The China Securities Regulatory Commission (CSRC) has issued an emergency notice requiring all fund companies to temporarily cease trading functions offered through in-app "applets."
Applets, which are currently offered by Tencent's (0700.HK) WeChat mobile messaging app, are similar to apps, but are only available within other apps, and can be installed without downloading to the user's local device. Tencent has called its applet's feature "Mini Program."
The CSRC notice states that within applets, mobile financial trading services must be restricted to the display of related financial product information. Only seven fund companies, which had already developed a Mini Program for WeChat, are affected by the notice, four of which have already complied. The functions offered by these seven finance-related Mini Programs can be divided into two categories: cash management and asset allocation. Cash management includes creating a fund account, logging in, managing cash, fund trading, assets lookup, and net value lookup, while asset allocation allows users to establish fixed fund investments.
The CSRC's ban on applet-based trading can be attributed to the role it gives Tencent in the trading process, explains an industry analyst. In the traditional sales model of fund companies, whether the fund is sold directly or through a third-party platform, user and banking information are available only to the fund management company and third-party platform. Regulators have control over this, but once applets become "licensed stores," Tencent will be able to collect information regarding every transaction. Regulatory authorities have yet to modify current trading rules such that they also extend to the new platform.
Editor's Note: WeChat launched its Mini Program function on January 9. For more information on this launch, please see "WeChat Officially Launches In-app 'Applets'," MD 1/09/17 issue.