See also severe punishment of securities companies: three crimes involved in Jianghai securities case and three major businesses suspended for half a year

category:Finance
 See also severe punishment of securities companies: three crimes involved in Jianghai securities case and three major businesses suspended for half a year


Among all kinds of supervision and management measures, business restriction is the most daunting means for securities companies. Once the business is restricted, it not only means the loss of business income for a certain period of time, but also means that this part of business has been regarded as high risk. In the near future, Zhongshan securities, pioneer securities and many other small and medium-sized securities companies have experienced similar experiences.

Under the impact of the epidemic, the performance of securities business in 2020 is not very good, and the impending suspension of business of Jianghai securities is undoubtedly worse. In May this year, Jianghai securities spread the news of seeking to transfer the controlling right of its futures subsidiary, sending out 51% equity of Jianghai Huixin futures with no less than 364 million yuan. Under the accumulation of negative news, the transaction is also fascinating.

Three crimes involved in Jianghai securities case

On the evening of June 22, the listed company Harbin Investment Corporation announced that its wholly-owned subsidiary Jianghai securities had received the regulatory measures notice in advance and decision on administrative regulatory measures issued by the CSRC.

In the corresponding documents, the CSRC pointed out that Jianghai securities has three major problems:

First, in the process of carrying out bond investment trading, there are insufficient management of traders qualification and trading behavior, inadequate management of underlying securities and counterparties, and insufficient effectiveness of compliance management and risk control;

Second, there are new channel businesses, internal management confusion and risk management not in place in the securities asset management business;

In a word, Jianghai securities has received negative evaluation from supervision in the three business areas of bond self operation, asset management and stock pledge.

Based on this, the CSRC plans to suspend the above business for six months. In the bond proprietary business, Jianghai securities can sell the existing bonds and cannot buy new ones; in addition to the necessary bond transactions to prevent liquidity risk, the scale of the funds involved in the repurchase transaction shall not be increased. In terms of asset management business, no new investment shall be made except for the newly established products for the purpose of continuing the undue assets held by the stock due products. In the stock pledge style repo business, except for the extension of the existing compliance, no new business is allowed.

In fact, among all kinds of supervision and management measures, business restriction is the most daunting means for securities companies. Once the business is restricted, it not only means the loss of business income for a certain period of time, but also means that this part of business has been regarded as high risk.

However, at present, the documents issued by the regulatory authorities are still prior notices. For the regulatory measures to be taken by the CSRC, Jianghai securities still has the right to state and defend. The CSRC will adopt the facts, reasons and evidence of its establishment upon review.

With regard to the regulatory issues of Jianghai securities, Harbin investment said that the company will conscientiously fulfill its shareholder responsibilities, urge Jianghai securities to comprehensively strengthen compliance and risk management, actively communicate with regulatory authorities, strictly implement regulatory measures and decisions, and comprehensively rectify relevant businesses.

In addition, Harbin Investment Co., Ltd. also admitted that if Jianghai securities was ordered to suspend part of its business related regulatory measures were formally implemented, it would have a certain impact on the operating performance of listed companies.

Five executives will be implicated

Three important businesses will be suspended, and the leader in charge of the business will naturally be held responsible. A total of five executives will be implicated in the regulatory instrument.

At the business level, due to the leadership responsibility for relevant issues, the CSRC plans to make decisions on the supervision and management measures for the vice presidents in charge of the three businesses of bond self operation, asset management and stock pledge, which are identified as inappropriate candidates and limit relevant rights. In addition, the compliance director and chief risk officer of Jianghai securities are also responsible for management, and they are intended to be denounced publicly by the CSRC, and their rights are restricted. Similarly, the relevant documents are all prior notices, and the above four executives still have the right to state and defend.

In addition, as the main person in charge of Jianghai securities, the president himself is also unable to avoid doubts from the supervision. In this regard, the CSRC took regulatory talks with Dong lichen, President of Jianghai securities, and asked him to come to Heilongjiang securities regulatory bureau at 10 a.m. on July 3 for regulatory talks.

It is worth noting that Dong lichen previously served as a director of Harbin Investment Group Co., Ltd. and the expiration date of this term of office is June 25, 2021. In the evening of May 6, Harbin Investment Group Co., Ltd. disclosed the resignation announcement of directors, and Dong lichen applied to resign as a director of the company and a member of the special committee of the board of directors due to personal reasons. However, according to people close to Jianghai securities, Dong lichen is still in Jianghai securities and has not changed his position.

After Dong lichen and another director resigned, the board of directors of Harbin Investment Group Co., Ltd. deliberated and approved the proposal of by election of two directors at the end of May. Among them, the by election director from Jianghai securities is one of the vice presidents who will encounter regulatory measures this time, Jiang Baolin, who is responsible for the stock pledge business. On June 19, the proposal was deliberated and passed at the 2019 general meeting of shareholders of Harbin Investment Group Co., Ltd.

In the near future, the double punishment system of company + senior management has appeared in the securities industry for many times. For example, in January this year, due to seven violations in the governance and business of Hualin securities company, the CSRC took administrative supervision measures to limit the scale of new businesses for three months, and Lin Li, then chairman and general manager, was taken regulatory talking measures.

Similarly, on June 3, due to the lack of transaction control and other problems in carrying out the bond proprietary business, the initial securities was suspended from the bond proprietary business for three months by the CSRC; Zhang Zhiming, the executive in charge of the fixed income business department and the head of the Department, was taken to restrict the rights of the executives and accept the regulatory talks.

More recently, on the evening of June 11, Jinlong stock disclosed that the regulatory authority had issued a ticket notice to Zhongshan securities in advance. In addition to the suspension of multiple new businesses, Shenzhen securities regulatory bureau plans to make a decision on the supervision and management measures to publicly condemn and restrict the rights of the chairman, President and compliance director of Zhongshan securities, and to make a decision on the supervision and management measures to two senior executives as inappropriate candidates. However, the punishment has not been officially implemented.

Expected transfer of controlling right of futures subsidiary

In the first half of 2020, the performance of small and medium-sized securities companies has been worrying. In addition to a large number of business suspension, Jianghai securities, a securities company far away in Heilongjiang Province, has become the focus of market attention.

According to the public information, Jianghai securities was founded in 2003 and is the only securities company registered in Heilongjiang. By the end of 2019, Jianghai securities had 20 branches and 57 business departments, accounting for more than 40% of the institutions within the jurisdiction of Heilongjiang Province; there were 1500 formal employees, belonging to one of the small and medium-sized securities companies in the industry.

Looking back at the performance in 2019, Jianghai securities achieved an operating revenue of 1.558 billion yuan, an increase of 23.73% year on year; its net profit of 186 million yuan, a turnaround from loss to profit year on year, is a good year. However, the problems of its stock pledge business have begun to emerge in the 2019 annual report.

According to the annual report, the operating revenue of Jianghai securities credit business in 2019 is 70.07% lower than that in 2018. The main reason is the decrease of interest income due to the decrease of the scale of stock pledge business; the operating cost increased by 795.61% year-on-year due to the year-on-year increase of the provision for the impairment of financial assets for sale back in the current period.

After entering 2020, the performance of Jianghai securities has declined significantly. According to the consolidated calculation of the monthly report data from January to may 2020, Jianghai securities realized a total operating revenue of 643 million yuan, a year-on-year decrease of 41.96%; and a net profit of 201 million yuan, a year-on-year decrease of 58.08%.

Under the decline of Jianghai securities, it is seeking to transfer the controlling right of its futures subsidiary in the near future. In the evening of May 29, Harbin Investment Corporation announced that Jianghai securities planned to transfer 51% of the shares of its holding subsidiary Jianghai Huixin futures through a formal public listing through the property rights trading agency at a price of no less than 364 million yuan. According to the comparison of the appraisal value, the premium rate of this transaction is about 120%.

In the announcement, Harbin investment said that the equity transfer is to optimize the allocation of resources, reduce the capital occupation of Jianghai securities and improve the efficiency of capital use; at the same time, strive to introduce more powerful strategic investors through public listing transfer, effectively improve the capital strength, profitability and industry competitiveness of Jianghai Huixin futures, and jointly promote the development of Jianghai Huixin futures with Jianghai securities expand. At present, the shareholding ratio of Jianghai securities in Jianghai Huixin futures is 87.50%; that of Bengbu investment is 12.14%; and that of Yiguang investment is 0.36%. After the completion of the transfer, Jianghai securities will only have 36.5% of the equity of Jianghai Huixin futures, becoming the second largest shareholder. Under the accumulation of negative news, the transaction is also fascinating. Whether it is to introduce more powerful strategic investors or to urgently need capital return, the equity transfer of Jianghai securities remains to be observed by the market. Extended reading: the national development and Reform Commission issued the central budget investment of 3.5 billion yuan in two batches to support Hainan free trade port national network information office to interview Zhang Bincheng, Secretary of the Party committee and chairman of Shaanxi Nuclear Industry Group Co., Ltd. in 10 online live platforms such as Huya and douyu. Source: responsible editor of securities company in China: Wang Xiaowu_ NF

In the announcement, Harbin investment said that the equity transfer is to optimize the allocation of resources, reduce the capital occupation of Jianghai securities and improve the efficiency of capital use; at the same time, strive to introduce more powerful strategic investors through public listing transfer, effectively improve the capital strength, profitability and industry competitiveness of Jianghai Huixin futures, and jointly promote the development of Jianghai Huixin futures with Jianghai securities expand.

At present, the shareholding ratio of Jianghai securities in Jianghai Huixin futures is 87.50%; that of Bengbu investment is 12.14%; and that of Yiguang investment is 0.36%. After the completion of the transfer, Jianghai securities will only have 36.5% of the equity of Jianghai Huixin futures, becoming the second largest shareholder.