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Why did the PPT "revelation" of Essence Securities embarrass all parties?

Why did the PPT "revelation" of Essence Securities embarrass all parties?

Why did the PPT "revelation" of Essence Securities embarrass all parties?

Recently, a brokerage distribution point analysis document has attracted a lot of attention in the financial circle. An industry insider said: "This PPT has created a rare situation that is embarrassing for all parties. ”

The so-called distribution point refers to the fact that in the financial market, the brokerage research institute provides investment research services as the seller, and the fund company and other buyer institutions score the brokerage company for distribution point settlement after enjoying the service, that is, the so-called distribution commission.

Since the incident fermented, Essence Securities and JPMorgan Fund have responded, and one party said that it was "the subjective assumption of individual employees and serious untruths that have not been reviewed." The other party responded that "there is no suspension of commissions for Essence Securities." ”

This is the end of the matter. However, sensitive topics in the industry, such as distribution points and split commissions behind the incident, are obviously not over yet, especially in the context of the general reduction of transaction commission rates.

The internal documents were sent to the wrong group, and Essence Securities apologized

Since November 27, a document on "JPMorgan Fund Distribution Point Analysis PPT" has been very popular in the financial circle. The document, signed by Essence Securities, contains comments on the leadership and management of JPMorgan Fund, investment research style, key holdings, and the working attitude and methods of fund managers.

For example, when talking about the investment and research atmosphere within the JPMorgan Fund, the PPT mentioned: "JPMorgan Investment President Du Meng has a large voice and has the right to adjust the ranking", "The fund manager is relatively lazy, and experts will only be interested in their own positions individually", "I like the right side style, and the overall consumption and cycle holdings are low".

Why did the PPT "revelation" of Essence Securities embarrass all parties?

Screenshot of the file

After the document was issued, it quickly attracted the attention of securities firms and fund insiders.

On November 28, Essence Securities issued a statement saying: "An employee of our company accidentally forwarded his personal document to a private WeChat group, which contained his personal subjective assumptions and unaudited serious false content. ”

At the same time, Essence Securities also said that the employee officially joined the company on August 23 this year and has only worked in Essence for 3 months. At present, Essence Securities has ordered the employee to stop all work, and will be seriously held accountable, and will further strengthen the professional normative management of sales personnel.

Why did the PPT "revelation" of Essence Securities embarrass all parties?

Essence Securities Statement

Although Essence Securities has apologized, the incident is not over. On the 29th, it was reported that JPMorgan Fund had suspended the commission of Essence Securities. In response, Morgan said: There is no suspension of commissions for Essence Securities.

In fact, in the seller-buyer relationship between brokerages and fund companies, public opinion incidents triggered by distribution points occur from time to time.

Among them, the most famous is that in April last year, Qin Han, the chief of fixed income of Guotai Junan Securities Research Institute, asked team members to work frantically and "crush" their peers in a group chat.

Why did the PPT "revelation" of Essence Securities embarrass all parties?

In April 2022, Qin Han, chief of fixed income of Guotai Junan Securities Research Institute, delivered a group chat

According to the Financial Associated Press, the chief asked team members to "evolve into a man-eating wolf", and the KPI was "1% of the team members in a single quarter, and 11% of the team", with the aim of "crushing GS Securities' peers".

Pie-point controversy

Why do different brokerages at different times cause public opinion turmoil because of the distribution point?

The practice of distributing points originated from the "research for commission" model launched in 1998, and at present, the split commission has become an important source of income for the brokerage research institute.

For example, according to Wind data, in the first half of this year, CITIC Securities' commission revenue reached 677 million yuan, followed by China Securities Construction Investment, GF Securities and Changjiang Securities, which were 496 million yuan, 476 million yuan and 467 million yuan respectively. In addition, China Merchants Securities, Guotai Junan, Orient Securities, Industrial Securities, Huatai Securities and Haitong Securities also have more than 300 million yuan in commission income.

A few "small goals" at every turn are not a small number for any company.

For individual brokerage researchers, the importance of distribution points is even greater. The chief of the above-mentioned brokerage said: "I hope that everyone (its team members) will work crazy and make crazy distribution points, and the annual salary will be one million this time next year, and ten million after 5 years." According to a previous report by the Financial Associated Press, some non-new wealth analysts in popular tracks such as TMT, medicine, and food and beverage may exceed the chief of some non-popular industries.

It is not difficult to understand that various brokerages will "fight" so much on the issue of distribution points. At the end of August this year, Haitai Xinguang, a listed company in the medical device industry, will hold a conference call to explain the performance of the first half of the year. Interestingly, this call attracted more than 20 brokerages to be the "host", and only 2 executives of listed companies participated in the meeting.

Why did the PPT "revelation" of Essence Securities embarrass all parties?

Poster of the performance briefing of listed companies

Coincidentally, in the first half of the performance call of listed companies such as Lege Co., Ltd., Changchun High-tech, and Weixinkang, more than a dozen brokerages also served as hosts.

This kind of broker-dealer "rolling" also reflects the revenue challenges encountered by brokerage research institutes in the context of declining trading commission rates, especially some brokerages that feature sell-side research.

In the first half of this year, Essence Securities achieved a total operating income of 6.978 billion yuan, a year-on-year decrease of 0.37%, and a net profit attributable to the owners of the parent company of 1.519 billion yuan, a year-on-year decrease of 7.72%.

According to the data reported by the Securities Association of China, in the first half of this year, the securities industry achieved operating income of 224.507 billion yuan and net profit of 85.050 billion yuan, a year-on-year increase of 9% and 5% respectively. Among them, more than eighty percent of the listed securities companies have achieved positive growth in net profit.

A week ago, on November 24, Essence Securities ushered in a new chairman, Duan Wenwu, secretary of the party committee and chairman of its parent company, State Investment Capital.

From the perspective of business performance, after Duan Wenwu took office, he is facing pressure to reverse the decline in the performance of Essence Securities.

Author | Lu Chunfeng

Edit | Han Zhongqiang

Operations | Liu Shan

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