This pioneer securities firm failed One point three 100 million bond buybacks failed

 This pioneer securities firm failed One point three 100 million bond buybacks failed

Recently, China judicial document network disclosed a judgment on bond repurchase contract dispute between WebTrust securities and Sichuan Linshui rural commercial bank. WebTrust Securities said it had been entrusted by Linshui rural commercial bank to carry out bond repurchase transaction, but Linshui rural commercial bank refused to perform the repurchase obligation after the expiration, so WebTrust securities took it to court.

Photo source: China referee document network

E-mail securities proposed that from April 26, 2017 to October 22, 2018, Linshui rural commercial bank entrusted e-mail securities to carry out bond buyout repo transaction in the national inter-bank bond market on behalf of Linshui rural commercial bank. Linshui rural commercial bank acted as the actual holder of the bond, and e-mail securities carried out bond buyout repo transaction with the designated trading party as entrusted by Linshui rural commercial bank.

At the expiration of the bond repurchase period, online credit securities repurchases the bonds from the trading party, and Linshui agricultural commercial bank repurchases the bonds from online credit securities at the same time. However, at the expiration of the period, Linshui rural commercial bank refused to perform the repurchase obligations for the five bonds agreed in the agreement. This time, the net letter securities filed a lawsuit on the 17 Nongfa 06 bond and 16 Nongfa 09 bond with the face value of 50 million yuan, involving the total bond purchase price One point three Billion yuan.

Linshui rural commercial bank does not recognize the claim of e-mail securities, and says that it has never signed an agreement or established a principal-agent relationship or other legal relationship with e-mail securities in respect of the bonds involved in the case, and that the litigation claims, facts and reasons of e-mail securities lack real and legal evidence support, which is inconsistent with the objective facts.

In the face of the two sides, the court conducted detailed cross examination, and the two companies also provided a lot of evidence. Some staff of Netcom securities also testified in court after the trial. However, after the trial, the court found that the existing evidence was not enough to prove that e-trust securities and Linshui Rural Commercial Bank signed the case involving the bond trading agreement, which formed the principal-agent relationship of bond trading. The bond trading between e-trust securities and the third party was not entrusted and instructed by Linshui Rural Commercial Bank.

The final court ruled that Netcom securities had no right to require Linshui agricultural commercial bank to perform the repurchase obligation and bear the liability for breach of contract for the bonds involved in the case, and its lawsuit request lacked sufficient evidence support and could not be established and should be rejected. Not only that, the court also decided that the case acceptance fee and litigation preservation fee should be borne by Netcom securities seventy-three point eight Ten thousand yuan.

Continuous deterioration of operation

On May 5, 2019, Liaoning Securities Regulatory Bureau issued a notice on risk monitoring of e-mail securities. Due to the companys major risks, Liaoning Securities Regulatory Bureau sent a risk monitoring field working group to the company for special inspection from now on, and monitored the companys operation and management activities such as transfer of funds, disposal of assets, deployment of personnel, use of seals, conclusion and performance of contracts.

Photo source: Liaoning Securities Regulatory Bureau

On the same day, Liaoning Securities Regulatory Bureau also issued a ticket to three natural persons, including Zhang Liqun, CEO of pioneer group, who actually controlled more than 5% of the equity of Netcom securities without approval.

Just ten days later, on May 17, 2019, the CSRC said that the recent daily supervision found that the financial situation of e-letter securities continued to deteriorate, the net capital and other risk control indicators have not met the requirements, and there are major risks. In the next step, the regulatory authorities will continue to strengthen supervision, urge the resolution of risks, and investigate and deal with the problems found in violation of laws and regulations according to law.

Taking the most obvious deterioration of net capital index as an example, the 2018 annual report of Netcom securities shows that as of the end of the reporting period, the net capital of the company is- thirty point five five Billion yuan, the companys operating revenue in that year- thirty-two point four four Billion yuan, net profit- twenty-eight point eight zero Billion yuan. Total net capital of the company as of the end of 2019- thirty-eight point three six Billion yuan, accumulated loss reached forty-one point zero two Billion yuan.

In its 2019 annual report, cybertrust Securities said that during the reporting period, the company only carried out securities brokerage business normally, and other businesses have been suspended. Bond repo business has been breached, involving a large number of lawsuits and arbitrations. Up to now, the companys operation and management activities are still monitored by the on-site working group of Liaoning Securities Regulatory Bureau.

For this financial report, the audit institution has given a qualified opinion, which is based on the monitoring of the companys business, the performance loss and the suspension of other businesses except brokerage business. The audit institution also stressed that the repurchase business of e-letter securities has been in breach of contract, involving a large number of litigation and arbitration, and failed to make an effective response plan to its current situation. These matters indicate that there are significant uncertainties that may cause significant doubts about the sustainable operation ability of e-letter securities.

Three times in the year

In recent years, e-letter securities has been involved in a number of lawsuits, and in 2020, the company has been listed as the executor three times.

In January 2020, Beijing Arbitration Commission ruled that Netease securities should compensate Yucheng County Rural Credit Cooperatives for the loss one point five three RMB 100 million, compensation amount seventy-three point eight two Ten thousand yuan, penalty interest three thousand seven hundred and ninety-five point three Ten thousand yuan, total one point nine one Billion yuan. After that, Netcom securities applied to Beijing NO.4 middle court for cancellation of the arbitration award, which was rejected in April 2020.

Photo source: China executive information disclosure network