The second phase of the reform of fees in the public offering fund industry has been fully implemented. On April 19, the China Securities Regulatory Commission (CSRC) formulated and issued the "Regulations on the Management of Securities Trading Fees for Publicly Offered Securities Investment Funds" (hereinafter referred to as the "Regulations"), which will officially come into effect on July 1, 2024. The "Regulations" state that in order to further implement the "Opinions of the State Council on Strengthening Regulation and Preventing Risks and Promoting the High-Quality Development of the Capital Market" (New "State Nine Articles"), further strengthen the management of securities trading fees in publicly offered securities investment funds, regulate the commission and distribution management of fund managers securities trading, protect the legitimate rights and interests of fund shareholders, and enhance the service capabilities of securities companies and institutional investors. The main contents are divided into four parts: 1. Reduce the commission rate for stock transactions of funds; 2. Lower the maximum proportion of commission distribution for fund managers' securities transactions; 3. Strengthen the compliance and internal control requirements of fund managers and securities companies comprehensively; 4. Clarify the content and requirements of commission disclosure at the fund manager level. Several fund companies told Caijing reporters that the new rules on transaction fees released this time are one of the specific measures of the CSRC to implement the new "State Nine Articles 1+N" policy document and the "Work Plan for Fee Reform in the Public Offering Fund Industry," fully embodying the spirit of "steadily reducing the overall fee rate of the public offering fund industry" in the new "State Nine Articles". The continued steady decrease in the overall fee rate will further guide the public offering fund industry to shift from being driven by scale to being driven by returns to investors. The release of the "Regulations" is conducive to reducing investment costs for investors, effectively lowering the trading costs of fund assets, and benefiting investors. Huaxia Fund pointed out that the next step, the CSRC will focus on the fund sales process, further standardize the sales process costs such as front-end and back-end loads, and promote the pilot project of outsourcing fund backend operations to become regular, further reducing the operational costs of small and medium-sized fund companies. Lowering investment costs for investors The "Regulations" require that the commission rate for stock transactions of public offering funds should be adjusted to a more reasonable level and establish a dynamic adjustment mechanism for commission rates: regularly adjust the commission rate for stock transactions of public offering funds according to changes in the overall market rates. In addition, the "Regulations" also require that the maximum proportion of commission distribution be reduced from 30% to 15%, effectively preventing interest transmission. For investors, the release of the "Regulations" can reduce the investment costs of fund investors and protect the rights and interests of investors. Huaxia Fund stated that the fee reform in the public offering fund industry highlights the regulatory orientation of maintaining the legitimate rights and interests of investors, which helps guide industry institutions to prioritize the protection of investor interests. Fortune Fund stated that with the continuous increase in the management scale of public offering funds in recent years, the scale effect of assets has provided some space for the downwaTake more market share.In addition, due to the unaffected nature of funds adopting the voucher settlement model, it is expected to drive the development of the voucher settlement model into the "fast lane." Securities firms can improve their comprehensive service capabilities continuously, driving more equity products to choose the voucher settlement model to compensate for the impact of the distribution ratio limit. In the new market environment, the voucher settlement model deepens the connection between securities firms and fund companies, increasing revenue for securities firms and improving the fund company's fund utilization efficiency. Funds can participate in financing and securities lending, stock pledge repurchase, and other businesses. Additionally, a medium-sized public offering institution in East China told reporters that from the perspective of securities firms, because commissions cannot be used for sales, the proportion of sales research business income in commissions will increase accordingly. However, due to the impact of commission rates, the overall space for commissions will decrease. There are pros and cons, and it can only be said that the future competitive situation will become more intense. For wealth management business, the future will shift from sales volume assessment to existing holding assessment. For securities firms that develop wealth management business to serve customers' real needs, this is the general trend. For traditional securities firms oriented towards product sales, they may face a painful transition process. Beneficial for purifying the industry ecosystem Overall, the release of the "Regulations" has a profound impact on the public fund industry. Huatai Fund stated that the implementation of the "Regulations" will comprehensively strengthen the supervision of securities transactions in the public fund industry, guide fund managers to allocate trading commissions reasonably, optimize and improve the disclosure of trading commission information, etc. It will also promote securities companies to enhance their securities trading and research service capabilities, focus on improving research depth and service quality to better provide professional services to gain clients' trust, and assist in the transformation of securities companies' wealth management, etc. All of these factors will help to promote the overall long-term healthy development of the securities fund industry and further form a good industry ecosystem. Furthermore, Huatai Fund also mentioned that the implementation of the "Regulations" will attract various long-term funds to increase their equity asset allocation through public funds, promote the development of equity funds, better serve the national major strategies and residents' wealth management needs, and facilitate the stable and healthy development of the capital market by providing sufficient funds and a good environment. China Asset Management also stated that the release of the "Regulations" complements the previously released "Public Fund Fee Disclosure XBRL Template Revision Plan," marking the full implementation of the second phase of the public fund industry fee reform. It is believed that with the gradual implementation of the third phase, standardizing the charging of fund sales and other supporting measures, it will reduce investors' fund investment costs, promote industry institutions to focus on improving customer service capabilities, provide more quality asset management services, and promote the formation of a good industry development ecosystem. Xiangcai Fund believes that in the future, with the deepening of the public fund fee reduction reform, it is expected to further lower the trailing commission ratio of third-party sales institutions, standardize fees in the sales process of public funds, better reduce investors' trading costs and investment thresholds, and promote a more favorable development ecosystem for the public fund industry.