4 securities firms and 8 people collectively punished! What's going on? Analyst | Business | Securities Firm
It is also a research business that causes trouble, and multiple securities firms are subject to regulatory penalties.
On June 8th, the Shenzhen Securities Regulatory Bureau and the Guangdong Securities Regulatory Bureau disclosed penalty notices involving at least four securities firms and relevant analysts, all of which involve research institute business. The penalty measures include issuing warning letters and conducting regulatory talks.
"These are actually the punishments implemented after the 'double random' inspection of regulatory research and reporting business last year. In recent years, the regulatory trend has become stricter, and many securities research institutes are currently undergoing rectification." The head of a securities research institute in southern China told Securities Times Securities China that not only the research business, but also the securities branch offices, investment banking business, and asset management business have received many punishments this year.
4 securities firms+6 analysts+2 executives receive penalties
Since the beginning of this year, there has been an increase in penalties imposed on securities firms for conducting research on their business.
On June 8th, the Shenzhen Securities Regulatory Bureau disclosed that three securities firms or analysts, including China Merchants Securities, Yingda Securities, and East Asia Qianhai Securities, have all received relevant regulatory penalties for their research business. At the same time, the Guangdong Securities Regulatory Bureau also issued a penalty to Guangdong Development Securities and related analysts.
Specifically:
There are the following problems in the issuance of securities research reports by China Merchants Securities: firstly, the market impact assessment mechanism is not perfect, the market impact assessment of individual research reports is insufficient, and the management of level up review is not in place. Secondly, the effectiveness of internal control management in analyst research activity management, customer service, and public speaking is insufficient. The third issue is that some research reports were not produced prudently, resulting in imprecise content expression, lack of citation information, improper disclosure of data sources, and non-standard authorship of research reports.
The Shenzhen Securities Regulatory Bureau stated that the above situation violates the provisions of the "Compliance Management Measures for Securities Companies and Securities Investment Fund Management Companies" and the "Interim Provisions on the Issuance of Securities Research Reports", and has decided to take administrative regulatory measures to issue warning letters to China Merchants Securities.
At the same time, Zhang Xia, Chen Gang, Geng Ruitan, and Tu Jingqing, as analysts of China Merchants Securities, released a research report titled "Intersection of Attack and Defense, Waiting for Dawn - Opinion and Allocation Suggestions for A-shares in February 2022" which was not rigorous in its expression. The prediction methods, analysis logic, and previous research opinions cited in the A-share market trend analysis were not fully explained in the report. The Shenzhen Securities Regulatory Bureau decided to take administrative regulatory measures to issue warning letters to them.
The Shenzhen Securities Regulatory Bureau has disclosed that there are the following issues with the research reports published under the signature of Zheng Gang, an analyst at Yingda Securities: firstly, some research report data are not labeled with their sources; The prediction formula is not cautious and has not been effectively validated. The second issue is that the risk disclosure in the investment report of a certain company is insufficient, and there are situations where the report expression is not rigorous. Therefore, the Shenzhen Securities Regulatory Bureau has decided to take administrative regulatory measures against Zheng Gang by issuing a warning letter.
The Shenzhen Securities Regulatory Bureau has disclosed that there are the following problems in the issuance of securities research reports by East Asia Qianhai Securities: firstly, the internal control mechanism is incomplete and the execution is not in place. If the internal management system for research and reporting business is not updated and improved in a timely manner, the effectiveness of internal control management in analyst research activity management, customer service, public speaking, etc. is insufficient, and the assessment index system for research institute employees is not comprehensive, and the assessment traces are not sufficient. Secondly, there is insufficient quality control and compliance review in the research report. Insufficient staffing of quality control and compliance personnel for research reports, weak independence in auditing, and lax control over the quality and compliance of research reports. Thirdly, the production of research reports was not careful. Some research reports have situations where the content is not expressed rigorously, the source of information is not indicated, the information is cited incorrectly, and the manuscript is incomplete.
The Shenzhen Securities Regulatory Bureau has decided to take administrative regulatory measures such as regulatory talks with East Asia Qianhai Securities, and requires the senior executive in charge of research business, Wang Fang, to bring valid identification documents to the Shenzhen Securities Regulatory Bureau for regulatory talks on June 12th. In addition, He Yanqing, the head of the East Asia Qianhai Securities Research Institute, has also been taken into administrative supervision measures by issuing warning letters.
The Guangdong Securities Regulatory Bureau disclosed that there are the following problems in the research report business of Yuekai Securities: firstly, there are deficiencies in business management, such as the lack of a media reporting monitoring mechanism, inadequate compliance review of conflicts of interest, failure to report some media interviews to regulatory departments, inadequate internal audit of some stocks entering the coverage pool, and failure to develop corresponding standards for independent research with non customer service nature and joint research with customer service nature. The second issue is that some research reports do not accurately predict the financial data of listed companies.
The Guangdong Securities Regulatory Bureau has taken administrative regulatory measures against Yuekai Securities by issuing warning letters. The Guangdong Securities Regulatory Bureau stated that Yuekai Securities should carefully identify and rectify issues, improve relevant systems and mechanisms for research and reporting business, further strengthen internal control, and effectively and comprehensively enhance compliance management level. Meanwhile, Li Xing, an analyst at Yuekai Securities, was taken to issue a warning letter.
Strict supervision and implementation of penalties after "double random" inspections
According to the head of the relevant securities research institute, the penalties imposed on multiple securities firms and analysts this time were all the results of last year's China Securities Regulatory Commission's "double random" inspection of research and reporting business. Penalties for securities firms' research business may continue to be disclosed, and under strict supervision, there will also be many penalties for other businesses.
According to preliminary statistics from Securities Times Securities China, since May this year, securities firms and analysts have received more than 20 fines for their research business. Fourteen securities firms have been punished for violating research reports, including Hua'an Securities, Zhongyuan Securities, Shouchuang Securities, Pacific Securities, Shanxi Securities, Southwest Securities, Shengang Securities, Nomura Oriental International, Minsheng Securities, Shenyin Wanguo, China Merchants Securities, Yingda Securities, East Asia Qianhai Securities, and Yuekai Securities.
On April 28th of this year, the Institutional Supervision Report hosted by the Securities and Fund Institutions Supervision Department released a report on the on-site inspection of securities research report business with "double randomness". The report showed that in order to comprehensively regulate the issuance of securities research report business activities, improve business quality and compliance level, the China Securities Regulatory Commission carried out a special work on on-site inspection of research report business with "double randomness" throughout the industry in 2022, covering 45 securities companies and 300 research reports.
Among them, typical problems discovered during the inspection include: some companies have not timely updated and adjusted their internal control systems in accordance with regulatory requirements; The effectiveness of the implementation of internal control systems in some companies is insufficient; The prudence in the production of specific research reports is insufficient, and some employees privately express securities analysis opinions.
The above notice stated that from the inspection results, the compliance level and professional ability of the research report business are generally good, but there are also problems such as incomplete system construction and inadequate implementation in some companies, and insufficient professionalism and prudence in the production of research reports by some securities analysts. In the future, relevant non compliant institutions and practitioners will be held strictly accountable.
A person in charge of a securities research institute has stated that the penalties imposed on securities firms for their research and reporting business will continue to be disclosed in the future, and it is expected that about 20 securities firms will be fined, and the situation of receiving fines for other businesses will not be uncommon.
