There are major deficiencies in the risk management and control of subsidiaries, and Founder Securities, which has experienced a significant increase in performance, has been punished by regulators after a month, and there are variables in major shareholders

After a month, Founder Securities was punished by the regulator.

A few days ago, the Hunan Securities Regulatory Bureau published a decision on administrative supervision measures, showing that Founder Securities was punished by regulators for failing to perform its management responsibilities to its subsidiary Founder Hong Kong in accordance with the law and for having major deficiencies in the latter's risk management and control.

Specifically, ascertained by the Hunan Securities Regulatory Bureau, Founder Securities failed to fulfill its management responsibilities of Founder Securities (Hong Kong) Financial Holdings Co., Ltd. (hereinafter referred to as "Founder Hong Kong") in accordance with the law, and did not effectively urge it to strengthen internal management and prudently carry out relevant business, which had major deficiencies in the risk control of Founder Securities in Hong Kong.

The regulator said that in accordance with the provisions of Article 70 of the Regulations on the Supervision and Administration of Securities Companies, it was decided that Fangzheng Securities should take administrative supervision measures such as ordering corrections within a time limit, ordering the punishment of relevant responsible personnel and reporting the results.

At the same time, Founder Securities should correct the above problems, strengthen internal control, improve risk control and control, punish the relevant responsible personnel, prevent such situations from happening again, and submit a written rectification report to the Hunan Securities Regulatory Bureau within 30 days from the date of receipt of the decision, and the Hunan Securities Regulatory Bureau will inspect and accept the rectification situation.

Coincidentally, Founder Securities just received a penalty from the Hunan Securities Regulatory Bureau a month ago.

On September 27, the Hunan Securities Regulatory Bureau announced a decision on regulatory measures showing that Xu Weiye, the current general manager of the Jishou Renmin Road Securities Business Department of Founder Securities, had borrowed other people's accounts to buy and sell stocks.

According to the Hunan Securities Regulatory Bureau, Founder Securities failed to strictly regulate the professional behavior of its staff, failed to discover and take effective measures to correct it in a timely manner. Decided that Fangzheng Securities would take administrative regulatory measures to order an increase in the number of internal compliance inspections and submit compliance inspection reports. Founder Securities shall carry out an internal compliance inspection of the securities business department involved every 3 months within 6 months from the date of issuance of the regulatory measures, and submit a compliance inspection report to the regulator within 10 working days after each inspection.

According to Tianyan, Founder Securities is the first batch of comprehensive securities companies in China and the first batch of members of the Shanghai Stock Exchange and the Shenzhen Stock Exchange. Formerly known as Zhejiang Securities Co., Ltd., it was established in 1988. It was restructured into a joint-stock limited company in 2010 and listed on the Shanghai Stock Exchange in 2011 (stock code: 601901).

It is reported that Founder Securities has 6 wholly-owned or controlled subsidiaries such as Founder Underwriting Sponsorship, Founder Medium-term Futures, Founder Fubon Fund, Founder Hesheng Investment, Founder Securities Investment, Founder Hong Kong Financial Holdings, etc., mainly engaged in investment banking, futures brokerage, fund management, private equity fund management, alternative investment, overseas business and other businesses, and holds 49% of the shares of Credit Suisse Founder. As of December 31, 2020, the company had a total share capital of 8.232 billion shares, total assets of 123.256 billion yuan and net assets of 40.357 billion yuan.

According to the results of the first half of this year, as of the end of June this year, Founder Securities achieved operating income of 4.080 billion yuan, an increase of 20.25% over the same period of the previous year; operating profit of 1.698 billion yuan, an increase of 82.09% over the same period of the previous year; and net profit attributable to shareholders of listed companies of 1.301 billion yuan, an increase of 102.70% over the same period of the previous year.

As of the first half of the year, the top two shareholders of Founder Securities held more than 20% of the shares, namely Peking University Founder Group Co., Ltd. and Beijing Zhengquan Holdings Co., Ltd., holding 27.75% and 21.86% of the shares respectively.

However, the above two major shareholders have frozen their shares. Among them, Peking University Founder Group froze more than 1.1 billion shares, accounting for 13.48% of the total share capital of Founder Securities; Beijing Zhengquan Holdings froze all the shares held, accounting for 21.86% of the total share capital of Founder Securities.

It is worth mentioning that recently, the main shareholders of Founder Securities have changed.

According to the public information disclosure, in August 2020, according to the court's ruling, 8.62% of the shares of Founder Securities held by Beijing Zhengquan Holdings were paid to Guotong Trust Co., Ltd. In accordance with the trust contract, CCC distributed the trust benefits to the beneficiary of the trust, China Cinda Asset Management Co., Ltd. (hereinafter referred to as "China Cinda"), in its original state, and distributed the shares of the above-mentioned companies under the court's ruling to China Cinda.

On September 7 this year, Founder Securities received the Csrc's "Reply on Approving the Change of Major Shareholders of Founder Securities Co., Ltd.", approving China Cinda to become the company's major shareholder. After the completion of the transfer registration procedures for the above shares, Zhengquan Holdings will hold 13.24% of the shares of Founder Securities and 8.62% of the shares of China Cinda.

At the same time, the remaining 13.24% of the shares of Zhengquan Holdings were held by the Dalian Intermediate People's Court on June 19, 2021 and July 31, 2021 on the Ali judicial auction network platform twice, and both auctions were sold.

Not only that, on July 5 this year, Peking University Founder Group received the (2020) Jing 01 Break No. 13-5 "Civil Ruling" delivered by the Beijing First Intermediate Court, ruling to approve the reorganization plan of five companies including Founder Group. According to the reorganization plan, the controlling shareholder and actual controller of Founder Securities are proposed to change, Founder Group and its co-actor Founder Production Control will no longer directly or indirectly hold the shares of Founder Securities, and the proposed new Founder Group will hold a total of 28.71% of the shares of Founder Securities.

Ping An Life or its wholly-owned entities will become the controlling shareholders of New Founder Group. Ping An of China, as the controlling shareholder of Ping An Life, intends to indirectly control 28.71% of the shares of Founder Securities. However, as of the end of June, the new Founder Group has not yet been established, and the change of the controlling shareholder and actual controller of Founder Securities still needs the approval of the CSRC, and the time for completing the change is still uncertain.

This article originated from Blue Whale Finance