Zhejiang regulators have issued a stern ultimatum to Hithink RoyalFlush Fund Sales, ordering the digital heavyweight to overhaul its operations immediately. This move signals a significant escalation in Beijing's ongoing effort to professionalize the third-party fund distribution sector and enforce strict firewalls between tech parents and their financial subsidiaries.
The specific violations cited by the Zhejiang Securities Regulatory Bureau reveal a systemic disregard for the independent fiduciary duties required in wealth management. The regulator found that RoyalFlush had failed to maintain clear separation in personnel and premises from its parent company and shareholders, essentially commingling its operations with its corporate affiliates. This 'blurring of lines' is a critical concern for Chinese authorities seeking to prevent contagion and ensure financial stability.
Beyond organizational independence, the bureau highlighted a dangerous lack of due diligence regarding fund managers and products. The company reportedly failed to implement mandatory risk-grading for certain products and lacked a mechanism to assess conflicts of interest, particularly for private equity funds managed by related parties. Such lapses suggest a sales-first culture that prioritizes corporate synergy over the protection of retail investors.
Furthermore, the regulator called out the use of unlicensed staff in operations and customer service roles, alongside an appraisal system that ignored essential fund retention metrics. By failing to link compensation to long-term investor outcomes, RoyalFlush allegedly fostered an environment focused on transactional volume rather than sustainable asset growth. The company now has 30 days to provide a comprehensive rectification report or face further administrative sanctions.