What’s new: China’s stock regulator found flaws in internal controls and security mechanisms at some brokerages in a special inspection this year of eight large securities firms’ investment banking businesses.
Shanghai-based Huajin Securities Co. Ltd and Gansu-based state-owned China Dragon Securities Co. Ltd. were found with numerous serious violations, the China Securities Regulatory Commission (CSRC) said Friday in a statement. The regulator suspended Huajin Securities’ sponsorship and corporate bond underwriting businesses for three months.
The inspection covered equities, bonds, mergers and acquisitions, and other investment banking activities at the eight brokerages, which also included Minsheng Securities Co. Ltd., Guotai Junan Securities Co. Ltd. and China Merchants Securities Co. Ltd.
Some companies were found to have serious problems such as poor internal control organization structures and conflicts of job responsibilities and interests, the CSRC said.
Five brokerages with relatively less severe violations are ordered to make corrections and resolve internal control weaknesses. The regulator also summoned 26 executives for regulatory talks.
The CSRC said the next step will be on-site inspections of investment banking internal controls on a regular basis.
The background: In the third quarter of 2022, 41 publicly traded Chinese brokerages posted total net fee income of 43 billion yuan ($6 billion) in investment banking, up 5.35% year-on-year.
Huajin ranked 51st with investment banking revenue of 266 million yuan in 2021 and China Dragon 70th with 117 million yuan, according to the Securities Association of China.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bob.simison@caixin.com)
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