"Brokerage butcher" Wu Qing took office, and more than 13 brokerages have been fined in the New Year
Compacting the "gatekeeper" responsibility
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Source | Bond Market Watch
On the first day of the Spring Festival, on 18 February, Huaan Securities received a fine from the Anhui Regulatory Bureau, which also became the first fine in the securities industry at the beginning of the Year of the Dragon after Wu Xinxin became chairman of the China Securities Regulatory Commission.
Specifically, Huaan Securities was ordered to take corrective administrative supervision measures because it was involved in three issues, which are: 1. There is imprudent production of research reports related to "Zuojiang Technology"; 2. There are deficiencies in personnel, network security, margin financing and securities lending business management; 3. In the process of carrying out investment banking business, there are insufficient due diligence, lax checks, and inadequate supervision.
The above situation violates the "Measures for the Compliance Management of Securities Companies and Securities Investment Fund Management Companies", "Measures for the Management of Network and Information Security of the Securities and Futures Industry", "Regulations on the Supervision and Administration of Securities Companies" and other relevant regulations.
Source: CSRC official website
In response to the fine of the Anhui Supervision Bureau, on the evening of February 18, Huaan Securities also responded, saying that it would immediately rectify in accordance with regulatory requirements, strengthen internal control and compliance management of related businesses, improve internal management and corporate governance, and promote the company's sustained, stable and standardized development. He also said that the company's current operation is normal, and investors are requested to pay attention to investment risks.
In fact, Huaan Securities has been issued a written warning letter by the Shenzhen Stock Exchange on February 5 because of the imprudent production of the "Zuojiang Technology" research report.
It is understood that "Zuojiang Technology" is once the "most expensive ST stock" - *ST Zuojiang (300799.SZ). From January to March 2023, the Shenzhen Stock Exchange issued three consecutive risk warning announcements that *ST Zuojiang may be delisted, but Huaan Securities recommended "buying" Zuojiang Technology in an in-depth research report released on April 25, 2023.
To the uproar, on December 1, 2023, *ST Zuojiang was investigated by the CSRC on suspicion of major financial fraud.
According to *ST Zuojiang's 2023 performance forecast, its net profit in 2023 is expected to be 160 million yuan to 225 million yuan, which is very different from the data predicted by Huaan Securities in the research report.
The Shenzhen Stock Exchange believes that the analysis conclusions of the relevant research reports issued by Huaan Securities are not based on sufficient evidence, the conclusions are not prudent, and the investment risks are not fully revealed, and the company is not strict in the quality review of the research reports, and requires Huaan Securities to take effective measures to rectify.
01
The sword refers to the violation of the brokerage
In fact, since the beginning of this year, during the tenure of Yi Huiman, the former chairman of the China Securities Regulatory Commission, at least 8 securities firms have been fined. They are: China Securities Construction Investment, SDIC Securities, Guotai Junan, Dongxing Securities, CICC, Wanhe Securities, Zhongde Securities, CITIC Securities, etc.
Since Wu Qing took office on February 7, to February 18, fines have been issued against 5 brokerages, namely Shenwan Hongyuan Securities, Ping An Securities, China Merchants Securities, Zhongshan Securities, and Huaan Securities.
Up to now, more than 13 brokerages have been fined.
On February 8, the day after Wu Qing took office, the official website of the China Securities Regulatory Commission issued a bond penalty announcement for Shenwan Hongyuan Securities and Ping An Securities, due to the non-standard underwriting due diligence and the failure to perform the duties of the entrusted management, Shenwan Hongyuan was ordered to correct the administrative supervision measures, and Ping An Securities was issued with a warning letter due to the violation of fair competition in the bond issuance pricing and the incomplete due diligence of individual bond projects.
Unexpectedly, the fines of Shenwan Hongyuan Securities and Ping An Securities were just "appetizers", and on the third day of Wu Qing's tenure, on February 9, he issued a fine to the "ghosts" of China Merchants Securities. The China Securities Regulatory Commission (CSRC) concentrated on the illegal trading of stocks by a number of relevant personnel of China Merchants Securities, and imposed administrative penalties on 63 people, with a total fine of 81.73 million yuan.
Source: Canned Gallery
Among them, 1 person was transferred to the judicial organ on suspicion of insider trading, 1 person was banned from the stock market for life, 46 people were placed under administrative supervision, of which 3 people were to be identified as inappropriate persons, 5 people were subject to regulatory talks, and 38 people were issued warning letters. In addition, the company took administrative supervision measures such as issuing a warning letter to the company's chairman Huo Da, and two compliance directors at the time, Zhao Bin and Hu Yu, who were supervised by the company, and China Merchants Securities, which was responsible for the management of employees, taking administrative supervision measures such as ordering an increase in the number of compliance inspections. It also urged China Merchants Securities to initiate internal accountability, interview relevant violators, and implement full coverage of accountability. The China Securities Regulatory Commission emphasized that it is necessary to rely on criminal accountability, administrative punishment, administrative supervision measures, and internal accountability to carry out three-dimensional punishment on China Merchants Securities.
On the same day, the Shenzhen Regulatory Bureau also issued the "Decision on Administrative Supervision Measures" and "Decision on Ordering China Merchants Securities to Increase the Number of Internal Compliance Inspections", mentioning: After investigation, (mainly before 2021) many employees of China Merchants Securities had borrowed other people's securities accounts to trade stocks for a long time, privately accepted customer entrustment to trade stocks, and entrusted others to speculate in stocks.
The Shenzhen Securities Regulatory Bureau clearly determined that Huo Da, as the chairman of China Merchants Securities, was responsible for the management of the above issues, Zhao Bin, as the then compliance director of China Merchants Securities, and Hu Yu, as the current compliance director, were responsible for the relevant violations.
In fact, on February 9, there was another brokerage company that was fined, that is, Zhongshan Securities.
Zhao Bo, then vice president in charge of asset management business and head of the asset management department, was punished by the regulatory interview, and Yuan Ling, then the compliance director, was issued a warning letter.
Source: The official website of the China Securities Regulatory Commission
In January before Wu Qing took over as chairman of the China Securities Regulatory Commission, more than 8 brokerages were punished. Among them, China Securities Construction Investment and SDIC Securities as sponsor representatives, and Guotai Junan, Dongxing Securities and CICC as bond trustees, were all warned for failing to perform their duties and responsibilities.
Source: Canned Gallery
The fines of Guotai Junan, Dongxing Securities, and CICC are typical. As the trustee of Tahoe Group's bonds, it violated the relevant regulations of the Administrative Measures for the Issuance and Trading of Corporate Bonds by failing to strictly abide by the Code of Conduct during the trusteeship period, failing to maintain necessary attention to Tahoe's failure to disclose relevant material debt overdue and litigation matters, and failing to disclose relevant material matters in the annual trustee management affairs report. It is relatively rare for a company to take regulatory measures against three large securities companies because of a single "one-off".
02
Compacting the "gatekeeper" responsibility
Since 2020, regulators, including the China Securities Regulatory Commission, have paid more and more attention to the "gatekeeper" responsibility of intermediaries. In March 2020, the Criminal Law was amended to clarify that the sponsor is the subject of the crime of providing false supporting documents and the crime of issuing material misrepresentation of supporting documents, and the crime is applicable to criminal liability, which can be punished with a maximum sentence of 10 years in prison. On December 26, 2020, the Standing Committee of the 13th National People's Congress deliberated and passed the Amendment to the Criminal Law. Since then, there has been a clear improvement in the responsibilities and risk control requirements of intermediaries.
Song Yixin, a lawyer at Shanghai Hanlian Law Firm, analyzed that the 2020 Criminal Law Amendment has made great strides in the criminal sanctions for securities crimes. To sum up, there are four bright spots: First, the scope is broadened, that is, depositary receipts and other securities recognized by the State Council in accordance with the law are included in the scope of regulation, and new situations of market manipulation are also stipulated; second, the intensity of the punishment for crimes such as fraudulent issuance and information disclosure and falsification of information is greatly increased, from prison sentences to fines; third, the targets are highlighted, that is, the criminal responsibility of controlling shareholders and actual controllers is strengthened; and fourth, intermediaries are held accountable and the criminal consequences of sponsors and other intermediaries who are not diligent and diligent are consolidated. In the future, the penalties, accountability and fines imposed by regulators and laws on intermediaries will become the norm, which also puts forward higher requirements for the practice level of intermediaries, so that intermediaries can become the "gatekeepers" of the securities market instead of "colluding" with the management of individual listed companies.
Source: Canned Gallery
During his tenure as deputy director of the Institutional Supervision Department and director of the Risk Disposal Office of the China Securities Regulatory Commission, Wu Qing was called a "butcher of securities firms" by the media for promoting the disposal of 31 illegal securities companies such as Delong Securities, Southern Securities, and Minfa Securities, and finally promoting 26 companies to enter judicial bankruptcy procedures.
Subsequently, in 2009, Wu Qing was transferred to the director of the fund supervision department, and the fund industry also launched a vigorous "rat warehouse" supervision, from the "Zhang Ye case" of the Rongtong Fund to the "Liu Hai case" and "Tu Qiang case", which shook the market.
As early as 2009, Wu Qing wrote an article in China Securities magazine to reflect on the Wall Street financial crisis, and also mentioned his own ideas on securities regulation in the article, he wrote: "The basic goal of financial supervision is undoubtedly to protect the legitimate rights and interests of customers and maintain the safety of the financial system, but there are no rules on the effective way to achieve the goal, and sometimes find it and give it up." The willingness of financial institutions to self-regulate and supervise is often unreliable, so there can be no gaps in financial supervision. ”
Judging from Wu Qing's experience as the director of the institutional department, the director of the risk disposal office, and the director of the fund supervision department of the China Securities Regulatory Commission, and a series of measures after taking office as the chairman of the China Securities Regulatory Commission, Wu Qing can only have higher requirements than his "predecessor" for consolidating the "gatekeeper" responsibility of intermediaries.
What do you think of Huaan Securities becoming the first brokerage company to be fined at the beginning of the Year of the Dragon, and whether the regulator will have higher and higher regulatory requirements for the "gatekeeper" responsibility of intermediaries such as brokerages in the future?