40 securities firms received 130 investment banking fines throughout the year! Nearly one every 3 days, two securities firms "hit the reef" again at the end of the year.

In 2024, there were continuous penalties in the field of securities investment banking, which can be called a "big year of investment banking penalties". As the year-end approaches, there have been at least 130 investment banking penalties, a 23.81% increase compared to the same period last year, affecting more than 40 brokerages; 136 underwriters have been punished, with an additional 4 underwriters having their business suspended. China Securities Co., Ltd. has the highest number of penalties, with 20 accounting for nearly one-sixth of the industry, and the phenomenon of "double penalties" for individuals and institutions is significant. At the end of the year, Shenwan Hongyuan Group Securities and Minmetals Securities once again ran into trouble in the Zhongtai Chemical financial fraud incident. The penalties disclosed by the Xinjiang Securities Regulatory Commission on December 24th show that both brokerage firms were issued warning letters for regulatory measures, with Shenwan Hongyuan Group as the main underwriter of "23Xinhua01" and Minmetals Securities as the main underwriter of "23XinhuaK1", both having deficiencies in various aspects of the issuer's due diligence work. The sharp increase in the number of penalties in the field of investment banking in 2024 reflects the strict crackdown by regulatory authorities on violations by investment banks. Through various regulatory measures and system improvements, regulatory authorities are working to ensure the compliant conduct of investment banking business and the healthy development of the market. 130 investment banking penalties issued this year According to data from Yidong, as of December 24th, there have been a total of 130 investment banking penalties issued this year, including ongoing supervisory business, an increase of 25 penalties compared to the same period last year, representing a 23.81% increase. By the end of 2023, there were 105 penalties issued. A total of 40 brokerages have been penalized for their investment banking activities, with China Securities Co., Ltd. receiving the highest number of penalties at 20; followed by Haitong with 11; CITIC SEC and Guosen with 7 penalties each; Minsheng Securities, Huatai United, and Huaxi with 6 penalties each; and CMSC with 5 penalties. Shenwan Hongyuan Group Securities had a total of 5 penalties for underwriting and sponsorship. Four underwriters have had their business suspended this year, including Hu Bin and Yang Ruibin of CITIC SEC, as well as Liu Nengqing and Qiu Ronghui of China Securities Co., Ltd. Two brokerages stumble in the same company Shenwan Hongyuan Group Securities and Minmetals Securities were both penalized due to financial fraud at the same company. Shenwan Hongyuan Group Securities, as the main underwriter of Zhongtai Chemical's "23Xinhua01" corporate bonds, failed to adequately verify the issuer's non-operating transactions, trade revenue, and the use of previous fundraising, and their due diligence work was not standard. Minmetals Securities, as the main underwriter of Zhongtai Chemical's "23XinhuaK1" corporate bonds, also failed to adequately verify the issuer's non-operating transactions, trade revenue, and the use of previous fundraising. Individual financial statement analyses were not thorough, and their due diligence work was not standard. On May 17th, Zhongtai Chemical announced that the company and relevant officials had received an "Administrative Penalty Decision" from the Xinjiang Securities Regulatory Commission, stating that there were false entries in the company's 2022 annual report; failure to timely disclose related party non-operating fund utilization in the 2021 and 2022 annual reports, and a false representation in the company's bond and debt financing instruments' annual reports and related bond prospectus disclosure. The Xinjiang Securities Regulatory Commission ordered the company to make corrections, issued a warning, and imposed a fine of 5 million RMB; warnings and fines of varying amounts were also given to individuals involved. The company's stock was suspended for one day on May 20th and resumed trading with a risk warning on May 21st, the stock symbol was changed from "Zhongtai Chemical" to "Xinjiang Zhongtai Chemical", and the daily trading limit was set at 5%. On May 19th, Zhongtai Chemical announced that the company and relevant officials received a correction to the announcement of the "Administrative Penalty Decision" from the Xinjiang Securities Regulatory Commission. Upon review, certain content in the original announcement was incorrect, and the fine amount for Yang Jianghong was changed from 5 million RMB to 2.5 million RMB. The misconduct of Shenwan Hongyuan Group Securities and Minmetals Securities did not meet the requirements and violated relevant regulations. Article 6, paragraph 1 of the "Regulations on the Issuance and Trading of Corporate Bonds" (CSRC Order No. 180) stipulates that underwriting institutions, trustees, credit rating agencies, accounting firms, asset appraisal agencies, law firms, and other professional institutions and individuals providing services for corporate bond issuance shall perform their duties diligently, strictly comply with professional norms and regulatory rules, and fulfill obligations as stipulated and agreed. Article 41 states that main underwriters should comply with business rules and industry norms, be honest and trustworthy, diligent, and maintain reasonable doubt, and conduct due diligence work in accordance with the principles of reasonableness, necessity, and importance to ensure the authenticity, accuracy, and compleIntegrity shall conduct a careful examination, and have reasonable and prudent reasons to believe that the information disclosed in the offering documents does not contain false records, misleading statements or significant omissions. If the lead underwriter has reasonable doubts about the important content of the professional opinion issued by the securities service institution in the corporate bond offering documents, it shall perform careful examination and necessary investigation and review work to eliminate such doubts. The securities service institution shall cooperate with the lead underwriter's relevant verification work.Multiple regulatory measures promote the compliance of investment banking business In order to ensure the compliance of the industry's business operations, multiple regulatory measures have been implemented considering the complexity and high incidence of violations in investment banking business. The self-discipline regulatory platform for investment banking business will start providing services from 9:00 on December 30, 2024, accepting submissions of draft directories from securities firms, investment banking project information and personnel information submissions, negative issues reporting on projects and companies, etc. In addition, the second phase of the self-discipline regulatory platform will be launched in 2025 to ensure comprehensive and efficient regulation and support for investment banking business. Furthermore, new rules for continuous supervision will be introduced. The Securities Association has consulted securities companies on the "Guidelines for Continuous Supervision of Securities Companies' Sponsorship Business". The drafting of these guidelines primarily covers three aspects: establishing sound practices for continuous supervision of sponsorship business to form clear and unified practice standards; clarifying the requirements for continuous supervision of convertible bond projects and entrusted management of bond characteristics, addressing the "confusion" in the continuous supervision practice of sponsors of convertible bonds; and forming a unified directory for continuous supervision work, covering the main contents of the continuous supervision stage, to guide sponsors in preparing continuous supervision work documents. On October 18 of this year, the China Securities Regulatory Commission (CSRC) issued a document stating that it has conducted on-site inspections of the internal controls and ethical conduct of some securities companies' investment banking businesses this year. In response to the issues identified during the inspections, the CSRC adheres to the principles of "penetrating supervision, full accountability throughout the chain" and dual penalties for institutions and individuals, focusing on the "key few" such as company executives and adopting measures in accordance with the severity of the issues. On December 20, a spokesperson for the relevant department of the CSRC stated during a press conference that the CSRC will deepen the implementation of the decisions and arrangements of the party central committee and the state council, and adhere to regulatory measures with "sharp teeth and edges", highlighting a combination of punishment, prevention, and treatment. The CSRC will continue to work with relevant parties to increase the comprehensive and three-dimensional accountability for securities illegal and criminal activities, support more investors in using legal weapons including civil lawsuits to hold illegal individuals accountable for damages, support the investor service centers in carrying out special representation litigation on behalf of investors, and better serve investors. The CSRC also supports cooperating with the people's courts to handle more securities disputes through special representative litigation, to better protect the legitimate rights and interests of investors, especially small and medium-sized investors, and maintain a good market ecology. This article is from "Cai Lian She". Editor: Liu Xuan, translated by GMTEight.