Chinese Regulatory Authorities Take Aim at Brokerage Abuse with Fines

Citic Securities, Haitong Securities, and Guosen Securities have all been fined by the Chinese regulator.

The Chinese financial services sector has been one of the more targeted realms in recent months, with government authorities helping clean up the industry. The government’s latest action has seen an imposed fine against securities giants Citic Securities, Haitong Securities, and Guosen Securities, part of an ongoing effort to better curb violations and illicit practices.

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Citic Securities, Haitong Securities, and Guosen Securities represent some of the largest players in China’s financial services industry. As a result of the edict, the China Securities Regulatory Commission issued a fine of $44.75 million (308.3 million yuan) along with a warning for weak practices and lax procedures.

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Indeed, China has not earned a reputation for being such an ironclad regulatory environment as some of its peers, though the efforts do underscore Beijing’s desire to oversee a more tightly controlled playing field. Citic Securities also had violated regulations related to margin financing and securities lending when handling transactions for Citadel (Shanghai) Trading Company Limited, prompting fines for two company executives, according to a Reuters report.

Moreover, Haitong Securities Co Ltd and Guosen Securities Co Ltd were also slapped with fines for violating margin financing rules – both also had proceeds from their respective businesses confiscated. Haitong Securities was fined $362,000 (2.5 million yuan), while Guosen Securities and its futures unit were fined a total of $1.5 million (105 million yuan).

Earlier today, Moody’s Investors Service lowered China’s long-term local currency and foreign currency issuer ratings from Aa3 to A1, changing its outlook from stable to negative. The downgrade is a reflection of Moody’s expectation that the country’s financial strength will weaken in the next few years, following a continuously rising economy-wide debt and a slowing down of potential growth.

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