According to statistics disclosed by the China Bank and Insurance Regulatory Commission (CBIRC), in the first quarter of 2018, CBIRC (established by merging the former China Bank Regulatory Commission and China Insurance Regulatory Commission) carried out enforcements against various violations, such as defective corporate governance, violation of macro-control policies, illegal arbitrage of intersectional financial products, infringement of rights and interests of financial consumers, and formulation or provision of false insurance materials. CBIRC strictly imposed administrative penalties on both institutions and responsible individuals violating the regulations during the law enforcement practice. During the first three months of 2018, CBIRC imposed administrative penalties on 646 banks or insurance institutions, with a total amount of confiscations and fines at RMB 1.158 billion, ordered 12 institutions to stop accepting new business, imposed administrative penalties on 798 responsible individuals, with a total amount of fines at RMB 28.6185 million, and disqualified or banned 107 individuals from the profession.
During the administrative investigation and penalty procedure carried out by administrative authorities, the supervised institutions and individuals can exercise their rights as provided in the laws and regulations to protect their legitimate interests, such as stating their cases, defending themselves and applying for a hearin. Currently CBIRC strictly imposed administrative penalties on both institutions and responsible individuals violating the regulations, therefore further developments of both financial institutions and its practitioners would be greatly influenced no matter the violation was committed only by an institution or together by an institution and individuals.
(1) Investigation. When a party is suspected of committing a violation, the supervision and inspection department would initiate an inspection and, if the conditions for filing an administrative penalty case are fulfilled, officially set up a case within five days upon the completion of the inspection. The supervision and inspection department shall complete the investigation within 90 days after setting up the case (can be extended upon approval) and later transfer the case to the administrative penalty committee office.
(3) Defending and hearing. After receiving the notification of proposed administrative penalties, the party shall submit written materials within ten days and an application for a hearing within five days (for potential serious administrative penalties) to the administrative authority, if it needs to state its case and defend itself. The administrative authority shall hold a hearing within thirty days after receiving the application and decide whether to finally issue a written decision of administrative penalties after hearing the party’s arguments.
Since most of supervised parties are institutions, the institutions often prefer not to defend themselves or to apply for a hearing. Based on experience, we propose a better way to respond to administrative investigations and potential penalties, which is to legally exercise rights as provided in laws and regulations, to launch sufficient and effective communication with administrative authorities, and to understand the rational of the supervision and enforcement. Our suggestions are as follows:
(2) Explain sufficiently and defend legitimately. Actively cooperating with investigation does not mean to give up any legitimate rights. Administrative authorities provide the parties sufficient chances to clarify facts, to state their cases and to defend themselves during the whole procedure, from the very beginning of discovery of suspected violations to the final decision of administrative penalties, which can be found both in the administrative authorities’ design of the whole procedure and in their mindsets. For example, during the inspection and investigation stage, the party can submit written documents to adequately state facts, explain its own subjective minds and analyze objective consequences of its behaviors. After receiving the notification of proposed administrative penalties, the party can also make written statements and defenses, and communicate with or make arguments in from of members of the administrative penalty committee in person.