7cardstud| Broker fines are intensively implemented, strict supervision and strict management, and do what they say

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Cheng Dan, a reporter from the Securities Times

After the landing of the new "National Nine articles", the "gatekeepers" of the capital market received intensive fines. Since April, 22 securities firms have been taken administrative supervision measures by the regulatory authorities. Some securities firms have issued administrative supervision measures to suspend the qualification of sponsor business for six months because of the lack of diligence and due diligence in the increase of sponsor projects, while other relevant responsible persons of securities firms have been identified as inappropriate candidates.

Tian Lihui, dean of the Institute of Financial Development of Nankai University, said that recently, there are not only a large number of fines against securities firms, but also heavy fines, which are obviously more stringent than before, and the supervision is more stringent and meticulous, and it has become a new trend to be strict and serious as soon as possible. In the process of developing the industry, securities firms need to put diligence and compliance in the first place and effectively play the role of "gatekeeper" in order to achieve high-quality development under the regulatory requirements of "two strong and two strict".

Ticket secret:

There has been a marked increase in the number of fines for securities firms.

On May 6, the Guangdong Securities Regulatory Bureau issued a warning letter to Guoxin Securities, believing that the company, as the IPO sponsor of Opter, had violated the rules in the process of continuous supervision. Specifically, it includes not timely urging Opt to implement the review and disclosure procedures for the change of the fund-raising plan, and failing to correct the problem of Opt's use of other fund-raising accounts to pay compensation.

This is a microcosm of repeated fines collected by securities firms under strict supervision in recent days. According to incomplete statistics, in April, a total of 22 securities firms received 60 warning letters or administrative supervision measures issued by the Securities Regulatory Commission, local securities regulatory bureaus and Shanghai, Shenzhen and North Stock exchanges, a significant increase compared with previous months, and about 16 fines were imposed on securities firms in March.

On April 30 alone, Beijing Securities Regulatory Bureau, Guangdong Securities Regulatory Bureau, Xinjiang Securities Regulatory Bureau and other three securities regulatory bureaus issued 12 tickets in succession, pointing to six securities firms, including China International Capital Corporation, Guodu Securities, Zhongtai Securities, Haitong Securities, CITIC Construction Investment and Huaying Securities. Among them, Sino-Thai Securities, Haitong Securities and CITIC Construction are all related to Gree Real Estate (rights protection) bond business.

From the perspective of the illegal content of various securities firms, investment banking business, brokerage business, asset management business and proprietary business and other main business areas are involved. Lack of compliance management, violation of regulations in the process of increasing sponsors and related processes of listed companies, inadequate due diligence of underwriting, inadequate management of margin trading business and so on are the focus of regulatory attention.

For example, on April 26, China International Capital Corporation was issued a warning letter by the Beijing Securities Regulatory Bureau for compliance management issues such as employees taking up posts without a license and employees investing in stocks in violation of regulations; on April 25, the Shenzhen Securities Regulatory Bureau announced that Huatai Securities held a customer training and exchange meeting in violation of regulations by the business department. Shenzhen Securities Regulatory Bureau issued a warning letter. According to the investigation, Huatai Securities Shenzhen Shennan Avenue Securities Business Department held a customer training and exchange meeting in 2019 in cooperation with external institutions, which involved explaining securities market trends and other related contents. The business department did not conduct compliance review on the activities, agenda, content, lecturer qualifications, etc.; on April 19, Huatai Securities and Donghai Securities were ordered to correct by Jiangsu Securities Regulatory Bureau because of a number of business violations such as self-operation. On April 29, Haitong Securities was ordered by the Shanghai Securities Regulatory Bureau to take corrective measures because of imprudent risk management in stock pledge business, illegal income swap business, imperfect internal control of individual risk bonds, and out-of-scope actual investment targets of individual private equity funds.

The penalty is heavy:

Some securities firms' recommendation business has been suspended for half a year.

In the intensive issuance of tickets at the same time, many tickets are still heavy. On the evening of May 5, Huaxi Securities said that it had received a decision on administrative supervision measures from the Jiangsu Securities Regulatory Bureau. According to the investigation, Huaxi Securities was suspected of failing to perform its due diligence in the recommendation of Jin Tongling (Protection of Rights) in 2019. It is suspected that there are false records in issuing a letter of recommendation for the listing of stocks to specific objects and in the relevant reports issued during the continuous supervision stage. Jiangsu Securities Regulatory Bureau decided to suspend the qualification of sponsor business for six months for Huaxi Securities from April 28 to October 27, 2024. Two sponsor representatives of Huaxi Securities were also identified as inappropriate candidates by the Jiangsu Securities Regulatory Bureau.

Not only that, three brokerages were filed for investigation because of violations, namely Haitong Securities, CITIC Securities and Soochow Securities. What they all have in common is because of the fixed increase project. Soochow Securities is suspected of Gome Communications, Zixin Pharmaceutical non-public offering stock sponsor business is not diligent due diligence. Citic Securities and Haitong Securities are found to be suspected of violating laws and regulations in the process of transferring non-public shares in 2023 in violation of restrictive regulations.

Some brokerage investment bankers pointed out that compared with the IPO project, Dingzeng business previously catered to customers' requirements of low fees and high speed, and would not assign a strong implementation team, so it was prone to problems. Recently, a number of heavier fines are related to Ding Zeng, reflecting the regulatory authorities' attention to the quality of Ding Zeng sponsors, and supervision may be further strengthened in the future.

Strict supervision will be normalized.

Behind the severe and fast penalty is the landing of the concept of "two strong and two strict" supervision, and the regulatory authorities continue to release the signal of "strict supervision and strict supervision" of securities firms.

On April 12, when interpreting the new "National Nine articles" of the capital market, Wu Qing, chairman of the Securities Regulatory Commission, mentioned strong supervision, saying that he would build an omni-directional and three-dimensional capital market supervision system and fully implement the supervision of "long teeth with thorns". He stressed that institutional supervision should promote a return to its origin, be better and stronger, further consolidate the responsibilities of "gatekeepers," and various industry institutions such as securities and futures funds should correct their business concepts and enhance their compliance level, professional service capability, and core competitiveness.

In the previously released "opinions on strengthening the Supervision of Securities companies and Public offering funds and speeding up the Construction of first-class Investment Banks and Investment institutions (for trial implementation)", the Securities Regulatory Commission proposed to strictly implement the requirement of "declaration and responsibility". Establish and improve the negative list of practice and integrity file management system, and further consolidate the responsibility of the "gatekeeper" of investment banks It is necessary to urge securities companies to improve the internal control system of investment banks, enhance their ability of value discovery, and strengthen the capacity building of project screening, valuation and underwriting.

Tian Lihui said that under the new "National Nine Articles" and the "Two Strong and Two Strict" regulatory concepts, the regulatory authorities 'determination to maintain market order and protect investors' rights and interests is reflected in their zero-tolerance attitude towards violations of laws and regulations in the capital market. The entire process of supervision has continued to be strengthened, and high standards have been put forward for the check responsibilities and continuous supervision responsibilities of intermediaries. Strict supervision has gradually become normalized, and the cost of violations by securities firms has increased.

The warning effect of fines is that intermediaries must not only strictly enforce the rules on IPO projects, but also maintain a high degree of vigilance and prudence and self-discipline in other corresponding chain businesses. Bo Xiaoxu, an analyst at AVIC Securities, believes that brokerages should not only strengthen comprehensive control over the quality of listed companies at the entrance, but should also further optimize the compliance internal control mechanism when carrying out subsequent fixed-value business, continuously improve the awareness and level of standardized operations, and proactively adapt to the requirements of "strict supervision and strict management" and act as a "gatekeeper".