58jlcom| Front page of Securities Daily: Securities supervision "qualification penalty" hits the key, truly "hurting" illegal intermediaries

On May 15, the CSRC released the law enforcement situation in 2023, showing that the CSRC severely punished intermediary agencies that failed to perform their duties and imposed "double penalties" on institutions and personnel in accordance with the law. In addition to the application of "property penalty" in accordance with the law, we should make full use of legal empowerment to explore the application of "qualification penalty". If Zhongtian Huamao accountant firm fails to perform due diligence in the audit practice of Dongfang net Power Annual report, the business income shall be confiscated and a fine of 5 times shall be imposed, and its securities service business shall be suspended for 6 months.

Coincidentally, on May 14, the Shenzhen Stock Exchange first opened an intermediary "qualification penalty" under the registration system, imposing a heavy "qualification penalty" on sponsors and accounting firms involved in a fraud case of a listed company for six months.

Compared with the one-off "property penalty", the "qualification penalty" directly "cuts" the business qualifications of illegal intermediary agencies, goes straight to the point, lasts longer, has a strong deterrent force, and is regarded as a "top punishment" by the industry.

First of all, the "qualification penalty" freezes the business qualifications of illegal intermediary agencies, which directly causes its business shutdown, project pressure, and affects its annual performance. According to the above cases, whether the CSRC suspends business qualifications or the exchange temporarily refuses to accept documents, it is essentially a "no" for illegal intermediaries to engage in securities-related business. The half-year-long business "window" is bound to affect the organization's related business income and drag down its annual performance. At the same time, due to the inability to develop the industry, it is bound to cause the loss of relevant projects under trial and waiting for review, and affect the quality of assets. Especially in the increasingly fierce competition in securities business today, half a year of business "lagging behind" has also put a big question mark on the business prospects of relevant institutions.

Secondly, faced with the pressure of stock customers and staff loss, the competitiveness of institutions has declined. Customer is a key factor related to the survival and development of intermediary agencies. The half-year business "window" makes most customers "can't afford to wait", which is likely to cause the financiers who are anxious to "replenish the blood" to switch to other places, and it is also likely to allow listed companies waiting for financial audit to choose.58jlcomHis years of customer accumulation may be destroyed at once. Judging from the past, it may also lead to staff turnover. Employees of illegal institutions are faced with the dilemma of being "unemployed" for a long time, so it is not impossible to choose to resign or even change jobs with projects.

Finally, the reputation of the intermediary involved has been damaged and it is difficult to regain trust. On the surface, the "qualification penalty" affects more of the "hard indicators" related to the business, projects and customers of illegal intermediaries, but from a deeper level, the "qualification penalty" has a greater long-term impact on institutional reputation, brands and other "soft power". The temporary backwardness of the business may be able to make up for in the short term, but it is difficult to take off the "bad record" label, and it is not easy to rebuild the market trust.

More importantly, the "qualification penalty" is an unbearable heavy penalty, and the securities companies involved will be deducted from the regulatory rating, which will affect the rating results, which is directly related to the allocation of regulatory resources, new business and new product pilots, on-site inspection frequency and many other aspects.

The other side of the "qualification penalty" shows the determination of securities supervision to "tusk with thorns" and severely punish incompetent intermediary agencies. Just as the CSRC said, pay close attention to the lack of diligence and due diligence, tighten the responsibility of the "gatekeeper", and urge intermediary institutions to improve the quality of practice. For this reason, intermediary institutions should correct their business concepts, improve their professional ability, strengthen internal control management, perform their duties, prevent illegal acts such as financial fraud, protect the legitimate interests of investors, and be good "gatekeepers" of the capital market.