In order to reduce conflict of interests between the sub-distributor and investors arising from the current practice of calculating sales bonus based on sales amount, the FSC invited the Bankers’ Association, the Trust Association, the Securities Investment Trust and Consulting Association, banks and investment trust companies to attend a meeting for deliberation on an appropriate calculation method for fund distribution rebates. The meeting attendants reached a consensus and agreed to calculate the rebates based on AUM. As for the contractual rates, the valid period for rebate calculation and etc, the fund companies shall reach an agreement with their sub-distributors and shall, in principle, concluded negotiations over the amendment of their contracts by the end of 2019.
According to the FSC, the current practice of calculating distribution rebate based on sales amount is very likely to result in ignoring  investors’ interests due to the incentive for sub-distributors to maximize sales volumes. After the adjustment (of the rebate calculation method), fund sub-distributors will have an incentive to sell funds that meet investors’ needs; this change will help maintain stable profitability of the fund products and reduce conflict of interests between the sub-distributor and investors. Meanwhile, long-term fund held by investors will also help increase operating flexibility of fund companies, which will, in turn, improve their fund performance.