5 Brokerages Receive Sponsorship Business Penalties at Rare Concentration Levels

Can AI · Dual Accountability Mechanism Improve the Compliance Level of Sponsorship Business?

Cailian Press, March 21st (Reporter Zhao Xinrui) This week, a batch of fines was issued again, and behind this concentrated punishment, multiple violations in the past sponsorship projects of several securities firms were exposed.

On March 20th, Huaxi Securities, Lianchu Securities, Dongfang Securities, Guotai Haitong Securities, and Zhongde Securities collectively received 10 fines. The violations covered a wide range of core securities business areas, including bond underwriting and trusteeship, stock sponsorship, and ongoing M&A supervision, highlighting regulators’ emphasis on standardizing the entire sponsorship chain. Analyzing these fines reveals three common points.

First, most of the fined violations involved past existing projects, not recent new business, exposing risks left by previous non-compliant practices of securities firms.

Second, regulatory penalties implement a “both institutional and individual” accountability, with responsible personnel being held accountable simultaneously, demonstrating regulators’ firm stance on pursuing violations to the end.

Third, the issues leading to fines are highly concentrated, generally pointing to inadequate ongoing supervision, process control, and due diligence.

Huaxi Securities: Violations in Certain Bond Projects, Project Leaders Also Penalized

On March 20th, the Sichuan Securities Regulatory Bureau issued two fines to Huaxi Securities and related project leaders. Investigations found that Huaxi Securities had deficiencies in due diligence on collateral information, insufficient verification of fund usage, and inadequate internal systems during the underwriting and trusteeship of certain bond projects. Two project leaders, Zhao Zhejie and Chen Yufang, were also subject to regulatory measures requiring correction.

From the basis of regulatory penalties, further details of Huaxi Securities’ violations are revealed.

According to Article 7 of the “Measures for the Administration of Corporate Bond Issuance and Trading” (CSRC Order No. 113), issuers, underwriters, and related staff are prohibited from engaging in unfair competition, benefit transfer, seeking improper benefits directly or indirectly, or other behaviors that disrupt market order during issuance pricing and distribution; Article 34 specifies that non-public corporate bonds should be issued to professional investors only, and should not use advertising, public inducements, or disguised public offerings, with each issuance not exceeding 200 investors.

These issues reflect problems in the company’s internal systems.

Lianchu Securities: Bond Projects Fail to Fulfill Responsibilities, Issuers Have Multiple Disclosure Violations

Lianchu Securities also received regulatory fines for bond project violations, primarily due to its failure to fulfill its duties as trustee, while the issuer, Shangshi Leasing, was also held accountable for multiple issuance and disclosure violations.

As the trustee for Shangshi Leasing bonds, Lianchu Securities mainly violated two aspects: first, inadequate supervision of the issuer’s fund usage; second, failure to disclose interim trustee reports in a timely manner and to supervise the issuer’s timely disclosure of interim reports. Consequently, Lianchu Securities was issued a warning letter.

The specific shortcomings of Lianchu Securities are further confirmed by penalties imposed on Shangshi Leasing. The company had multiple violations in bond issuance and disclosure, which should have been identified and corrected within Lianchu Securities’ trustee responsibilities.

In the bond issuance, Shangshi Leasing’s non-public bond “21 Shangshi 01” with a scale of 400 million yuan was issued, but the company obtained funds through short-term loans and subscribed to 210 million yuan in the name of related institutions, indicating illegal fund sources. Lianchu Securities failed to effectively supervise the use of these funds.

Additionally, Shangshi Leasing failed to disclose periodic reports for mid-2023, annual 2023, 2024, and 2025, and did not promptly disclose changes in general managers, accumulated new borrowings, or external guarantees. Lianchu Securities, as trustee, did not timely supervise or urge the issuer to disclose these reports.

In response, regulators issued a warning letter and required corrective actions. The company’s chairman Lin Zhen and then-General Manager Shi Li also received warning letters.

Guotai Haitong Securities: Inadequate Compliance Control, Ongoing Supervision of Past Projects Violated Regulations

The violation by Haitong Securities occurred before its absorption into Guotai Haitong Securities. Due to an incomplete compliance control system, multiple violations occurred during ongoing supervision of sponsorship projects, resulting in a warning letter.

The fines show that Haitong Securities served as sponsor for the 2020 non-public stock issuance of Puli Pharmaceutical and the 2021 issuance of convertible bonds to unspecified investors. However, during ongoing supervision, the following four issues were identified:

First, insufficient investigation of abnormal or concerning situations; second, unprofessional conduct by project team staff; third, internal quality control and review processes were inadequate; fourth, the conclusions in ongoing supervision reports and special review opinions were inaccurate.

Two project supervisors, Zhou Zhou and Tian Jia, were responsible for these violations and received warning letters.

It is noteworthy that these violations occurred during Haitong Securities’ period, serving as a warning that securities firms need to further strengthen compliance and internal governance during business integration, address quality issues, and prevent legacy risks.

Zhongde Securities: Insufficient Due Diligence in Sponsorship Projects, Ordered to Rectify

Zhongde Securities was found to have inadequate due diligence in two related projects involving Taiyuan Heavy Industry’s sponsorship and underwriting, with the following violations:

As the sponsor for Taiyuan Heavy Industry’s 2020 non-public stock issuance and listing, due diligence on large accounts receivable, prepayments, and financial expenses was insufficient, and some work papers were not properly archived.

As co-lead underwriter for Taiyuan Heavy Industry’s 2022 non-public bond issuance, due diligence on key subsidiaries, major clients, and suppliers was also insufficient, with some work papers not archived timely.

Regulators believe these issues reflect poor compliance management at Zhongde Securities and require the company to rectify the problems and hold relevant personnel accountable, submitting a written report within 30 days.

Dongfang Securities: Ongoing Supervision Violations in Restructuring Projects, Project Lead Also Penalized

Unlike other firms with multiple violations, Dongfang Securities was penalized for a past M&A restructuring project.

In 2016, Dongfang Securities served as an independent financial advisor for Guangyuyao Pharmaceutical’s issuance of shares to acquire assets and raise supporting funds, with related-party transactions. During ongoing supervision, the following violations occurred:

First, failure to reasonably scrutinize the authenticity of sales and the accuracy of sales expenses; second, not conducting necessary verification when using professional opinions from accounting firms; third, inadequate ongoing supervision of performance commitments; fourth, inaccurate conclusions in supervision reports and special review opinions.

Two project leaders, Zhu Jian and Huang Wan, were responsible and received warning letters.

(Reporter Zhao Xinrui, Cailian Press)