Compliance breaches and talent loss double pressure, Zheshang Securities is deeply stuck in a development dilemma

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Since 2026, compliance regulation in the securities industry has continued to tighten. The China Securities Regulatory Commission (CSRC) has explicitly emphasized the need to adhere to strict legal supervision, enhance law enforcement deterrence, and strengthen the industry’s risk defense.

Against this backdrop, Zheshang Securities has repeatedly crossed regulatory lines, being named and penalized again by the Zhejiang Securities Regulatory Bureau this year. Coupled with turbulence in senior management, loss of key talent, and prominent financial risks, this brokerage is caught in a triple dilemma of compliance governance, team stability, and business development, with its path to growth fraught with thorns.

The ongoing compliance shortfalls have become the biggest developmental risk for Zheshang Securities. On March 13, 2026, the Zhejiang Securities Regulatory Bureau ordered Zheshang Securities to rectify its administrative supervision measures, pointing directly to its two core compliance loopholes.

On one hand, the fundamental control of fund custody business has completely collapsed, with some core position personnel lacking the required work experience, the office not being independent, investment supervision processes being inadequate, and management of personnel being deficient, violating relevant custody business management regulations.

On the other hand, the subsidiary’s penetrating control has failed, with inadequate compliance management for asset management subsidiaries, private equity subsidiaries, etc., and the lack of implementation of principal responsibilities, becoming the key issue for this penalty.

This is not the first time Zheshang Securities has been penalized for compliance issues. In January 2026, its Hangzhou branch was issued a warning letter and recorded in the integrity archive for lax compliance review of investor transactions and formalistic management of real-name securities accounts, exposing the head office’s lack of risk control transmission to the branches.

Tracing back to 2025, the company’s compliance risks had already begun to surface, with its investment banking business being criticized for lacking quality control checks, internal control processes being irregular, compliance gaps in proprietary trading, and the asset management subsidiary being penalized for compliance issues and failing to rectify effectively, ultimately implicating the head office, highlighting the superficial nature of its compliance rectification.

As the compliance crisis remains unresolved, personnel turbulence and talent loss have followed, further impacting the company’s stable development.

In the past six months, the core management team of Zheshang Securities has undergone intensive adjustments, completing a change in the chairman in October 2025, with former president Qian Wenhai resigning in February 2026, succeeded by former vice president Cheng Jingdong, while director Chen Xijun also resigned, indicating significant fluctuations in governance. Although this adjustment ended the “one-person rule” pattern, the core management team is entering an adaptation period in the short term, which may affect the advancement of business decisions.

Compared to the senior management adjustments, the mass loss of core talent in the research institute has a more direct impact on the business.

From the end of 2025 to early 2026, Zheshang Securities’ research institute faced a talent exodus, with chief analysts and key researchers in key areas such as food and beverage, chemicals, and home appliances leaving in succession. Some key personnel even joined competitors along with their teams, while several members of the management team were dismissed, resulting in a dual loss of management and business talent.

For small and medium-sized brokerages, sell-side research is key to connecting with institutional clients and building a brand. The loss of talent not only weakens the competitiveness of research but also indirectly drags down collaborative businesses such as investment banking and asset management.

Financial concerns are also not to be overlooked, adding more uncertainty to the company’s development.

According to the 2025 semi-annual report, Zheshang Securities had a goodwill book value as high as 682 million yuan, primarily stemming from earlier acquisitions of subsidiaries. However, with the current disorder in subsidiary compliance management and performance fluctuations, if future profits fall short of expectations, the company will face goodwill impairment risks, eroding current profits.

At the same time, in the first three quarters of 2025, the net cash flow from operating activities was 5.449 billion yuan, a year-on-year decrease of 31.80%, with cash flow diverging from profit growth, reflecting its need to improve receivables and cash flow management capabilities.

Currently, the Zhejiang Securities Regulatory Bureau has demanded that Zheshang Securities rectify within a specified period, making compliance governance the key to breaking the deadlock.

For Zheshang Securities, only by confronting compliance shortfalls, improving the internal control system, strengthening penetrating control of subsidiaries, and implementing principal responsibilities can it prevent repeated violations; at the same time, it needs to optimize talent incentive mechanisms, stabilize the core team, strengthen management of employee professional conduct, and restore team cohesion. Furthermore, it must actively mitigate goodwill impairment risks and improve cash flow conditions, relying on the new management team to drive strategic implementation.

Compliance is the foundation of a brokerage, and talent is the core driving force for development.

In the context of tightening industry regulation and increasingly fierce competition, if Zheshang Securities can complete compliance rectification on schedule, stabilize its talent pool, and resolve financial risks, it may be able to emerge from its current predicament; if it fails to effectively tackle multiple challenges, its market competitiveness may continue to decline, and its development prospects are not optimistic.