Silver LOF hits five consecutive limit-downs, over 17,000 people collectively file complaints. Guotou Ruibin states that "a working group has been established."

When professional financial institutions adjust rules for “fairness,” why did it trigger over ten thousand collective complaints of “unfairness”?

For investors who purchased Guotou Silver LOF, the experience over the past week might be: watching the net value mysteriously evaporate by over 30% in a single day, then placing orders and queuing on their phones, but still unable to “break through” the door of the limit-down decline that has lasted five days in a row. A storm triggered by the international silver plunge is evolving into a series of tests of rules, liquidity, and trust.

In just a few days, more than 17,000 rights protection complaints have been filed. From late-night valuation adjustment notices to viral rights protection tutorials on social media, why does the technical operation intended to protect all holders ultimately make many investors feel like they are “the ones trapped”?

On February 6, Guotou Ruixin Fund announced that it had established a working group to study and develop relevant plans to support investors in resolving their claims through channels such as settlement, mediation, arbitration, or other legal means. Details will be announced separately.

From a 30% single-day plunge to five consecutive limit-downs

On February 6, Guotou Silver LOF opened with a limit-down again, marking the fifth consecutive trading day of decline. By the close, the fund’s order book amounted to nearly 2.3 billion yuan, with a trading volume exceeding 200 million yuan, and a premium rate still as high as 28.73%. Similar trends appeared in the previous four trading days, with daily order book amounts exceeding 2.7 billion yuan.

“Cannot sell” has become a common dilemma for tens of thousands of investors. “Guide to escaping limit-down,” “Order placement tips,” and other content flooded major investment platforms, spreading anxiety. “Every day hits the limit down, I can’t sell, it’s the fourth day of placing orders, I’ve already lost my principal, and I haven’t ‘escaped’ yet,” said an investor from Zhejiang.

The trigger for this ongoing crisis lies in the aftermath of a valuation adjustment.

Rewinding to January 30, precious metals like silver experienced an epic plunge, with daily fluctuations far exceeding normal levels. As the only domestic LOF fund tracking silver futures, Guotou Silver LOF suspended trading for an hour on the morning of February 2 and then resumed with a limit-down, closing with an order book of 8.667 billion yuan.

That evening, an announcement about adjusting the valuation model was like a boulder thrown into a calm lake. Guotou Ruixin Fund announced that it would adjust the valuation method for its holdings of silver futures contracts in Guotou Silver LOF. This technical operation directly caused the net value of Guotou Silver Futures A to fall by 31.5% on the same day.

Why adjust the valuation? Guotou Ruixin Fund told First Financial that “the recent market environment has far deviated from the ‘normal’ range.” The international silver market experienced an epic crash, with daily fluctuations far beyond normal. However, the domestic futures market has a limit-up and limit-down system. If the fund continued to use the settlement price of the Shanghai Futures Exchange silver futures for valuation, its net asset value would significantly exceed the true value of the underlying assets in the international market, creating a “phantom high.”

“Continuing to use unadjusted valuation could lead to early redeeming investors exiting at a ‘phantom high’ net value, while the risk of the asset prices returning to their true value is fully transferred to those who continue to hold,” Guotou Ruixin Fund said. This, in their view, clearly violates the principle of fairness.

So why wasn’t it announced in advance? Guotou Ruixin Fund responded that if they had announced it earlier, they worried it would be interpreted as intentionally guiding investors not to redeem, potentially leading to market panic and a run on the fund.

The fund explained that its net value is calculated based on asset prices at the end of each trading day. This means that before trading closes, the fund’s actual value is an “unknown.” For reasons such as the timing of price determination and fairness considerations, the industry practice for public funds is to announce valuation adjustments after the plan is finalized.

This explanation did not fully dispel investor doubts. The sharp shrinkage of account funds and the liquidity crisis caused by continuous limit-downs made “unable to sell” a common plight for tens of thousands of investors. As public opinion continued to ferment, investor rights protection demands also persisted.

In major investment communities, related posts about “complaints” and “rights protection” flooded the screens, even with detailed tutorials on complaint procedures. On February 6, First Financial found that on the Consumer Protection platform alone, the collective complaints about “Guotou Silver LOF unilaterally adjusting valuation causing losses” had already exceeded 17,600, with over 17,000 participants.

After trading hours on that day, Guotou Ruixin Fund issued an announcement regarding actively resolving investor claims related to the Silver (LOF) fund. The company stated it would actively respond to investor demands, has established a working group, and is studying and formulating relevant plans to minimize the impact of valuation adjustments on investors.

Guotou Ruixin Fund said it supports investors in resolving claims through channels such as settlement, mediation, arbitration, or other legal means, with details to be announced separately. Additionally, it will continue to adhere to lawful, compliant, and diligent operational principles, ensuring fair pricing in fund operations and valuation, and protecting the legitimate rights and interests of all investors.

Fairness and experience—can they both be achieved?

The handling of this valuation adjustment by Guotou Ruixin Fund has sparked intense debate in the industry about “compliance” versus “investor experience.”

First Financial interviewed several fund companies, finding divergent opinions. A compliance officer from South China believed that, from a regulatory perspective, the temporary disclosure of information must be completed within two days of the event. Guotou Ruixin’s operation might be compliant, but from a rational and investor experience standpoint, such “sudden” operations are hard for most investors to accept.

“Legally compliant and routine in the industry, but the handling method is indeed questionable,” said a person from a North China fund company. They noted that the extreme market conditions are rare and lack precedent, and Guotou Ruixin may lack sufficient experience in responding. Even if they issued a prompt notice during trading, it might not change the market trend and could instead trigger more uncertainty.

However, another industry insider firmly denied this operation. They believe that the reasonableness of the valuation adjustment does not mean the operation was flawless. The core issue with Guotou Ruixin’s approach is that it did not give investors enough time to judge and decide, fundamentally ignoring investors’ right to information. This is the key reason for the surge in complaints, directly touching on the “sensitive red line” of information disclosure and investor experience.

“Fund managers aim to prevent利益输送 and protect holders’ interests, but from the investor’s perspective, there may be a loss of trust due to delayed disclosure,” said a product marketing professional from a large fund company to First Financial. This incident also exposes the severe challenges faced by fund product design and investor suitability management in extreme market environments.

He believes that this event has somewhat weakened investors’ trust in the timeliness of fund valuation adjustments and the sufficiency of risk disclosures. Some investors doubt the product operation rules and information disclosure pace, and due to lack of professional understanding, misunderstandings such as “rules are unfavorable to themselves” may arise, shaking their confidence in the professionalism and responsibility of the fund industry.

A product department staff member from a Shanghai-based fund company shared a similar view. They told First Financial that before making major valuation adjustments, fund companies should fulfill full disclosure obligations and communicate clear information to investors as early as possible. “For example, announcing during the day or on weekends in advance can help stabilize investor expectations and avoid trust damage caused by sudden overnight notices.” They believe that proactive communication might not necessarily trigger a run on the fund and could instead reduce market shocks caused by uncertainty.

Furthermore, regarding the choice of valuation adjustment method, this person also questioned, “A one-step revaluation may not be the best solution.” In cases of severe liquidity shortages, they suggest considering more buffered approaches such as redemption quotas to lessen the immediate impact on investors’ net asset values and minimize market influence.

“Adjusting valuation should be a cautious decision. When possible, alternative methods that are fairer to investors and cause less market impact should be prioritized,” they added. Currently, the specific methods and calculations of valuation adjustments are not fully transparent. As public opinion continues to ferment, fund companies should adopt a more transparent and open attitude, explaining the valuation logic and decision basis to investors and responding promptly to market concerns. This is necessary to maintain investor trust and ensure industry stability.

It is also noteworthy that whether this valuation adjustment is “legal” has become a core focus of investor rights protection.

Chen Wei, a full-time lawyer at Beijing Yinghe (Shenzhen) Law Firm, believes that the announcement of the valuation adjustment itself does not violate the relevant provisions of the “Guiding Opinions on Valuation Business of Securities Investment Funds” issued by the China Securities Regulatory Commission. However, the retrospective application of the valuation adjustment to the shares traded on February 2 seriously violates the principle of fairness and damages investors’ legitimate rights.

Chen Wei told First Financial that although the “Securities Investment Fund Law” does not explicitly prohibit “retrospective adjustments,” the fundamental principle of “fair treatment of all fund shareholders” runs throughout the law and is the legal basis for prohibiting net value retrospective adjustments. Any retrospective behavior directly contravenes this core principle and causes significant unfairness to investors at different times.

“T-day net value is the ‘legal benchmark’ for that day’s trading. That is, regardless of what decisions the fund manager makes after T-day trading, those decisions should affect the net value on T+1 and subsequent days,” he explained. He believes that retrospective adjustments severely undermine fairness.

Chen Wei argued that allowing decisions made on the evening of T to influence T-day trading is equivalent to making investors pay for a rule change that has already occurred but was not disclosed. “This seriously damages the principle of fair treatment for all traders on the same day and fundamentally deprives them of their right to know and choose.”

Investor rights protection is ongoing. Chen Wei advised that severely harmed investors should closely monitor the handling plans of the CSRC and other authorities regarding fund managers and custodians, and consider filing damages claims in a timely manner to protect their legitimate rights and interests.

(Source: First Financial)