baccaratfr| SDIC Securities received another fine for failing to implement effective compliance management of employees 'practicing behavior

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21st Century Economic reporter Li Yu reporting from Shenzhen

Another brokerage has been warned!

On May 21, Hebei Securities Regulatory Bureau issued a decision on the administrative supervision measures of issuing warning letters to Hebei Branch of Guotou Securities Co., Ltd.

Hebei Securities Regulatory Bureau pointed out that there are the following problems in Hebei Branch of GIC Securities. First, there is no effective compliance management for employees' professional behavior. Individual employees illegally entrust third parties to conduct investor solicitation activities; some employees sell financial products and provide investment advisory services without trace management; the mobile phone numbers actually used by some employees are not included in the compliance monitoring system; investment consultants provide investment advice to investors without reasonable basis and have not been examined by compliance personnel.

Second, the management of investor appropriateness is not in place. Take the initiative to introduce medium-and high-risk fund products to ordinary investors whose expected investment objectives, investment duration and risk levels are uncertain; some public fund products mislead investors in the sales process, and there is no risk reminder.

The third is to implement special assessment and incentive policies for some public fund products during the subscription period.

Fourth, the content of information publicity is incomplete. The branch does not publicize the interest rates and rates of margin trading at the place of business.

The above actions violate item 7 of Article 8 of the measures for the Administration of Securities Brokerage Business (Securities Regulatory Commission order No. 204) and Article 2 of the interim provisions on the Administration of Securities Brokers (revised in 2020) (Securities Regulatory Commission notice (2020) No. 20). According to the relevant provisions such as the interim provisions on Securities Investment Consulting Business, Hebei Securities Regulatory Bureau decided to take administrative supervision measures to issue warning letters to the CIC Securities Branch. The branch is required to submit a written report to Hebei Securities Supervision Bureau within 15 working days after receiving the decision.

A reporter from the 21st Century Economic report learned that prior to this, CIC Securities had been taken regulatory measures due to problems such as inadequate performance of sponsor duties.

On January 16, 2024, the Shanghai Stock Exchange updated the announcement that Guotou Securities Co., Ltd., as the sponsor of the initial public offering and listing application project such as Shanghai Rongsheng Biopharmaceutical Co., Ltd., was warned by the Shanghai Stock Exchange because of the lack of recommendation duties in the recommendation work of related projects. Fu Youkai, the representative of the company's sponsor, and Li Ze (Jin Kirin analyst) were both criticized by the Shanghai Stock Exchange.

It is reported that the production line of Rongsheng's core products has been shut down for as long as 3 months, which has a significant adverse impact on its business performance and is a major issue affecting the continued operation of the issuer. However, the sponsor fails to carry out the careful verification and report to the SSE in time when it is aware of it, until the sponsor is clearly required to take targeted verification measures for the shutdown and issue a special verification opinion, and the sponsor shall perform the verification procedure and report.

In addition, there are also cases in which due diligence procedures are not in place and there are weak links in internal control. In the early stage, the Shanghai Stock Exchange carried out on-site supervision of the practice quality of CIC securities and found that it did not check the key issues such as income, capital flow and inventory of individual projects.

According to the relevant regulations, the Shanghai Stock Exchange decided to give a regulatory warning to CIC securities. In addition, Fu Youkai and Li Zeye, as the sponsor representative of Rongsheng biology designated by CIC Securities for initial public offering and listing in Science and Technology Innovation Board, were also notified and criticized by the Shanghai Stock Exchange because of the lack of performance of their sponsor duties, which will be notified to the China Securities Regulatory Commission and recorded in the CSRC integrity file database.

According to incomplete statistics, under the regulatory background of "two strong and two strict", the regulatory authorities have issued more than 70 penalty notices against securities firms and more than 200 fines against securities practitioners so far this year. These fines for securities firms mainly include warning letters and orders for correction, while the rest are for filing investigations, suspending business, and so on.

"tighter regulation will drive the change of the industry pattern." Hu Xiang, an analyst at Soochow Securities, believes that the current regulatory authorities set the focus of "two strong and two strict" work, making it clear that securities companies should "put functionality in the first place, adhere to customer-centered, and correctly handle the relationship between functionality and profitability." it is expected that in the follow-up to eliminate the dead corner of supervision, correct the positioning of industry institutions, and highlight the functionality of industry institutions will become the phased focus of supervision.