substantially risen.During the period, commercial banks to carry out personal wealth managementbusiness in China has achieved great development, wealth management business hasbecome the focus of business competition and the main source of major commercialbank profit. Despite wealth management product on the market varied, there are stillmany legal issues to be resolved, especially few laws and regulations to clarify thelegal nature, the legal relationship between banks and its clients is also very vague.In addition, there are pressing issues needed to solve, such as unclearness of rightsand obligations between two parties, deficiency of laws in cross-sector bankingbusiness, breakup of minimum guarantee return. These issues result directly inincrease of wealth management product risks, rise of various legal disputes betweenbanks and its clients. Investors of wealth management product tend to be indisadvantaged status, their legitimate interests can be properly protected. Therefore itis necessary to clarify legal nature of wealth management product to effectivelycontrol product risks and to protect legitimate rights and interests of investors.The text of the article includes four aspects.The first part discusses some of legal issues which commercial banks currently faced in China, the issues mainly related to inconsistency of defining legal naturebetween laws and regulations, legal disputes arising from indetermination of rightsand obligations in wealth management business, deficiency of laws in cross-sectorbanking business, and legal validity of minimum guarantee return and etc.The second part focuses on defining legal relationship between wealthmanagement products, since the legal predicament mentioned in the first part mainlyarises from vagueness of wealth management products’ legal nature, it is necessaryto reclassify products into on-balance and off-balance business which can besubcategorized into debtor-creditor relationship, agent relationship and fiduciaryrelationship.In the third part, concentrate on protecting the interests of wealth managementproducts investors, and learning from the fiduciary duty under the Anglo-Americanequity law, discuss transfer of risk from banks to investors, and carry out differentinvestor protection system and differentiated regulatory requirements at differentrisk-return allocation model, as well as to strengthen legal regulation of bankobligation in wealth management business, point out the shortcoming of currentprovisions in relevant laws and regulations.In the fourth part, make several recommendations from the perspective ofcentralization of legislation and standardization of wealth management business. Bycentralization of legislation to replace current fragmented legislation, establishfiduciary law to protect interests of trusted product investors. By setting up marketaccess threshold and stricter bank obligation, normalize wealth managementbusiness of commercial banks in China.