The gold store is gone and it is difficult to redeem the deposited money
Gold custody risk geometry
"Gold asset management business must be established by banks, securities and other financial institutions, while gold accumulation business must be established by banking depository financial institutions. Therefore, ordinary gold stores do not have such business qualifications, especially franchise stores."
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The price of gold has risen, but the gold that consumers have entrusted to gold stores has disappeared.
Recently, the news that "China Gold Beijing R&F Plaza Store (also known as the 'China Gold Beijing Concept Store') has closed and left the store" has attracted public attention. Many consumers have handled gold custody business here, but due to the sudden closure of the store, they all suffered varying degrees of property losses.
Tang Hao (pseudonym) has been spending money in this gold store since 2012, and has successively taken custody of 1,250 grams of gold. According to his understanding, the incident involved about 60 to 70 kilograms of gold, and the victims were mostly middle-aged and elderly people. At the same time, many consumers discovered when safeguarding their rights that the gold store involved was actually a franchise store of China Gold, and the gold custody business was carried out illegally by the franchisee.
On April 1, China National Gold Group Gold and Jewelry Co., Ltd. (hereinafter referred to as "CICC Jewelry") issued an announcement in response, stating that it would advance payments to relevant consumers and would strengthen access control and supervision of the franchise business. At present, some consumers have received gold bars redeemed by CICC Jewelry.
The announcement gave consumers the confidence to recover their losses, but behind the "disappearance of custody gold", it still needs to be clarified. Is the gold store's gold custody business compliant? What are the risks behind it and how to avoid them?
The deposit disappeared, CICC Jewelry advanced the payment first
"We went to work yesterday to take inventory, and in the evening the company said that we had collected all the goods and were closing the store." At noon on December 27, 2023, after receiving the news from the salesperson, Tang Hao hurried to the China Gold Beijing Concept Store (hereinafter referred to as "the incident involved"). "Gold Store"), he found that the store had been closed and the gold entrusted there had "disappeared".
The "thunder" that Tang Hao stepped on was a gold custody business called "Worry-Free Booking for Investment Gold Bars": consumers do not take away the physical gold after paying the money, but hand it over to the gold store for safekeeping according to the agreed period. A certain fee will be reduced for each gram of gold purchased, and a certain number of grams of pure gold will be given as a gift. After expiration, you can take delivery, renew the contract or repurchase at the real-time gold price.
"It is equivalent to purchasing gold at a price lower than the real-time base price without any handling fees." The gold store involved wrote in its introduction to the gold custody business. However, many consumers told reporters from China Youth Daily and China Youth Daily that they do not seek interest in gold custody, but rather value the safety and convenience of gold stores in storing gold.
Li Xiao (pseudonym) felt at the time that "China Gold is a big brand and (can be) trusted as a bank." Therefore, in July 2021, the operator recommended and purchased a gold custody service. In the past three years, Li Xiao has kept a total of 400 grams of gold in custody at the gold store involved, spending nearly 160,000 yuan, but she has never seen the gold with her own eyes. It wasn't until the end of February 2024 that she learned through news reports that the gold store had closed down, "I had not received any information before."
After the gold store suddenly closed, some consumers reported the case. At present, the case has entered the judicial process, and Yang Moumou, the actual controller of the gold store involved, has been criminally detained by the public security organ.
On April 1, CICC Jewelry issued an announcement, deciding to advance payments to relevant consumers, and stated that it “will comprehensively strengthen access control and supervision and management of the franchise business, and make every effort to safeguard the legitimate rights and interests of consumers.” During the interview, the reporter learned that before issuing the announcement, China National Gold Group had conducted 10 offline communications with victims’ representatives.
It is reported that on the second day after the announcement, a consumer received a call from China Gold Group. The other party stated that China Gold would pay all compensation in the form of physical gold bars.
Tang Hao received 850 grams of gold bars as compensation on the second day of the Qingming Festival. "There are still 400 grams that I haven't received because I only have the reservation certificate and I can't find the bank statement for the time being." Tang Hao introduced that China Gold's requirement for this compensation is that the bank statement must be presented before the payment can be made on the spot, otherwise we will have to wait for further plans. .
Recently, a reporter called the China Gold Beijing flagship store as a customer. The operator said, "Currently, gold custody-related business is no longer carried out. Customers who handled it in the early stage can apply for delivery within the specified time after the custody expires."
True and false “gold custody”
"Gold custody" has become the focus of attention from all parties in this gold store runaway incident.
In the prospectus of CICC Jewelry, the reporter saw relevant business introductions. The prospectus states in the "Gold Leasing and Custody Gold Business" section that "the Custody Gold Business is a business where customers purchase gold bar products from the issuer (i.e. CICC Jewelry - reporter's note) and can choose to deposit them with the issuer for safekeeping. It will be withdrawn after the period. The company can use the custody funds during the custody period in accordance with the custody agreement signed by both parties. Since individual customers do not have proper storage methods after purchasing investment gold bars, the company provides gold custody services to customers who purchase investment gold bars."
Many industry experts believe that the above-mentioned gold custody business already has certain attributes of gold asset management products.
The "Notice on Matters Concerning the Gold Asset Management Business" issued by the General Office of the People's Bank of China stipulates that gold asset management products can only be initiated and established by financial institutions. Other institutions must act as agents to sell gold asset management products issued by them, and must comply with the requirements of the financial regulatory authorities. Management regulations. At the same time, physical gold invested in gold asset management products must be registered and managed. Registration and custody services are only provided by financial institutions and gold trading venues approved by the State Council and financial regulatory authorities such as the Shanghai Gold Exchange.
“Gold custody in the legal context is, to be precise, investment in gold asset management products, which refers to investors entrusting financial institutions to invest their property in physical gold or gold products. For the physical gold invested, financial institutions licensed by the financial regulatory authorities "Custody" with the Shanghai Gold Exchange, that is, registration and custody." Ma Kai, a partner at Beijing Long'an (Chongqing) Law Firm, said that engaging in gold custody business without a special financial business license would violate relevant regulatory regulations.
The reporter learned during the interview that gold custody is not a strict legal concept. It is closer to the "storage" of gold by a third-party institution, similar to a bank's safe deposit box business. According to lawyer Huang Changrui of Beijing Chongguang (Wuhan) Law Firm, the gold custody business engaged in by the gold store involved is more similar to the gold accumulation business model within the scope of gold asset management business.
The "Interim Measures for the Management of Gold Accumulation Business" previously issued by the People's Bank of China shows that gold accumulation refers to a liability business in which financial institutions open gold accounts for customers in accordance with agreements with customers and record customers' deposits of a certain weight of gold within a certain period. The gold accumulated by customers can be purchased from banking depository financial institutions, and customers should be supported to withdraw physical gold or sell gold to obtain corresponding monetary funds.
"In ancient times, many people would deposit gold and other materials with gold and silversmiths, and the gold and silversmiths would issue something similar to a silver bill as a voucher." Wang Ren, a professor at the School of Finance at Capital University of Economics and Business, said that gold custody has existed since ancient times. It is based on a "one-to-one" hosting relationship. Strictly speaking, this is a civil behavior and is not prohibited by law. However, in this incident, the gold store involved carried out gold custody business by collecting predetermined payments, promising to pay on the agreed date, and paying interest with physical gold. It was essentially engaged in a "one-to-many" financial business and was suspected of illegal fund-raising. .
Wang Ren added that the gold custody business is actually similar to gold accumulation, but modern financial transactions implement a franchise system. "If the operating entity does not obtain relevant qualifications, it is operating illegally."
Illegal gold custody risk geometry
In fact, behind the disappearance of gold stores is the fact that many franchisees conduct gold custody business in violation of regulations.
Tang Hao later checked the bank statements and found that in August 2013, the payee of the gold store involved had been changed from "China Gold" to "Beijing Sandingyuan Gold and Jewelry Co., Ltd." (hereinafter referred to as "Sandingyuan"). The salesperson once replied to him that "the boss has changed."
Sanding was originally a franchisee of China Gold. An announcement issued by CICC Jewelry on April 1 mentioned that Sandingyuan’s Beijing R&F Plaza store violated the “Specialty Store Franchise Agreement” signed with the company and conducted the so-called “Worry-free Gold Bar Reservation” business without authorization. It also clarified the franchisee nature of the gold store involved.
In recent years, franchising has become an important way to expand business in the gold and jewelry industry. CICC Jewelry's 2022 annual report shows that as of 2022, China Gold has opened 3,642 stores, including 3,537 franchise stores, accounting for 97.12%, while there are only 105 directly operated stores. At the same time, CICC Jewelry will continue to expand new stores.
"Gold asset management business must be established by banks, securities and other financial institutions, while gold accumulation business must be established by banking deposit-taking financial institutions. Therefore, ordinary gold stores do not have the qualifications for this type of business, especially franchise stores." Huang Changrui said, In addition to professional qualifications, the risk of the gold custody business lies in whether the gold store can redeem gold, or whether the operator of the gold store has illegal purposes when operating such projects.
He explained that first of all, if an operator sells the same product to multiple consumers and asks consumers to hold custody, there is a risk of selling more than one product. Such behavior may violate the crime of fraud, illegal fund-raising or illegal deposit-taking. suspicion. Secondly, the operator closes the store and runs away after operating for a period of time, which has the obvious purpose of embezzling consumers' gold. Thirdly, exchanging gold at a specific time may cause a run. "For example, the price of gold has risen sharply recently, and a large number of consumers have to redeem gold. If a gold store uses gold for turnover and cannot redeem it, it will cause a run."
In recent times, the price of gold has continued to rise, and the price of gold jewelry exceeded the 700 yuan mark on April 3. The gold custody business carried out by the gold store involved is similar to futures in terms of trading model, with the characteristics of delivering goods at an agreed time. Real-time fluctuations in gold prices will also bring risks.
Tang Hao once analyzed the business model of gold custody, "The underlying asset is definitely not physical gold, but it can be profitable in other ways." As the price of gold rises, he considers that if he redeems the gold in custody now, the store will definitely lose money.
Wang Ren said that the value of gold in custody increases as the gold price rises, which increases the risk of gold stores running away. At the same time, gold stores may not purchase enough gold in time after receiving payment for gold. As gold prices rise, stores will suffer losses when redeeming gold to consumers. Therefore, operators would rather constitute a breach of contract than honor the gold. "The gold custody that gold shops engage in illegally is a financial business in itself, but the gold shop's ability to resist risks is very small." He said.
Ma Kai believes that gold is a precious metal of huge value, and gold market transactions have a significant impact on the stability of the financial market. Therefore, regulatory authorities have strong supervision over gold transactions.
It is understood that the "Interim Measures for the Management of Gold Accumulation Business" require that banking deposit-taking financial institutions should establish a physical gold reserve management system for gold accumulation business based on their own gold business conditions, strengthen the management of physical gold liquidity, and meet the needs of customers to withdraw physical gold. demand for gold.
Regarding the potential risks of the custody fund business, CICC Jewelry also made it clear in the prospectus that the company's sales department will collect and review the amount of custody fund business in a timely manner every day, and report it to the product and transaction risk control department, asset finance department and other departments for the purpose of Do a good job in inventory management, and at the same time, relevant departments make advance analysis of the expected amount of custody funds to be withdrawn, and coordinate inventory products in advance.
Invest in gold with more peace of mind
In recent years, "illegal gold custody" businesses have been repeatedly banned in practice, and cases involving "illegal absorption of public deposits" are not uncommon.
The "Chengdu Jinyin Street Case" is a typical case. From 2012 to 2015, Chengdu Jinyin Street Company illegally carried out the "gold-generating" business. The process was that customers purchased gold in the store or brought their own gold to the store for investment. Every 100 grams of gold was given to the customer 1 per month. Profit from grams of gold. As of the incident, the victims had suffered a total loss of approximately 500 million yuan.
Shandong Gold Beijing Jinyuan Guiyou Store also launched similar gold custody business. In 2022, the gold store closed down, and consumers could not withdraw the investment gold bars entrusted here. Cheng Keji was the victim of the case. She told reporters that the case also involved the signing of gold subscription contracts and the escape of franchisees.
In order to protect the legitimate rights and interests of consumers, regulatory authorities in Fuzhou, Fujian, Nantong, Jiangsu and other places have issued illegal fund-raising risk reminders to warn of risks in the gold custody business.
“After purchasing gold, it is held in store custody, or payment is made in advance and the gold is delivered upon expiration. Both transaction models will create the risk of non-return or non-delivery.” Ma Kai believes that the custody, transaction and redemption of gold require the trustee to have sufficient capabilities. payment ability.
In his view, general institutions are outside supervision and their ability to pay is not guaranteed. For example, if they carry out gold custody business, they may not be able to actually pay when the gold price fluctuates sharply, and eventually they will be left empty-handed. Therefore, he reminded investors that gold transactions should be conducted through financial institutions approved by regulatory authorities to minimize risks arising from counterparties "escape" and "thunderstorms".
The incident of franchisees closing their stores and running away has also sounded the alarm for the gold and jewelry industry. For enterprises in the industry, the China Gold Association recommends strengthening access review, standardizing business processes and system construction; ensuring the implementation of regulatory systems and measures, regular store inspections, timely discovery of problems, revealing hidden dangers, and effective rectification; strengthening the supervision of franchisees Discipline and professional ethics training ensures that franchisees carry out business activities in a standardized manner, eliminate violations of laws and regulations, and maintain brand reputation.
In addition, the supervision and governance of illegal gold custody businesses need to be further strengthened in the future.
Ma Kai suggested that, first, strengthen supervision in a targeted manner. Currently, there is an "over-the-counter" phenomenon in gold trading, and it is necessary to strengthen supervision over areas prone to "over-the-counter transactions" such as gold stores, silver buildings, and jewelry stores. The second is to further build a dense regulatory system network. Taxation, industry and commerce, financial regulatory agencies and other departments must work together to weave a tighter cage for gold trading supervision and fill regulatory loopholes from the institutional level. The third is to strengthen investment safety awareness. Extensively popularize knowledge related to gold custody and improve investors’ risk awareness and identification capabilities. "At the same time, formal gold custody institutions should strengthen risk warnings during the transaction process and disclose investment risks."
In Wang Ren’s view, the gold custody business in the future needs to be more closely aligned with the gold accumulation business. On the one hand, the licensing system must be clarified, and market entities that have not obtained relevant qualifications are not allowed to carry out relevant business; on the other hand, strict purchase rules must be formulated stipulate rather than implement the current trading model with futures nature.
China Youth Daily·China Youth Daily trainee reporter Jia Jiye Xi Congcong reporter Zhu Caiyun Source: China Youth Daily
Version 05, April 9, 2024