Yuan Ye (袁野)
Table of Contents
Comment from the editor: law students or recent law graduates in the United States (US) and many other jurisdictions in the world write student notes related to their experiences in judicial clerkships or summer work experiences. This detailed study of Chinese case law on the duty of care of asset managers and a comparison with counterpart US law has similar roots. It arose from Yuan Ye’s experience as an intern in one of the Supreme People’s Court’s Circuit Courts as an undergraduate law student. The article combines that experience with his study of US and other transnational law (and further Chinese law studies) at STL.
As of the end of 2018, the total scale of China’s asset management market reached approximately CNY124.03 trillion (USD 17.5 trillion) in total. In 2019, a large number of financial management banking subsidiaries issued over 400 asset management products, covering fixed-income products, hybrid products, equity products and other products. Under the New Rules for Asset Management (“资管新规”), asset management products may differ from each other in many aspects, such as investment scope and information disclosure requirements. However, whatever the management products are, all asset managers must “perform the obligation of good faith, diligence, and duty of care for the interests of principals” to “protect the interests of financial consumers”. This shows a clear policy trend requiring protection of asset management clients (investors).
Chinese legal community has long treated the protection of investors’ interests as a hot issue. But Chinese scholars, lawyers and courts have mostly addressed this issue from the public law perspective, focusing on market regulation pursuant to government corresponding financial policy. In other words, the Chinese legal community has not discussed these issues very much from a private law perspective, more specifically, contract law, tort law or trust law.
This article will fill in this important gap in the professional literature, by focusing on one group of civil cases that have arisen in Chinese courts. These cases normally will be brought as “entrusted investment disputes.” A typical factual pattern in these cases is that investors entrust an individual or financial institution to invest substantial amounts of money and the contracts incorporate fiduciary duties. Later the investors sue asset managers for misconduct causing economic loss, seeking compensation for breach of fiduciary duties. Chinese courts, for various legal and policy reasons discussed later in this article, have not provided effective remedies for investor compensation claims.
For example, Chinese courts usually consider those investment contracts with articles promising investors minimum payback as loan contracts rather than investment contracts, because clauses promising investors minimum payback violate the mandatory Chinese Security Law provision prohibiting securities companies from guaranteeing returns. These group of cases will not address fiduciary law remedies for investors.
The policy concern of “ensuring financial security” is the reason that drives courts to review issues from a public law perspective instead of civil law perspective. According to the judicial opinion (a type of policy document) issued by the Supreme People’s Court of the PRC (“SPC”) on financial issues, the goal of Chinese courts’ judgments on those issues is to “serve the real economy” and “prevent financial risks.” Protecting investors only appeared as one of over a dozen methods to achieve that goal, which implies that courts’ prioritize the public interest when deciding entrusted investment cases. Consequently, when investors’ interests have been infringed, regulatory authorities often impose punishment upon asset managers for violating relevant regulations, leaving no remedies for the investors to seek compensation for their monetary loss. The lack of applicable civil law rules to construe the appropriate legal relationship between investors and asset managers also contributes to this dilemma. With unified and integrated rules, rights and obligations of asset managers and investors could be properly balanced.
Chinese civil law theory, like common law, also admits that the essence of investor-manager relationship is trust with fiduciary duty as its core, although some may argue it is a contractual feature of investor-manager relations. Whoever the asset manager is (bank, fund or individual), fiduciary duty of asset managers provides the core legal basis for the protection of investors once the entrusted investment relationship has been established.
The principal statutory basis for fiduciary duty in China is Article 25 of the Trust Law of the PRC, which requires a trustee to act in the “utmost interest of the beneficiary” and “perform the obligation of being honest, trustworthy and cautious, and managing effectively.” Although fiduciary duty originates from common law, Chinese scholars, law practitioners and the SPC have already reached a consensus that fiduciary duty under Chinese civil law also consists of the duty of loyalty and duty of care. The duty of loyalty forbids trustees to act on behalf of persons other than the beneficiaries. Chinese Trust Law has set forth explicit rules on the duty of loyalty by listing prohibited conducts, such as related-party transactions, trading with trust properties by inherent properties, gaining benefits from trusteeship, etc.
Contrary to the duty of loyalty, however, no statutory authority or commercial practice has developed explicit and detailed rules for the duty of care. This begs the question of exactly what standard of care is owed or would be considered sufficient to discharge the duty owed. The natural question would be whether Chinese case law could fill the gap between insufficient supply of legal rules and huge commercial demands in practice.
This article argues that Chinese courts are developing standards for the duty of care on asset management through case law, although they are not yet detailed. This paper firstly summarizes the duty of care of asset managers under US law, because it has heavily and substantially influenced Chinese commercial law on this issue. Then the current applicable statues on the duty of care in Chinese law are examined to determine the gap that exists when compared to US law. In Part IV, this paper explores Chinese courts’ judicial practice on this issue using an empirical case study and synthesizing its rules.
Although it is not generally realized outside of China, US law has heavily influenced China’s commercial law on investors protection. That has been implicitly recognized by the SPC. On the issue of duty of care, when several SPC judges discussed detailed standards of duty of care in a recent book, they cited the Uniform Prudent Investor Act Article 2-8. Therefore it is helpful and necessary to examine US statues and case law on the duty of care of asset managers.
Like China, under US law, an asset manager, as an agent, firstly owes fiduciary duties to its client, as principal. Other fiduciary duties are grounded in the law of trusts. The detailed standards of duty of care under US law can be synthesized as follows:
- The duty of prudent administration.A trustee shall administer the trust as a prudent person would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.
- The duty of eliciting enough information. The manager, at the inception of the relationship and periodically thereafter, shall elicit from investors a sufficient information and make a reasonable assessment of their technical sophistication in investment matters and risk tolerance.
- The duty of reasonable care. The manager shall employ reasonable care to avoid misleading clients by calculating performance with due care when preparing marketing materials, pitch books, website presentations and other materials provided to clients and prospective clients.
- The duty of giving reasonable investment advice. For example, the manager shall use due diligence to research investments, make selections and recommendations with due care, and monitor investments with reasonable frequency to account for potential changes.
- The duty to seek best execution of investor trades. One example is staying apprised of and using reasonably available alternative trading venues to execute trades when they offer best execution.
- The duty of fair treatment. The manager shall treat clients fairly and avoid favoritism of one client or group of clients over another in handling investment opportunities and trade allocations and adopting investment opportunity and trade allocation procedures and applying them consistently over time so that no client or group of clients is systematically disadvantaged.
- The duty of full and fair disclosure. The manager shall disclose all material facts to clients and prospective clients. Such as ensuring that disclosures contain all facts that a reasonable investor ought to know in order to make an informed decision about investing.
Compared with US law, Chinese statutes appear to be abstract principles rather than detailed standards. In terms of substantive norms, the coverage of duty of care under the statute is also limited when compared to US law. The duties of information soliciting and best execution, for instance, are not covered.
Current Chinese law on standards of duty of care can be synthesized as follows:
- Perform asset management for the utmost interests of the investors; perform managers’ obligations of being honest, trustworthy and cautious, and managing effectively; perform duties diligently, act in good faith, be prudent and diligent, and manage assets in person.
- Manage the trust property and his inherent property separately and keep separate accounts for the two, and must manage the trust property of different investors separately and keep separate accounts for them.
- As agreed in the contract, truthfully disclose to investors the fund’s investments, assets and liabilities, and distribution of investment returns, expenses and performance compensation paid by the fund, potential conflicts of interest, and other important information that may affect the lawful rights and interests of investors, and may not conceal any information or provide any false information.
- Properly keep records and other relevant materials on investment decision-making and suitability compliance, and keep such materials confidential.
- Fairly treat the assets of different funds under its management and establish mechanisms to prevent tunneling or conflict of interests. These rules can be found from Interim Measures Article 22 and Measures for the Compliance Management of Securities Companies and Securities Investment Fund Management Companies (Revision 2020) Article 6(6).
The launch of China Judgements Online (“中国裁判文书网”) in 2014 made it possible to research how Chinese courts have decided a specific category of cases. The author searched all cases decided under the following two filters, resulting in 79 cases:
- According to the Provisions on the Causes of Action for Civil Cases (“民事案件案由规定”) issued by the SPC, that set out the permitted causes of action, two causes of action (“案由”) address the issue of duty of care: a) disputes between financial institution and investors arising from commission contracts (“金融委托理财合同纠纷”) and b) disputes between private individuals and investors arising from commission contracts (“民间委托理财合同纠纷”). In practice, these two causes of action have been widely applied to disputes arising from entrusted asset management where managers are either financial institutions or individuals. So, the author used “institutional management” and “individual management”, as filters, to refer to the two groups of cases when searching.
- Duty of care, in most cases, is expressed by the word “qinmian” (“勤勉”).  So, the author used “qinmian” as key word appeared in the judgments.
Courts’ interpretation and development on duty of care only be reflected by related application and reasoning in every single case. So, analysis in this part starts with question of whether courts applied the duty of care and continues with whether courts provided reasoning in their applications. Cases with sufficient and useful reasoning are further analyzed at the end of this part. Almost half of the 79 cases did not apply duty of care. Among the remaining cases, more than half of them provided sufficient reasoning.
Among all 79 cases, 10 out of 30 “institutional” cases and 27 out of 49 “individual management” cases have mentioned “勤勉” but have not applied duty of care, where“勤勉”appeared as plaintiffs’ argument or basis for holding the investment contract valid.
Among those 10 “institutional management” cases under this category, 8 of them involved “勤勉” (duty of care) as one of the arguments by investors against asset managers, such as Wu Mingfang vs Pingan Bank Co.Ltd, Li Zhenfei vs Shenzhen Hui Baili and Sun Jianchang vs Jinan Jiuchen; In Gao Xinqiu vs Zhaoshang, the “勤勉” (duty of care) was only promised by managers in the investment contract without invoking it; In Luo Fuhui vs China Industrial Bank Ltd, the “勤勉” appeared in one article cited by the court but it did not apply it.
Among those 27 “individual management” cases under this category, 24 of them involved (duty of care) “勤勉” as one of the arguments by investors, such as Tan Xiaohui vs Chen Liguo; In cases like Mao JIanxin vs Zhen Yutian, the court found the Principal Warranty Clause (“保底条款”) valid because it can “urge the trustee to be diligent and dedicated”.
Courts applied the duty of care in most institutional investment cases and fewer than half of individual investment cases. This article will focus on these cases. 20 out of 30 “institutional investment” cases and 22 out of 49 “individual management” cases have substantially applied duty of care or provided substantive norms on this issue.
1(2)(a) Why detailed reasoning is missing in judgments
Courts do not set out their reasoning in the judgments in great detail for legal and political reasons. Among 20 “institutional management” cases under this category, 8 of them applied duty of care without substantial interpretation and legal reasoning. One example is Cui Jianmei vs China Industrial and Commercial Bank. In that case, the court found that asset manager “has designated, experienced, and diligent professionals to be responsible for tracking and supervising the wealth management assets of plaintiff” as required by management contract between the parties，but provided no reasoning on why such professionals can be considered as “diligent”.
Among the 22 “individual management” cases under this category, 7 of them applied duty of care without interpretation and reasoning. In Tan Xiaohui vs Chen Liguo , the court held that:
“when performing the investment agreement, manager shall perform the obligations with prudence and diligence and promptly take measures to prevent expansion of losses when investment incurs losses. Based on the above analysis, this Court determined at its discretion that Chen Liguo (the manager) shall bear 60% of the economic losses from the investment based on both parties’ investment experience, investment behavior, profit sharing ratio and fault in the process.”
Here, the court mentioned factors such as investment experience and profit sharing ration, that may affect the fulfillment of duty of care. It did not, however, explain whether the asset manager had acted diligently under these factors.
Similarly, in case Zhou Zhijie vs Yu Xiaofei, the court held that：
“when losses are incurred, asset managers shall promptly take measures to prevent further losses. Based on the above analysis, according to the investment experience, investment behavior, the proportion of earnings sharing and the faults in the process of performance of the contract of both parties, determined in its discretion that Yu Xiaofei (manager) and Zhou Zhijie (investor) shall bear 60% and 40% of the loss respectively.”
Here, the court also has not explained whether the manager had fulfilled the duty to prevent further loss and why his action brought him 60% of the loss.
The lack of reasoning can be explained from three perspectives. First, the lack of reasoning is a well-known phenomenon in Chinese judicial practice. Although the SPC has taken measures to promote reasoning in court judgments for over 20 years, the lack of reasoning remains, especially in lower courts, as admitted by one of the SPC vice presidents. In my view, the reasons are complicated, including fear of being punished under the judicial responsibility system, excessive judge workload, and lack of judicial independence.
Second, as discussed above, the lack of clear statues and judicial interpretations on this issue make it relatively difficult for judges to apply the law. Chinese judges in lower courts generally rely on the judicial interpretations issued by the SPC when there is no clear guidance provided in statutes. So, when no judicial interpretations are provided on the issue of duty of care, lower court judges elect not to apply the rule with reasoning.
Third, compliance with financial policy is a key factor in determining an asset manager’s breach of duty of care. Because the national financial policy has been very dynamic years, it may be troublesome for judges to be very clear and conclusive when interpreting and applying the “abstract” duty of care in a clear way which produces a clear deviation from national policy.
1(2)(b) Judgments with Reasoning
Cases applied duty of care with substantive reasoning are relatively rare but important in relation to courts’ ability to properly apply duty of care. 12 “institutional management” and 15 “individual management” cases applied duty of care with detailed interpretations of its standards.
Among “institutional management” cases, a short but good example is Tan Chuanjun vs China Industrial and Commercial Bank, in which the investment contract required the manager to sell all of the shares of stock held by investors before a specific date 27th May, 2017. However, a newly adopted regulation after the signing of the contract prohibited the sale of stocks by the manager before two years from the issue date, which was 24th May, 2018. The court held that manager had fulfilled its duty of care by selling the stock on 30th January, 2019 and reasoned that:
“The management was established on May 24, 2016……Under the new regulation, it is impossible for the manager to sell shares before May 23, 2018 and the completion of selling also requires reasonable time.”
Among “individual management” cases, a good example is Li Xianju vs Wang Shunfang. In this case, the investment of stock was successful under the manager’s operation in 2017. Therefore the investment agreement for 2018 was signed. Later, the manager intended to exempt herself from the liability on the grounds that she did not know the account password and had never operated the stock account before. The court denied such argument and found breach of duty of care by reasoning that:
“It was due to the successful performance of the 2017 agreement that the parties would renew the 2018 Stock Cooperation Agreement with Mr. Qiu Huigen (the investor). At the sign of the 2018 Agreement and the Supplementary Agreement, Li Xianju(the manager) never indicated that she did not know the password of her stock account, nor did she indicate that she had never operated stock sales and purchases of the account……As a professional with security qualification, Li Xianju repeatedly signed Stock Cooperation Agreements with Wang Shunfang, and accepted the entrustment of Wang Shunfang to make stock investment, but claimed that she had never operated the stock account, which has obviously violated contractual obligations and the duty of care to handle the entrusted affair personally and report the entrusted affair in time.” 
Other cases that applied duty of care with reasoning and interpretation of its standards can be categorized as follows:
|Rules and Standards||Institutional management||Individual management|
|The extension of the investment’s operation term by manager as authorized by investing contract does not violate duty of care||Ji Tianyu v. Shandong Chuangdao
Qu Zhiyun v. Shandong Chuangdao
|The failure to buy or sell assets at certain point as required by contract violates duty of care||Zhao Ronghua v. Shanghai Chanhong
|Liu Yuelin v. Wu Xinhua
Huang Lizhi v. Yuan Lipeng
Chen Zhiguo v. Zhang Xiongjun
|The manager’s contribution of asset as permitted by contract and mandatory rules dose not violate duty of care.||Zhou Lichun v. Guangdong Junxin|
|The obligation to fulfill suitability obligation||Yang Zhijian v. Shenzhen Guotou
Wangxiang v. China Construction Bank
|The obligation to disclose the structure of investment||Zhouyan v. China Industrial and Commercial Bnak
|The obligation to disclose market changes||Zou Jingjuan v. Zhu Yiqun
|The obligation to keep full records of the handling of investment||Xue Baojin v. Ye Lei
|The obligation of obedience and deliver incomes||Liji v. Deng Xifu|
It can be seen from the chart above that fulfilling suitability obligations has been a principal issue in “institutional management” cases, which is consistent with the current policy to “strengthen the suitability obligations of asset managers”. For “individual management” cases, the main issue has been whether asset managers have sold shares of stock or other securitized assets at an appropriate time.
Chinese lower courts have elaborated and developed the standards of duty of care by providing factual patterns and developing new rules. However, a gap between U.S. law still exist in terms of the coverage and depth of rules.
The overall result of the case study is summarized in the charts below:
Institutional Management Cases
|Mentioned without Application||10||33%|
|Applied without reasoning||8||26%|
|Applied with reasoning||12||61%|
Individual Management Cases
|Mentioned without application||27||55%|
|Applied without reasoning||7||14%|
|Applied with reasoning||15||31%|
Only a very limited number of cases set out detailed standards of duty of care when stating its legal authority. In Zhangjie v. Shanghai Haitong Security, an SPC case, the SPC Judge identified three duties of asset managers as trustee, although the reasoning was very brief:
“The Haitong Asset Management Company, as a trustee, had the duty to avoid conflict of interests, treat client fairly and disclose all information that may affect investment decision to the client”
Considering the dominant authority of the SPC in terms of developing case law in China, the author has searched all SPC cases with key words of “trustee” in whole context and “duty of care” (“勤勉”) or “fiduciary duty” (“信义义务”) in the reasoning part, only to find that this case is the ONLY SPC case that expressly stated detailed standards of duty of care in financial asset management. 
Another SPC case that applied duty of care is Sun Jinlin vs Zhang Xuhui. In that case the manager continued to possess investor’s stock after the termination of trust. The SPC simply held that “the continuing possession of stock and the refusal to return had violate the contract and thus violated duty of care and duty of loyalty” without further reasoning. Since SPC cases that addressed this issue are still rare, such brief reasoning leads the author to the conclusion that the applying asset managers’ duty of care has not yet become a familiar and “comfortable” practice for SPC judges, which may be the core reason that there is not yet a judicial interpretation on this issue.
Although there are not many SPC cases on this issue, lower courts, as shown above, have elaborated the standard of asset managers’ duty of care in some cases. Their work can be generally categorized into two types:
2(1)(a). Factual Patterns for Existing Duties.
On the duty of disclosure of “important information” to clients, the court in Zou Jingjuan and Wujian vs Zhu Yiqun held that the manager had not fulfilled the duty to disclose market volatility to client when “the account’s net value was less than 85% ”; In Liu Qingxiang vs Liu Zhiyuan, the court held that the manager’s failure to disclose management situation has “caused the client to miss of good opportunity to adjust investment plan” and thus caused loss of money , therefore the duty of care is violated.
2(1)(b). Developing New Rules
In some cases, the courts had not cited any specific statues, but applied duty of care with its own reasoning under certain specific circumstances. Such reasonings usually has no basis in existing statues.
Examples including the two cases discussed in Part 2(2)(b). The case law from Tan Chuanjun vs China Industrial and Commercial Bank can be synthesized as “the reasonable extension of management period, if permitted by mandatory rules, does not violate duty of care”. Similarly, the case law offered by Li Xianju vs Wang Shunfangcan be synthesized as “the manager shall be deemed possessing necessary investment abilities and skills if they had a successful entrusted relationship before”.
Other cases that developed its own rules covered various aspects of the trust. They cannot be classified into existing statutory duty of care as summarized in Part II. For example, in Yingdi vs Jilin Trust Ltd, the court held that the manager had fulfilled its duty of care when the investment plan was breached by the financier of the trust because:
“[T]he manager had actively performed its duties as the trustee, after the financier entered the bankruptcy proceedings, through declaring claims, attending creditors’ meetings, holding beneficiaries’ meetings, entrusting intermediaries with evaluation and consultation, signing reorganization documents, etc., and there was no obvious violation of trust laws and the contract.”
It is noteworthy that some courts have not followed the U.S. law approach to distinguish the suitability obligation from duty of care due to different understanding of the structure of fiduciary duty. For example, Lu Chunming v. China Minsheng Bank and Tang Yidan vs Shenzhen Fuxing Chengzhang had explicitly treated the breach of suitability obligation as one factor contributing to the breach of duty care. In the former case, the court held that in order to perform duty of care:
“[E]fforts shall be made to improve the risk assessment and hierarchical dynamic management of financial products……so as to prevent the investors from mistaking the project nature……due to improper wording.”
In the latter case, the court held the manager had fulfilled its duty of care because：
“[T]he company has done due diligence and formed a report on the feasibility of the trust plan and the possible risks and risk control measures and formed a conclusion……[the investor] also had expressly agreed to the trust plan and expressly expressed that he was aware of and willing to bear the risks arising therefrom.”
Comparing the synthesized rules above with the duty of care under U.S. law, it can be found that Chinese case law has two gaps:
First, in terms of the scope and coverage of detailed standards, Chinese case law also has not addressed duties such as “eliciting from client a sufficient amount of information at the inception of the relationship and updated thereafter periodically”, or “seeking best execution of investment”.
Second, in terms of the depth of rules and related reasoning, only a few Chinese cases have elaborated or develop detailed standards of duty of care with sound reasoning. Most of the cases that addressed duty of care, even applied appropriate statutes, have not offered reasoning as to why such fact patterns lead to a breach of duty of care.
Two factors can explain this gap. First, lack of reasoning, as discussed above, makes it more difficult to synthesize comparable rules. Second, the limited number of “useful” cases on this issue reduced the possibility of a broader rule synthesis. In practice, disputes arising from entrusted investment often do not involve fiduciary duty. When asset managers are individuals but not professional institutions and the managers agree to provide minimum payment back to the investor (such as a Principal Warranty Clause), courts tend to consider the investment contract a loan contract rather than an entrusted investment case. If it is considered a loan contract, fiduciary duty is inapplicable. Further, entrusted investment cases may be resolved by court-held mediation or parties’ reconciliation instead of judgment by court, which again reduces the possibility for judges to apply the duty of care.
Under the New Rules for Asset Management, the asset management industry has entered an era of “extensive asset management”(“大资管”). That means “the boundary between different financial business such as banks, securities, insurances, trusts, and funds has been progressively broken.” It is thus necessary for Chinese trust law and related legal rules, as part of an inherent consistent civil law system, to develop comprehensive and detailed rules on duty of care to protect investors’ interests.
Chinese statues have not fulfilled this role well, but the author’s empirical case study in Part V Section 3 has demonstrated that Chinese courts are capable of interpreting abstract statutes when hearing cases and developing detailed standards for the duty of care. As discussed above, over 80% of “institutional management” cases that mention “勤勉” have indeed applied duty of care, with 61% of them having substantive legal reasoning. These percentages are much better than those found in cases of “individual management” where over half of them have not actually applied duty of care and only 31% of them having legal reasoning. This difference can be explained by government policy to supervise financial institutions much more strictly as compared to individuals.
Under the big policy picture of “ensuring financial security,” courts must fulfill the task of protecting financial consumers. If courts appropriately apply the duty of care, it does not only help to compensate consumers, but also contributes to the stability of China’s financial market order and security. Successfully fulfilling this task requires further interpreting the standards of duty of care. Chinese courts have made considerable progress in this regard. We can expect that Chinese courts will develop the desired rules in future asset management cases, but the lack of reasoning creates obstacles and the consistently changing policies may cause confusion for judges and make them wary of setting out their reasoning.
 In China, “asset management” means “financial services that a banking, trust, securities, fund, futures, or insurance asset management institution, financial asset investment company, or any other financial institution, as commissioned by an investor, invests and manages the commissioned property of the investor. See Guiding Opinions of the People’s Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange on Regulating the Asset Management Business of Financial Institutions，No. 106  of the People’s Bank of China (《中国人民银行、中国银行保险监督管理委员会、中国证券监督管理委员会、国家外汇管理局关于规范金融机构资产管理业务的指导意见》(银发〔2018〕106号)) (“New Rules for Asset Management” ) Article 2.
 “Analysis of the Market Scale of the Asset Management Industry and the Collective Asset Management Business of Securities Traders in 2019.” ChinaBaogao, July19, 2019. http://market.chinabaogao.com/gonggongfuwu/0G9433cR019.html.
 HuaBao Secutity (华宝证券), “2020 Annual Report on China’s Financial Products: A New Era of Wealth Management” (2020中国金融产品年度报告：财富管理新时代), p.281, available at https://www.vicsdf.com/doc/vA9seCVKa3rLiR5gsxIEsQ.
 Supra note 1, Article 10.
 Supra note 1, Article 12.
 Supra note 1, Article 2.
 Supra note 1, Article 1 (3).
 Hu Zhiguang and Zhouqiang (胡光志,周强,) Lun Woguo Hulianwang Jinrong Chuangxin Zhong de Xiaoefizhe Quanyi Baohu (论我国互联网金融创新中的消费者权益保护), Faxue Pineglen (法学评论), 2014, 32(06):135-143; Liu Yingshuang(刘迎霜), Analysis of China’s Path to Protection of Financial Consumer Rights and Interests——A Concurrent Reference to the Financial Consumer Protection in the US Financial Regulatory Reform (我国金融消费者权益保护路径探析——兼论对美国金融监管改革中金融消费者保护的借鉴)，XianDai FaXue (现代法学)2011, 33(03), p.91-98.
 Fang, Rong, Peng Wang, Jun Sha, Meidong Xing, and Jie Hu, “金杜资管主题月: 大资管问答.” China Law Insight. King & Wood Mallesons , June 1, 2018. https://www.chinalawinsight.com/2018/06/articles/corporate-ma/金杜资管主题月-大资管问答/.
 Infra note 16.
 Supra note 8，Liu Yingshuang, p.95.
 Infra note 55.
 Chinese Security Law article 135: “A securities company may not make any promise to its clients on the proceeds as generated from securities transactions or on compensating the losses as incurred from securities transactions”. The Supreme People’s Court of the PRC held that “although it is inappropriate for investment institutions or natural persons other than securities companies to apply the abovementioned laws completely, according to a maiore ad minus, the special provisions on special subjects can also play a guiding role when guiding general subjects.” Therefore, it is illegal to promise minimum payback under this provision. People’s Court Press Judicial Viewpoint Integration of the Supreme Court.
 For what is judicial opinion, see Finder Susan, “How are Supreme People’s Court Opinions Structured?”, available at https://supremepeoplescourtmonitor.com/2020/01/20/how-are-supreme-peoples-court-opinions-structured/#comments.
 Notice of the Supreme People’s Court on Issuing the Several Opinions on Further Strengthening Financial Trials, Fa Fa  No.22(《关于进一步加强金融审判工作的若干意见》,法发22号), Article 2 and 3.
 Such as Yuan Youbao (“原油宝”), see “Last Week in Brief: China’s Top Financial News in the Week Ending April 26.” Last Week in Brief: China’s Top Financial News in the Week Ending April 26. YICAI GLOBAL, April 27, 2020. https://www.yicaiglobal.com/news/last-week-in-brief-china-top-financial-news-in-the-week-ending-april-26.
 Li Yong(李勇), Cong Jijin Guanliren Xinyiyiwu kan SiMu Jijin Fengxian Fangkong (从基金管理人信义义务看私募基金风险防控) [Private Equity Fund Risk Prevention and Control from the Perspective of Credit Obligations of Fund Managers], Jian Cha Ri Bao(检察日报), 2020-03-30 (003).
 See generally Tao Weiteng(陶伟腾), Jijin Tuoguanren zhi Yiwu Shuxing Bianxi: Xinyi Xiwu yiuo Hetong Yiwu (基金托管人之义务属性辨析：信义义务抑或合同义务？), [Analysis of Nature of Obligation of Fund Custodian: Fiduciary Obligation or Contractual Obligation?], Nan Fang Jinrong(南方金融), 10(2019)8, p.89-97.
 Entrusted investment relationship refers to the contractual relationship between the managers and investors where investors have entrusted managers to manage their assets, such contract is generally called as entrusted contract.
 Trust Law of the People’s Republic of China (《中华人民共和国信托法》)，Article 25：“The trustee shall abide by the provisions of the trust documents and handle the trust affairs for the utmost interests of the beneficiary. The trustee shall fulfill his duties and perform the obligation of being honest, trustworthy and cautious, and managing effectively.”
 Supra note 8.
 Lei, JiPing, Ziguan Jiufen: Ruhe Dingwei Tuoguanren Xintuo Yiwu de Fanwei(资管纠纷：如何定位托管人信托义务的范围), China Law Insight. King & Wood Mallesons , October 23, 2019, https://www.chinalawinsight.com/2019/10/articles/investment-management/资管纠纷：如何定位托管人信托义务的范围/.
 The 2nd Civil Division of the Supreme Court of the People’s Republic of the PRC(最高人民法院民事审判第二庭)，Understanding and Application of Minutes of the National Courts’ Civil and Commercial Trial Work Conference(《〈全国法院民商事审判工作会议纪要〉理解与适用》) (2019), p491.
 Trust Law of the PRC, Article 26: “The trustee must not take advantage of the trust property to seek profits for his own except getting remuneration according to the provisions of this Law.” Article 28: “The trustee must not make transactions between his inherent property and the trust property, or make transactions between the trust properties of different trustors, except that the trust documents prescribe otherwise or with the approval of the trustor or the beneficiary, and make transactions based on fair market price.” Here, “inherent property” means asset managers’ own personal property.
 “The contract text of various asset management products for the trustee’s obligations seem to be detailed, although there are still a lot of vague concepts.” Supra note 24, at 492.
 For discussion on “Chinese case law”, see Finder Susan, “China’s Evolving Case Law System in Practice.” Tsinghua China L. Rev. 9 (2016), p.245.
 Supra note 24, p203, 410. In this book written by judges from the SPC, the judges explicitly cited US legal authority when discussing derivative action and suitability obligation.
 Ibid, p.492.
 Agency is the fiduciary relationship that arises when one person (a “principal”) manifests assent to another person (an “agent”) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act. Restatement (Third) of Agency § 1.01 (2006).
 “We then saw [the fiduciary] concept develop over hundreds of years in the common law. As it did, we saw two streams of analysis emerge: one couched in the law of trusts, the other in the laws of agency.” Remarks of Andrew J. Donohue, Director of the SEC Division of Investment Management at IAA/ACA Insight’s Investment Adviser Compliance Forum 2010 (February 25, 2010).
 See Schnase, Lorna A, 2010, An Investment Adviser’s Fiduciary Duty.
 The Uniform Trust Code Article 8, Section 804.
 SEC v. Capital Gains Research Bureau, 375 U.S. 180 (1963).
 Newton v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 135 F.3d 266, 270-271 (3d Cir. 1998), which says: “The duty of best execution, which predates the federal securities laws, has its roots in the common law agency obligations of undivided loyalty and reasonable care that an agent owes to his principal.” See also Commission Guidance Regarding Client Commission Practices Under Section 28(e) of the Securities Exchange Act of 1934, Release No. 34-54165 (July 18, 2006): “Fiduciary principles require money managers to seek the best execution for client trades….”
 See Remarks of Lori Richards, Director of the SEC‟s Office of Compliance, Inspections and Examinations, at the ICI Conference 2001 Mutual Fund Compliance Conference (June 14, 2001): “To ensure that advisers are fulfilling their duty of best execution, they are required to „periodically and systematically‟ evaluate the quality of execution services received from the broker- dealers that are used to execute …trades.”
 Dawson-Giammalva Capital Management, Inc. and Judith A. Mack, Advisers Act Release No. 1889 (August 3, 2000) (Dawson-Samberg), citing Capital Gains, 375 U.S. at 191-92. (adviser and officer liable for failing to adequately disclose soft dollar arrangements, violating Section 206(2) (under which adviser has a fiduciary duty).
 These duties can be found in a) Trust Law of the PRC (“Trust Law”) Article 25 , Article 30, available at http://en.pkulaw.cn/display.aspx?cgid=e959773635209e7cbdfb&lib=law; b) Securities Investment Fund Law of the PRC (2015 Amendment) (“Investment Fund Law”) Article 9, available at http://en.pkulaw.cn/display.aspx?cgid=cd8acac44fc18cabbdfb&lib=law; c) Interim Measures for the Supervision and Administration of Privately Offered Investment Funds (“Interim Measures”) Article 4, available at http://en.pkulaw.cn/display.aspx?cgid=b6584da56bcaef2abdfb&lib=law.
 These duties can be found in a) Trust Law Article 29; b) Investment Fund Law Article 5(2); and c) Interim Measures Article 23(1) .
 Interim Measures, Article 24:“Private fund managers and custodians shall, as agreed in the contract, truthfully disclose to investors the fund’s investments, assets and liabilities, and distribution of investment returns, expenses and performance compensation paid by the fund, potential conflicts of interest, and other important information that may affect the lawful rights and interests of investors, and may not conceal any information or provide any false information. The information disclosure rules shall be additionally developed by the AMAC.”
 These rules can be found in a) Trust Law Article 33 and Interim Measures Article 26.
 Interim Measures, Article 22:” Where a private fund manager manages different types of private funds, it shall adhere to the principle of specialized management; and if its management of different private funds may lead to tunneling or conflict of interests, it shall establish mechanisms for prevention of tunneling or conflict of interests.” And Article 23(1):” In conducting the private fund business, a private fund manager, custodian, or distributor, any other private fund service provider, or any of their employees shall not: (1)mix the institution’s own assets or the assets of others with the fund assets for investment”.
 Interim Measures, Article 22:” Where a private fund manager manages different types of private funds, it shall adhere to the principle of specialized management; and if its management of different private funds may lead to tunneling or conflict of interests, it shall establish mechanisms for prevention of tunneling or conflict of interests.” And Article 23(1):” In conducting the private fund business, a private fund manager, custodian, or distributor, any other private fund service provider, or any of their employees shall not:(1) mix the institution’s own assets or the assets of others with the fund assets for investment.”
 Measures for the Compliance Management of Securities Companies and Securities Investment Fund Management Companies (Revision 2020) (“《证券公司和证券投资基金管理公司合规管理办法(2020修正)” ) Article 6 (6):“Promptly identify and properly handle the conflicts of interests between the company and clients, between different clients and between different businesses of the company, earnestly safeguard the interests of clients and treat all clients equally”.
 On January 1, 2014, the Provisions of the Supreme People’s Court on the Online Issuance of Judgment Documents by People’s Courts became officially effective. Under this judicial interpretation, the SPC will establish the website of China Judgment Online to uniformly release the effective judicial documents of the people’s courts at all levels, including judgments(“判决”), rulings（“裁定” ) and determinations (“决定”).
 Under Chinese civil law, the fundamental legal relationship between the investors and asset managers constitutes a entrust contract, where an investor is principal (“委托人”)and an asset manager is agent（“受托人”）.Therefore, the agreement to manage assets is one type of entrust contract. See Article 396 of Contract Law of the People’s Republic of China:” A commission contract is a contract whereby the principal and the agent agree that the agent will handle the principal’s affairs.”
 “勤勉”is generally translated to “diligence”.
 Wu Mingfang vs Pingan Bank Co.Ltd Yiwu Futian Branch, Civil Judgement of the Zhejiang Jinhua Intermediate Court, Case No. (2015) Jinyi Min Chu Zi Di 3100 , (2015) 金义民初字第3100号.
 Li Zhenfei vs Shenzhen Hui Baili Caifu Guoji Asset Management Co.Ltd and Shandong Qixiang Ltd, Civil Judgement of the Shanghai Minhang District Court, Case No. (2018) Hu 0112 Min Chu 25199, (2018) 沪0112民初25199号.
 Sun Jianchang vs Jinan Jiuchen Stock Investment Ltd, Civil Judgement of the Jinan Shizhong District Court, Case No. (2019) Lu 0103 Min Chu 10755, (2019) 鲁0103民初10755号.
 Gao Xinqiu vs Zhaoshang Security Ltd Beijing Anwai Street Branch, Civil Judgement of the Beijing Dongcheng District Court, Case No. (2014) Do Min Chu Zi 06411, (2014) 东民初字第06411号.
 Luo Fuhui vs China Industrial Bank Ltd Longyan Longjin Branch, Civil Judgement of the Longyan Xinluo Districht Court, Case No. (2014) Do Min Chu Zi 06411, (2015) 龙新民初字第8049. In this case, the court cited an regulatory provision requiring commercial banks to perform duty of care when selling investment products, but finally held that there existed no entrusted investment relation between the investor and the bank.
 Tan Xiaohui vs Chen Liguo, Civil Judgement of the Hunan High People’s Court, Case No. (2019) Xiang Min Zai 24, (2019) 湘民再24号.
 Mao JIanxin vs Zhen Yutian, Civil Judgement of the Zhejiang Quzhou Intermediate Court, Case No. (2017) Zhe 08 Min Zhong 40, (2017) 浙08民终40号.
 In many cases, the Principal Warranty Clause under which asset manager warrant investors no loss of principal have been held invalid because it is “unfair”, such as in (2019) 浙0802民初4162号(Zhang Zhuoyuan vs Quzhou Yongan Jiaye Partnership) and (2016)京02民终3283号(Luo Changsheng vs Zhouping). But some courts have held its validity. Such as in this case, the court argued that:” the guaranteed minimum income clause reflected the consistency and balance of rights, responsibilities and benefits and thus was not unfair. It can urge the trustees to be diligent and dedicated, preventing moral risks, and cultivating honest transactions.” (“保底条款彰显了权、责、利的一致性，并未显失公平，且有利于督促受托人勤勉敬业，防止道德风险，培养诚信交易”).
 However the reasoning is likely to appear in a court’s trial report (“审理报告”) which is not accessible by the public, see Finder Susan, Supreme People’s Court’s Bench Memoranda? Available at https://supremepeoplescourtmonitor.com/2020/07/21/supreme-peoples-courts-bench-memoranda/.
 Cui Jianmei vs China Industrial and Commercial Bank Zibo Zhangdian Branch, Civil Judgment of the Shandong Zibo Intermediate Court, Case No. (2017) Lu 03 Min Zhong 1227, (2017)鲁03民终1227号.
 The original texts are:“被告亦应委派富有经验、勤勉尽责的专业人员负责跟踪、监督原告的理财资产.”
 Tan Xiaohui vs Chen Liguo and Yin Lixiang, Civil Judgement of the Hunan Changsha Intermediate Court, Case No. (2017) Xiang 01 Min Zhong 2830, (2017) 湘01民终2830号.
 The original texts are:“因此，在《投资咨询服务协议书》履行过程中，陈立国应当履行谨慎、勤勉的受托投资义务，在投资发生亏损时，应当及时采取措施，防止损失扩大。基于上述分析，本院综合双方的投资经验、投资行为、收益分享比例及履约过程中的过错情况，酌情确定涉案资金投资股市的经济损失由陈立国承担60%.”
 Zhou Zhijie vs Yu Xiaofei, Civil Judgement of the Hunan Changsha Kaifu District Court, Case No. (2017) Xiang 0105 Min Chu 7059, (2017)湘0105民初7059号.
 Back in 1999, in its Five-Year Reform Plan, the SPC started to emphasize the importance the legal reasoning to ensure judgment quality. See Circular of the Supreme People’s Court on Issuing the Five-Year Reform Outline for the People’s Courts ( No. 28) (“最高人民法院关于印发《人民法院五年改革纲要》的通知, 1999年10月20日, 法发28号”).
 Vice-president of the SPC Li Shaoping: Functional Orientation and Key Focus of the Reform of Law Interpretation and Reasoning of Adjudicative Documents in the New Era, available at http://www.court.gov.cn/zixun-xiangqing-101562.html.
 Zhuang Xulong(庄绪龙), Caipan Wenshu”Shuo Linan”de Xianshi Yujing yu Zhidu Lixing(裁判文书“说理难”的现实语境与制度理性), Legal Application(法律适用), 2015(11): 83-92.
 Zhu Suli (朱苏力), Panjueshu de Biehou(判决书的背后)，Legal Study(法学研究), 2001(03):12-13.
 Jiang Yuanliang(姜远亮), Relationship Orientation and Interactive Path between Guiding Cases and Judicial Interpretation(指导性案例与司法解释的关系定位及互动路径——以刑事审判为视角), Legal Application(法律适用), 2019(08):3-14.
 Tan Chuanjun vs China Industrial and Commercial Bank Beijing Branch, Civil Judgement of the Beijing Xicheng District Court, Case No. (2018) Jing 0102 Min Chu 40684, (2018)京0102民初40684号.
 Li Xianju vs Wang Shunfang, Civil Judgement of the Shanghai Yangpu District Court, Case No. (2019) Hu 0110 Min Chu 10027, (2019) 沪0110民初10027号.
 The original texts were “正是该份协议的适当履行，双方当事人才会在此基础上与邱惠根共同续签《2018年股票合作协议书》。李先菊签订《2018年股票合作协议书》及《补充协议》时从未表示其不知股票账户密码，亦从未向王顺芳表示过其从未操作过该账户的股票买卖。现李先菊以其不知账户密码、从未操作过该股票账户为由，意欲免除其赔偿责任，依据不足。相反，李先菊作为具有专业资质的从业人员，一再与王顺芳签订《股票合作协议书》，接受王顺芳委托进行股票投资，却称其从未操作过该股票账户，显属违反协议书约定，亦违反法律规定受托人应亲自处理、及时报告委托事务等勤勉义务.”
 Ji Tianyu v. Shandong Chuangdao Investment Fund, Civil Judgment of Shandong Jinan Intermediate Court, (2019)鲁01民终9861号.
 Qu Zhiyun v. Shandong Chuangdao Investment Fund, Civil Judgment of Shandong Jinan Intermediate Court, (2019)鲁01民终9870号.
 Zhao Ronghua v. Shanghai Chanhong, Civil Judgment of Shanghai Financial Court, (2019)沪74民终663号.
 Liu Yuelin v. Wu Xinhua, Civil Judgment of Hunan Changsha Intermediate Court,(2019)湘01民终12517号.
 Huang Lizhi v. Yuan Lipeng, Civil Judgment of Shandong Zibo Intermediate Court, (2019)鲁03民终2966号.
 Chen Zhiguo v. Zhang Xiongjun, Civil Judgment of Beijing No.3 Intermediate Court (2018)京03民终14174号.
 Zhou Lichun v. Guangdong Junxin, Civil Judgment of Guangzhou Tianhe District Court (2015)穗天法金民初字第4869号.
 Yang Zhijian v. Shenzhen Guotou, Civil Judgment of Shenzhen Futian District Court (2018)粤0304民初41610号
 Wangxiang v. China Construction Bank, Civil Judgment of Beijing Hiadian District Court (2018)京0108民初21776号
 Zhouyan v. China Industrial and Commercial Bnak, Civil Judgment of Shandong Zhizhao District Court (2016)鲁1102民初6348号.
 Zou Jingjuan v. Zhu Yiqun, Civil Judgment of Jiangsu suzhou District Court (2018)苏05民终9200号.
 Xue Baojin v. Ye Lei, Civil Judgment of Shanghai Changning District Court, (2019)沪0105民初13125号
 Liji v. Deng Xifu, Civil Judgment of Jiangsu Changzhou District Court (2019)苏04民终46号.
 New Rules for Asset Management, Article 6.
 Zhangjie vs Haitong Security Assets Management Ltd, Civil Judgement of the SPC, Case No. (2018) Zui Gao Fa Min Shen 1423, (2018)最高法民申1423号.
 The original text was “海通资管公司作为受托人负有避免利益冲突、公平对待客户、向客户提供影响投资决策的全部信息等信义义务。”
 The author searched all SPC cases with “受托人”（“trustee”）in whole texts and “勤勉” in the reasoning part and found only 2 cases (three repeated cases omitted). If the “勤勉” is switched to the higher concept “信义义务”，then there was only one case——the one I cited.
 Sun Jinlin vs Zhang Xuhui, Civil Judgement of the SPC, Case No. (2018) Zui Gao Fa Min Zai 143, (2018) 最高法民再143号.
 The original text was: “孙进林长期占有案涉股票，并在张旭辉与茅山旅游公司间的委托合同关系已经解除，其继续占有案涉股票已无合同上依据的情形下，拒不返还大凌集团股票，违反勤勉义务与忠实义务”.
 Zou Jingjuan and Wujian vs Zhu Yiqun, Civil Judgement of the Jiangsu Suzhou Intermediate Court, Case No. (2018) Su 05 Min Zhong 9200, (2018)苏05民终9200号.
 It is noteworthy that the 85% threshold is set by investment agreement, but not decided by the court. Actually, the author was expecting a court-held standard instead of party-agreed.
 Liu Qingxiang vs Liu Zhiyuan, Civil Judgement of the Guangdong Zhongshan Intermediate Court, Case No. (2016) Yue 20 Min Zhong 4191, (2016)粤20民终4191号.
 In the case, the court held that “although Liu Qingxiang’s (the manager) failure to timely report the financial management situation did not necessarily lead to the failure of the realization of the contractual purpose, it made Liu Zhiyuan (the investor) lose the favorable opportunity to timely give financial management instructions according to the situation of profits and losses, which led to continuous losses. Liu Qingxiang concealed the losses and should bear the corresponding fault liability.” The original text was: “刘清香未及时报告理财情况，虽不必然导致合同目的无法实现，但使得刘植远错失了及时根据盈亏情况作出理财指示的有利时机，导致持续亏损，刘清香对亏损情况加以隐瞒，具有过错，应承担相应的过错责任。”
 Tan Chuanjun vs China Industrial and Commerical Bank Beijing Branch, Civil Judgement of the Beijing Xicheng Districht Court, Case No. (2018) Jing 0102 Min Chu 40684, (2018)京0102民初40684号.
 Supra note 68.
 Yingdi vs Jilin Trust Ltd, Civil Judgement of the Changchun Nanguan Districht Court, Case No. (2018) Ji 0102 Min Chu 2943, (2018) 吉0102民初2943号.
 The original text was :“案涉信托计划的融资人出现违约后，吉林信托采取起诉、保全等方式使其信托债权得到了司法保护，并在融资人进入破产程序后，通过进行债权申报、参加债权人会议、召开受益人大会、委托中介机构评估和咨询、签署重整文件等积极履行了受托人管理职责，不存在明显违反信托法律规定及合同约定的行为。案涉信托计划的融资人进入破产重整程序后，吉林信托通过通讯方式召开受益人大会，在受益人未形成有效决议的情况下，吉林信托为受益人选择了债转股的偿还模式，与大部分债权人选择相一致，履行受托人职责符合信托法律及信托”.
 Lu Chunming and Xiao Shifen vs China Minsheng Bank Ltd, Civil Judgement of the Hubei Wuhan Intermediate Court, Case No. (2016) E 01 Min Chu 3478, (2016) 鄂01民初3478号.
 Tang Yidan vs Shenzhen Fuxing Chengzhang Asset Management Ltd, Civil Judgement of the Chongqing 5th Intermediate Court, Case No. (2016) Yu 05 Min Chu 3943, (2018) 渝05民初3943号.