Five tickets a day! Involving multiple small and medium-sized securities firms | Business | Securities firms

Securities firms continue to research business penalties.

On June 6th, the Shanghai Securities Regulatory Bureau website issued five consecutive fines related to securities firms, involving Deng Yongkang, an analyst at Minsheng Securities, Cao Xute, an analyst at Shengang Securities, Zhang Peng, an analyst at Nomura Oriental International Securities, Song Tao, an analyst at Shanghai Shenyin Wanguo Securities Research Institute, and Yu Jinxin, an analyst at Minsheng Securities.

Recently, there have been frequent violations in the research business of small and medium-sized securities firms. China Securities News reporters have found that since May, multiple securities firms or their related employees, including Shanxi Securities, Pacific Securities, Shouchuang Securities, and Zhongyuan Securities, have been fined for violating regulations in their research and reporting business. Issues such as unlicensed employment, insufficient prudence in research and reporting production, and management systems for research and reporting business have received key regulatory attention.

Industry insiders point out that high-quality and compliant research reports are the foundation for the development of securities research institutes. As a seller's market, at present, it is necessary for regulatory authorities to continuously strengthen supervision and regulation, coupled with the continuous improvement of internal compliance and self-discipline systems of institutions, and to strengthen compliance promotion and make every effort to curb potential problems.

Multiple securities analysts are penalized

On June 6th, regulatory information from the Shanghai Securities Regulatory Bureau showed that analysts from multiple securities firms, including Shengang Securities, Nomura Oriental International Securities, and Minsheng Securities, were issued warning letters. The reason for this is that the authenticity of the information sources and the basis for the analysis conclusions used in the research report issued by the signed analysts of relevant securities firms have become direct regulatory issues.

After investigation, it was found that the securities research report released by Shanghai Securities in 2022 cannot guarantee the authenticity of some information sources, which does not comply with the provisions of Article 9 of the Provisional Regulations on the Issuance of Securities Research Reports.

The reporter found through investigation that Article 9 clearly stipulates that the production of securities research reports should be compliant, objective, professional, and prudent. The signed securities analyst shall be responsible for the content and viewpoints of the securities research report, ensure that the information source is legal and compliant, the research methods are professional and prudent, and the analysis conclusions have reasonable basis.

Although the specific content of the research report cannot be determined through public channels, the identity of the responsible person is not a secret.

According to public information, Cao Xute belongs to the "elderly" in the industry. He joined Bohai Securities in 2005 and has since worked at Guojin Securities and Dongxing Securities. In April 2019, he switched to Shenzhen Securities. The reporter searched the WeChat official account of "Shengang Securities" with his name as the key word. A strategy seminar published at the end of 2019 showed that Cao Xute was the "director of Shengang Securities Research Institute". As of 2022, Shanghai SIPG Securities and its subsidiaries have a total of 1090 employees, with 3 analysts listed on the official website's personnel bulletin board, with Cao Xute ranking first.

Analysts from Shanghai Shenyin Wanguo Securities Research Institute Co., Ltd., Minsheng Securities, and Nomura Oriental International Securities have also been taken by the Shanghai Securities Regulatory Bureau to issue warning letters for similar reasons. Among the responsible persons for punishment, Deng Yongkang is the assistant director of Minsheng Securities Research Institute and the chief analyst of the power equipment and new energy industry.

According to the Shanghai Securities Regulatory Bureau, as a securities practitioner, Yu Jinxin sent relevant content to more than 700 customers through WeChat chat on July 13, 2022, which was forwarded and spread, causing adverse effects. This content has not been included in a research report and has not been reviewed by the company in which it is employed.

Although the specific securities firm was not disclosed, after investigation, it was found that there was only one employee with the same name, so it can be inferred that he is an analyst at Minsheng Securities and joined Minsheng Securities at the end of 2021.

As one of the three pillars of business development strategy, Minsheng Securities positions its investment research business as a key direction for overtaking and differentiated competition in the curve. In terms of team building, Minsheng Securities has introduced Hu Youwen, a Platinum Analyst from New Wealth, as the Vice President and Dean of the Research Institute of Minsheng Securities in the past two years. Feng Cheng, the leader of New Wealth's Best Sales Service Team, serves as the Vice Dean of the Research Institute and General Manager of the Institutional Business Department.

Subsequently, Minsheng Securities Research Institute successively introduced two vice deans, Zhou Tai, Chief Energy Mining Officer, and Qiu Zuxue, Chief Metal Officer, as well as a group of well-known analysts in the industry, including Zhou Junzhi, Chief Macro Officer, Mou Yiling, Chief Strategy Officer, Deng Yongkang, Chief Power Equipment and New Energy Industry Officer, and Fang Jing, Chief Electronics Industry Officer.

As a seller's market, it is common for securities firms to encounter such problems in their research reports, and it is also difficult to completely eliminate them. At present, regulatory authorities need to continuously strengthen supervision and regulation, coupled with the continuous improvement of internal compliance and self-discipline systems, and strengthen compliance promotion to curb potential problems to the greatest extent possible. Some securities professionals believe that timely punishment for violations by regulators is conducive to providing correct directional guidance for securities firms' research reports, and also to continuously improving the compliance level of securities firms' research business.

Some securities firms are experiencing chaos in their research business

According to a report by a reporter from China Securities News, in addition to the aforementioned securities firms, since May, securities firms such as Shanxi Securities, Shouchuang Securities, Pacific Securities, and Zhongyuan Securities or their related employees have been fined for violating regulations in their research and report business, working without a certificate, insufficient prudence in research and report production, and management systems for research and report business have received key regulatory attention.

Specifically, unlicensed employment is one of the key issues that regulatory authorities are concerned about, and Shanxi Securities, Pacific Securities, and others have been named for such issues. On June 2nd, the Shanxi Securities Regulatory Bureau stated that after investigation, it was found that in July 2022, during their tenure at the Shanxi Securities Research Institute, Pan Haitao and Fan Xin had not yet registered as securities analysts with the China Securities Association, but had already signed their names on the securities research reports they participated in. The Shanxi Securities Regulatory Bureau decided to issue a warning letter to them. Coincidentally, on May 26th, the Yunnan Securities Regulatory Bureau announced that there were five individuals from Pacific Securities who did not obtain analyst qualifications but released research reports in the name of analysts.

The lack of prudence in the production of research reports, such as unclear data sources and insufficient argument, also requires attention from securities firms. For example, on May 18th, the Anhui Securities Regulatory Bureau issued a warning letter to Chen Xiao and recorded it in the integrity file of the securities and futures market. The Anhui Securities Regulatory Bureau found that the research report titled "Specialized, Refined, Unique, and New" Intelligent Warehousing and Logistics Suppliers, Self developed and Self produced to Build Core Competitiveness "published under its name had insufficient basis for selecting comparable companies, insufficient evidence for profit forecasting, inconsistent text and charts, and unclear data sources.

In addition, some securities firms still need to improve their research and reporting business management systems. On May 25th, Shouchuang Securities was taken to issue a warning letter. The Beijing Securities Regulatory Bureau pointed out that its research report business management system is not sound, and the management of third-party publication or forwarding of company research reports is not in place. There are cases of long-term unauthorized reproduction of research reports by the media without timely rights protection. On May 22nd, the Henan Securities Regulatory Bureau also pointed out that the relevant system for the issuance of securities research reports by Zhongyuan Securities is incomplete, and the quality and compliance review mechanisms are not sound.

Regulatory efforts continue to increase

As seller research becomes increasingly complex, the supervision of seller research reports continues to increase. It is reported that in order to comprehensively regulate the issuance of securities research reports, improve business quality and compliance level, regulatory authorities will carry out a "double random" on-site inspection special work on research reports throughout the industry in 2022, covering a total of 45 securities companies and 300 research reports. Recently, regulatory authorities issued a notice to securities firms on the "double random" on-site inspection of securities research report business.

According to the "Notice", 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 of some companies, and insufficient professionalism and prudence in the production of research reports by some securities analysts. Subsequent regulatory authorities will hold relevant non compliant institutions and practitioners strictly accountable. Industry insiders have revealed that the recently disclosed fines related to securities firm research reports are part of the results of the aforementioned special inspections.

Zhao Bing, the director of Huaxing Securities Research Institute, stated in an interview with reporters that high-quality and compliant research reports are the foundation of the securities research institute's business development, and also the core competitiveness of the institute in building a differentiated research platform. In the context of stricter regulation of research and reporting business, securities firms need to pay more attention and strengthen compliance promotion, so that compliance awareness can penetrate into the hearts of every employee of the research institute.

Some scholars have also pointed out that as a professional report, securities research reports have high authority and influence, especially in preventing moral risks and some illegal and irregular phenomena.

In response to the weak internal control links in the research and reporting business of some securities companies discovered during this inspection, as well as the weak compliance awareness of some securities analysts and other practitioners, regulatory authorities have reiterated four regulatory requirements: firstly, securities firms are required to strengthen the source of research and reporting information and trace management, laying a solid foundation for high-quality research and reporting; The second is to require securities firms to strengthen internal control throughout the entire process of research report production, review, and publication, and focus on improving professional quality and compliance levels; The third is to require securities firms to regulate and control public statements and customer service activities, and strengthen public opinion risk management; The fourth is to require securities firms to improve personnel performance evaluation and internal accountability systems, and promote stable and far-reaching industry development.