Starting from next Monday, another leading brokerage company will strictly regulate the two financial institutions, and the repayment of securities lending and borrowing will be prohibited for financing the purchase of securities, and the industry will generally respond to penetrating supervision
Finance Associated Press, January 20 (Reporter Lin Jian) The two financial businesses pay more attention to standardization. Within a week, GF Securities and China Securities Construction Investment, two leading brokerages, adjusted the rules for the repayment of margin and securities lending liabilities, prohibiting investors from financing to buy securities to repay securities lending liabilities. At present, the revision of GF Securities has taken effect on January 15, while the adjustment of China Securities Construction Investment will be implemented from January 22.
The picture shows GF Securities' notice on adjusting the rules for the repayment of margin and securities lending liabilities
The picture shows the notice of China Securities Construction Investment on adjusting the repayment rules of margin financing and securities lending liabilities
Regarding the above adjustments, both brokerages said that they were to strengthen risk management and prevent the risks of the two financial services, among which GF Securities clarified the actual content of the adjustment, that is, when the cash bond position in the credit account is less than the number of margin contracts, cash bonds are not allowed to be repaid. The reporter of the Financial Associated Press learned that this kind of adjustment is not the latest one, and many brokerages have prohibited investors from financing to buy securities to repay securities lending liabilities, for example, Huafu Securities has banned investors from using securities purchased on margin to repay securities lending contracts from October 9, 2023. In addition, some large brokerages, including those in Shanghai, have also banned such behavior.
In order to prevent the two financial circumvention and two financial cash-out, and maintain market fairness
In this regard, a person from a brokerage in South China and North China told reporters that the above adjustment is mainly to prevent the two financial and two financial cash out, among them, how to use the financing quota to buy non-financing target stocks, commonly known as "two financial bids", is to bypass the standard, the financing proceeds are used to invest in non-margin securities lending targets or cash out. Investors can withdraw funds through margin trading to achieve the purpose of abnormal transactions such as purchasing non-underlying securities or transferring out credit accounts on margin.
The above-mentioned person said that at present, most brokerages in the industry have stopped investors from financing to buy securities to repay securities lending liabilities, but there are still some small and medium-sized brokerages that have not yet been banned. There is a view that securities firms have successively prohibited investors from financing to buy securities to repay securities lending liabilities, aiming to regulate some investors engaged in improper arbitrage in the market, and at the same time, it can also avoid the company's shareholders to detour to reduce their holdings and arbitrage, which is conducive to curbing speculation, maintaining market fairness, and protecting the interests of investors.
The reporter also learned that in practice, the controlling shareholders of some listed companies will use the cash-out funds to repay the stock pledge financing debt, and then turn the pledge financing liability into a "two financing" liability. On the one hand, this approach achieves the purpose of financing and leverage, and on the other hand, it avoids the information disclosure obligation that should be borne by the listed company when its shares are pledged to a certain proportion.
Focusing on the current market, investors are more sensitive to the securities lending system, which is also the background of this round of high attention to the bidding of the two financial institutions and the cashing out of the two financial institutions. On January 19, there were market rumors that "after receiving the guidance of the regulator's window, CITIC Securities has suspended the securities lending business for some customers and raised the threshold for institutional customers." The reporter of the Financial Associated Press learned from CITIC Securities and said that there was no such thing, there was no suspension, and there was no regulatory guidance.
According to the interviewed industry participants, the above adjustment cannot be simply interpreted as an interpretation of the tightening of the securities lending business or the suspension of the securities lending and borrowing system. At the regular press conference of the China Securities Regulatory Commission on January 20, Shen Bing, director of the Institutional Department of the China Securities Regulatory Commission, said that the margin financing and securities lending system has generally maintained stable operation since its launch more than 10 years ago, and has played a positive role in promoting price discovery, calming market fluctuations, and curbing "new speculation".
The risk management of the two financial services continued to be upgraded, and penetrating supervision was strengthened
According to the reporter's observation, it is not difficult to find that the risk management of the two financial services is indeed continuing to upgrade. Since the implementation of the new regulations on margin financing and securities lending business in October 2023, securities companies have continuously revised the contracts of the two financial services, so as to patch business loopholes, strengthen the penetrating management of customers' trading behaviors and trading purposes, and prevent the risk of participating in or facilitating violations.
In October 2023, the China Securities Regulatory Commission (CSRC) issued a notice to cancel the lending of securities by senior executives and core employees of listed companies through special asset management plans established by participating in strategic placements, and appropriately restrict the lending methods and proportions of other strategic investors in the early stage of listing. At the same time, the Shanghai and Shenzhen North Stock Exchanges issued the Notice on Optimizing the Relevant Arrangements for Securities Lending and Securities Lending Transactions, making the following arrangements:
It is clarified that "if an investor holds restricted shares or strategic placement shares of a listed company, as well as shares subject to transfer restrictions such as the reduction of shares by major shareholders or specific shareholders transferred by way of block trading, the investor and its affiliates shall not sell the shares of the listed company through securities lending and borrowing during the restriction period", further improving the requirement that "restricted shares shall not be allowed to borrow and lend securities". At the same time, securities companies are required to verify the situation of investors in accordance with the principle of penetration, conduct front-end control over investors' relevant trading behaviors, and strictly prohibit participation in violations or facilitation of violations.
Shen Bing, director of the Department of Institutions of the China Securities Regulatory Commission, said that after the release of the new regulations, the China Securities Regulatory Commission has urged securities companies to strictly implement the requirements of the new regulations by strengthening penetrating management, on-site inspections, and regulatory penalties. "Overall, the effect of policy implementation is in line with expectations. Up to now, the balance of securities lending and borrowing has decreased by 23.4% compared with the beginning of the implementation of the new regulations, and the balance of loans by strategic investors has decreased even more, reaching 35.7%. In addition, after the issuance of the new regulations, there were new listings of senior management strategic investors, and no lending occurred in the early stage of listing, indicating that the implementation of the new regulations is good. ”
The reporter of the Financial Associated Press learned that at present, it is indeed around strengthening penetrating management, and the brokerage has been taking action to investigate layer by layer. Regarding the new regulations on margin financing and securities lending business, the person in charge of the relevant department of the China Securities Regulatory Commission said in response to reporters' questions that in the next step, the China Securities Regulatory Commission will comprehensively strengthen penetrating supervision, on the one hand, consolidate the responsibilities of securities companies, and urge securities companies to strengthen the penetrating management of customer trading behaviors and trading purposes in accordance with the requirements of "not seeing clearly, not doing business", strictly prohibiting participation in violations or facilitating violations, and effectively improving business levels.
On the other hand, the China Securities Regulatory Commission will strengthen regulatory law enforcement, establish and improve the working mechanism of penetrating supervision, and strictly crack down on violations of the requirements of "restricted shares shall not be allowed to be borrowed" through multi-layer nesting, collusive trading, tandem arbitrage, etc., and investigate and deal with them together.
(Finance Associated Press reporter Lin Jian)