Brokerage penalties are being issued intensively: Investment banking operations are facing reckoning, and compliance has become a matter of life and death.

AI Regulation and the Dual Penalty System: How Will They Reshape the Brokerage Industry Ecosystem?

Six institutions fined in one week.

Investor Network Jiang Ji

By early 2026, regulatory efforts in China’s securities industry continue to intensify, demonstrating the authorities’ determination to reinforce the “gatekeeper” responsibilities of intermediaries.

Recently, securities regulatory bureaus across various regions disclosed multiple administrative sanctions, with several brokerages penalized for past violations. Notably, in early March 2026, the Shanghai Securities Regulatory Bureau issued several fines, targeting institutions such as Orient Securities, China-Deutsche Securities, and Guotai Haitong Securities, directly pointing to their dereliction of duty in ongoing supervisory and investment banking activities.

This is not an isolated case but part of a broader normalization of regulatory enforcement in recent years. As market observers, we need to look beyond the surface of fines to understand the underlying industry logic being reshaped by regulators.

Fines Profile: Why Is Investment Banking a “High-Risk Area”?

Looking at recent enforcement cases, investment banking activities are undoubtedly a “hotspot” for violations.

Specifically, violations are highly concentrated around inadequate due diligence, internal control failures, and lapses in ongoing supervision. For example, the Shanghai Securities Regulatory Bureau recently issued a warning letter to Lianhe Securities, criticizing its failure as a trustee to properly oversee the issuer’s fundraising funds; Orient Securities, China-Deutsche Securities, and Guotai Haitong Securities were also penalized for insufficient ongoing supervision and review of past projects.

It is noteworthy that current penalties exhibit a clear “dual penalty” feature: both the institution and responsible individuals are held accountable. Underwriters, project leaders, and even senior executives are now subject to sanctions. This “penetrative” regulation aims to break the previous mindset of “the firm takes the blame, individuals remain unscathed,” significantly increasing personal costs for violations.

Deeper Logic: Clearing Existing Risks and Imposing Lifelong Responsibility

This regulatory crackdown continues the focus on accountability for existing projects. For instance, Guotai Haitong Securities’ penalty even traces back to projects from before its merger with Haitong Securities, sending a clear message: regulation has no time limit, and responsibility is lifelong.

Under the full registration system, the “gatekeeper” role of intermediaries is elevated to an unprecedented level. In the past, some brokerages operated under the illusion that “once the project is issued, everything is fine,” neglecting ongoing supervision. Now, regulators are clearing out existing risks, explicitly warning the industry: no matter how long ago a project was completed, if issues are found, regulatory action can be taken at any time. This is not only a punishment for violations but also a warning to the entire industry.

Industry Shift: Compliance Moving from Cost Center to Core Competitiveness

Why do violations in investment banking keep recurring? The root cause lies in the previous business model of “emphasizing deal origination over execution.” During periods of rapid expansion, some brokerages cut corners on due diligence and left internal controls weak.

However, as the capital market enters a phase of high-quality development, the logic has changed. Compliance and risk control are no longer costs but essential tickets for survival and growth.

First, the challenges of risk control after mergers and acquisitions are prominent. Guotai Haitong Securities’ penalties related to pre-merger projects reflect the industry’s historical risk transfer issues during M&A waves. Business integration is easier than cultural and control integration. Without effectively managing and digesting historical compliance risks, M&A can become a burden rather than an asset.

Second, industry segmentation will accelerate. In the short term, the barrage of fines will impose financial losses, reputational damage, and downgrades in credit ratings on brokerages. In the long run, this will accelerate industry differentiation. Leading brokerages with robust compliance systems and strong capital bases will better adapt to the “thorny” regulatory environment; smaller firms with weak internal controls will face further survival challenges. The “Matthew Effect” will intensify, with resources concentrating in high-quality institutions.

Finally, incentive mechanisms need urgent reform. Behind fines lies a battle between individuals and systems. If performance assessments still focus solely on scale, compliance will remain just a slogan. Future brokerages must incorporate compliance metrics into core evaluations and even grant veto rights to enforce discipline, fundamentally reversing the impulse to “push through with problems.”

Respect the Market, and You Can Steady Your Steps

For investors, ongoing regulatory penalties serve as a risk education. When choosing investments, it’s not enough to consider the issuer’s qualifications; the track record and compliance reputation of the sponsor institution should also be factored in.

For brokerages, the current intensifying regulatory environment is not the end but a new beginning. Only by abandoning short-term performance obsession, truly respecting the rule of law, and integrating compliance into their DNA can they achieve steady long-term development.

A healthy capital market ecosystem requires not only strict regulation but also honest participation. When “gatekeepers” fulfill their responsibilities, the foundation for high-quality market development is solidified. In this compliance test, only those institutions that shoulder their responsibilities will survive cycles and earn future respect. (Produced by Think Finance)■