CSRC urges Alipay to correct violations

BEIJING - China's leading third-party online payment platform Alipay was told by the country's securities watchdog on Friday to correct violations in its new spare money investment service.

Alipay, a subsidiary of the e-commerce giant Alibaba Group, announced Monday it will offer nearly 800 million of its users the option to directly invest with the private Tianhong Fund using spare cash from Alipay accounts.

The new business is called Yu'ebao.

The China Securities Regulatory Commission (CSRC) said in a statement that Alipay failed to file for some of its fund sales payment and settlement accounts involved in the new business, a procedure required by the commission for supervision purposes.

The company also failed to submit an agreement it drafted with a third-party bank as its external supervisor for these accounts, according to the CSRC statement.

Calling Alipay's new business a "positive effort to explore market innovation," CSRC said it welcomed innovation, but it also has to ensure fund safety of investors through an effective supervision system.

The commission urged Alipay to make additional filings within the stipulated time to avoid any penalty.

Alipay replied later Friday on its official Sina Weibo, China's most popular microblogging service, saying that the company will proceed as the regulator requires.

Alipay added that its new business will not be suspended and the interests of its users will be fully protected.

Yu'ebao has become a hit online as it reportedly offers customers higher investment yields than interest from banks.

The business attracted more than 1 million users as of Tuesday evening, six days since its launch, according to Alipay's Sina Weibo.

Regarded as China's first "Internet Fund," the business features the lowest threshold of investment with a minimum of one yuan (16 cents). It also allows users to realize fund redemption at any time.

Alipay also provides online payment services for Taobao.com, China's leading online shopping platform run by Alibaba Group. The group announced at the end of 2012 that total transaction volume at Taobao.com had exceeded 1 trillion yuan by November.