A sales department in Wenzhou, China Galaxy, was ordered to correct employee transactions on behalf of customers in violation of the law

Source: China Economic Network

Beijing, November 25 (China Economic Net) -- The website of the Zhejiang Regulatory Bureau of the China Securities Regulatory Commission (CSRC) today announced a decision to order corrective measures against the Wenzhou Danan Road Securities Business Department of China Galaxy Securities Co., Ltd.

After investigation, between January 2016 and January 2021, the Wenzhou Danan Road Securities Business Department of China Galaxy Securities Co., Ltd. had problems such as practitioners handling securities trading operations for customers, acting as a fund and account broker for a long time to engage in over-the-counter capital allocation, and obtaining illegal benefits from them, reflecting that the compliance management and risk control of the sales department were not in place. At the same time, the sales department was aware of the above problems and clues, and failed to report to the Zhejiang Securities Regulatory Bureau in a timely manner on major events that had occurred or might affect the operation and management of branches and the rights and interests of customers.

The above situation violates the first paragraph of Article 27 of the Regulations on the Supervision and Administration of Securities Companies (Order No. 653 of the State Council), Item 4 of Article 6 of the Measures for the Compliance Management of Securities Companies and Securities Investment Fund Management Companies (Order No. 133 of the SECURITIES Regulatory Commission and Order No. 166 of the Securities Regulatory Commission), Article 21 of the Interim Provisions on the Administration of Securities Brokers (Announcement [2009] No. 2 of the CSRC), Article 20 of the Interim Provisions on the Administration of Securities Brokers (Announcement [2020] No. 20 of the CSRC), Article 20 of the Interim Provisions on the Administration of Securities Brokers (CSRC Announcement [2020] No. 20), Article 18 of the Provisions on the Supervision of Branches of Securities Companies (CSRC Announcement [2013] No. 17) and Article 15 of the Provisions on the Supervision of Branches of Securities Companies (CSRC Announcement [2020] No. 66).

In accordance with article 70 of the Regulations on the Supervision and Administration of Securities Companies, the Zhejiang Securities Regulatory Bureau decided to order the Securities Business Department of Wenzhou Danan Road of China Galaxy Securities Co., Ltd. to correct the above problems within a time limit to meet the following requirements: The sales department should earnestly strengthen the management of the professional behavior of employees, supervise and urge employees to be diligent and conscientious, prevent employees from engaging in violations of laws and regulations, further consolidate internal control, improve compliance levels, do a good job in risk management, and safeguard the legitimate rights and interests of customers.

Relevant regulations:

Article 27 of the Regulations on the Supervision and Administration of Securities Companies: Securities companies shall establish and improve risk management and internal control systems in accordance with the principle of prudent operation, and prevent and control risks. Securities companies shall exercise centralized and unified management of branch offices, and shall not engage in joint ventures or cooperation with others in the operation and management of branch offices, nor shall they contract, lease or entrust branches to others for operation and management.

Article 6 of the Measures for the Compliance Management of Securities Companies and Securities Investment Fund Management Companies: Securities fund operating institutions carrying out various businesses shall operate in accordance with regulations, be diligent and conscientious, adhere to the principle of putting the interests of customers first, and comply with the following basic requirements: (1) Fully understand the basic information, financial status, investment experience, investment objectives, risk preferences, integrity records and other information of customers and update them in a timely manner. (2) Reasonably divide the categories of customers and the risk level of products and services, ensure that appropriate products and services are provided to suitable customers, and do not defraud customers. (3) Continue to urge customers to standardize securities issuance behavior, dynamically monitor customer trading activities, promptly report and handle major abnormal behaviors in accordance with law, and must not facilitate customers to engage in securities issuance and trading activities in violation of regulations. (4) Strictly regulate the professional conduct of staff, urge staff to be diligent and conscientious, and prevent them from using their positions to facilitate violations of laws and regulations, exceeding their authority, or other acts that harm the legitimate rights and interests of customers. (5) Effectively manage insider information and undisclosed information, and prevent the company and its staff from using the information to buy and sell securities, suggest others to buy and sell securities, or leak the information. (6) Timely identify and properly handle conflicts of interest between the company and customers, between different customers, and between different businesses of the company, effectively safeguard the interests of customers, and treat customers fairly. (7) Lawfully perform the procedures for reviewing related party transactions and information disclosure obligations, ensure the fairness of related party transactions, and prevent improper related party transactions and the transmission of benefits. (8) Carefully assess the impact of the company's operation and management behavior on the securities market, and take effective measures to prevent disrupting market order.

Article 21 of the Interim Provisions on the Administration of Securities Brokers: Where a securities broker violates the securities company's internal management system, self-discipline rules, or laws, administrative regulations, regulatory agencies and administrative departments in the course of practicing his practice, the securities company shall pursue its responsibility in accordance with the relevant provisions and the provisions of the entrustment contract, and promptly report to the company's domicile and the securities brokerage agency of the securities business department where the securities broker serves. Where a securities broker no longer meets the prescribed requirements for practice, the securities company shall terminate the entrustment contract.

Where securities brokers are suspected of violating laws, administrative regulations, regulatory authorities, and administrative departments, the securities company shall promptly report to the relevant regulatory authorities or administrative departments; if it is suspected of a criminal offense, the securities company shall promptly report to the relevant judicial organs.

Article 20 of the Interim Provisions on the Administration of Securities Brokers: Where a securities broker violates the securities company's internal management system, self-discipline rules, or laws, administrative regulations, regulatory agencies and administrative departments in the course of practicing, the securities company shall pursue its responsibility in accordance with the relevant provisions and the provisions of the entrustment contract, and promptly report to the company's domicile and the securities brokerage agency dispatched by the securities business department where the securities broker serves. Where a securities broker no longer meets the prescribed requirements for practice, the securities company shall terminate the entrustment contract.

Article 18 of the Provisions on the Supervision of Branches of Securities Companies: Where a major event occurs that affects or may affect the operation and management of the branch office and the rights and interests of customers, the branch office shall promptly submit a report to the local securities regulatory bureau, explaining the cause of the incident, the current status, the possible consequences, and the measures taken and proposed.

Article 70 of the Regulations on the Supervision and Administration of Securities Companies: The securities regulatory authority under the State Council shall order securities companies with imperfect governance structures, imperfect internal controls, chaotic operation and management, establishment of off-the-books accounts or off-the-books operations, refusal to implement supervision and management decisions, or violations of laws and regulations, and may take the following measures: (1) order the number of internal compliance inspections to be increased and submit compliance inspection reports; The responsible person of the domestic branch shall give a reprimand; (3) order the punishment of the relevant responsible personnel and report the results; (4) order the replacement of directors, supervisors, senior management personnel or restrict their rights; (5) temporarily take over the securities company and conduct a comprehensive inspection; (6) order the suspension of part or all of the business of the securities company or its domestic branch, and cancel the domestic branch within a time limit. Where a securities company is suspended from its business or its domestic branch offices are revoked within a time limit, it shall place customers and handle outstanding business in accordance with relevant provisions. Where the person in charge of compliance has already performed the duties of stopping and reporting violations of laws and regulations of securities companies in accordance with law, the person in charge of compliance shall be exempted from liability.

The following is the full text:

Decision on ordering corrective measures against the Wenzhou Danan Road Securities Business Department of China Galaxy Securities Co., Ltd

China Galaxy Securities Co., Ltd. Wenzhou Danan Road Securities Sales Department:

After investigation, between January 2016 and January 2021, your sales department has problems such as employees handling securities trading operations for customers, acting as a fund and account broker for a long time to engage in over-the-counter capital allocation, and obtaining illegal benefits from them, reflecting that the compliance management and risk control of the sales department are not in place. At the same time, the sales department is aware of the above problems and clues, and fails to report to our bureau in a timely manner on major events that have occurred or may affect the operation and management of branches and the rights and interests of customers.

In accordance with the provisions of Article 70 of the Regulations on the Supervision and Administration of Securities Companies, our bureau has decided to order your sales department to correct the above problems within a time limit and meet the following requirements: The sales department should effectively strengthen the management of the practitioners' professional behavior, urge the employees to be diligent and conscientious, prevent the practitioners from engaging in illegal acts, further consolidate internal control, improve the level of compliance, do a good job in risk management, and safeguard the legitimate rights and interests of customers.

Your sales department should complete the rectification and submit a written rectification report to our office before November 30, 2021.

If you are dissatisfied with these supervision and management measures, you may submit an application for administrative reconsideration to the China Securities Regulatory Commission within 60 days of receiving this decision, or you may file a lawsuit with a people's court with jurisdiction within 6 months from the date of receipt of this decision. During the period of reconsideration and litigation, the implementation of the above-mentioned supervision and management measures shall not be stopped.

Zhejiang Securities Regulatory Bureau

November 8, 2021