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Zhongshan Securities was named and criticized by regulators again this year.

On July 31, the Guangdong Securities Regulatory Bureau disclosed two regulatory measures, targeting Zhongshan Securities Foshan Branch and its then-head.

He was “named” many times this year
All related to private equity business

Judging from the content disclosed by the regulators, the reason why Zhongshan Securities Foshan Branch was "named" this time was related to its private equity business: "Upon investigation, it was found that Zhou Guisong, the former head of your branch, privately sold private securities investment funds that were not sold on behalf of Zhongshan Securities Co., Ltd. and obtained improper benefits from them. Many former employees of your branch participated in the above activities, which reflects the problem of inadequate compliance management of your branch."

The above situation violated the relevant provisions of the "Regulations on the Compliance Management of Securities Companies and Securities Investment Fund Management Companies" and the "Regulations on the Management of Financial Products Sold by Securities Companies". Therefore, the Guangdong Securities Regulatory Bureau took administrative supervision measures such as supervisory talks with Zhongshan Securities Foshan Branch.

The then-person in charge Zhou Guisong was restricted by regulators from serving as a director, supervisor, senior manager or branch head of a securities company or actually performing the above duties within two years.

In fact, this is not the first time that Zhongshan Securities has been named by regulators for its private equity business this year.

In February 2024, Zhongshan Securities was ordered by the Shenzhen Regulatory Bureau to make rectifications. At that time, the public regulatory information showed that Zhongshan Securities' private asset management business had four problems: 1. The related-party transaction control mechanism was not sound, and the relevant mechanisms for related-party entity identification, transaction system monitoring, and related-party transaction approval and evaluation were not perfect; 2. Internal control was not strict in the establishment and maintenance of investment product pools, investment decisions, and transaction execution; 3. There was insufficient compliance management of asset management product promotion, management fee rate setting, and information disclosure; 4. The salary deferred payment mechanism and private asset management-related business systems were not perfect or were not updated in a timely manner or effectively implemented.

Zhao Bo, then vice president in charge of asset management business and head of the asset management department of Zhongshan Securities, was ordered by the Shenzhen Securities Regulatory Bureau to make corrections and have a regulatory interview; Yuan Ling, then compliance director of Zhongshan Securities, was issued a warning letter by the Shenzhen Securities Regulatory Bureau.

Losses for three consecutive years
The actual controller intends to transfer equity

In the past three years, Zhongshan Securities' performance has not been ideal and it has been in a loss-making state. Data shows that from 2021 to 2023, Zhongshan Securities' operating income was 1.047 billion yuan, 416 million yuan, and 490 million yuan respectively; net profit attributable to the parent company was a loss of 53 million yuan, 180 million yuan, and 91 million yuan respectively, with losses for three consecutive years.

According to the semi-annual report information disclosed by the actual controlling shareholder Jinlong Co., Ltd., Zhongshan Securities achieved revenue of 484 million yuan in the first half of 2024, a year-on-year increase of 112.68%; net profit was 169 million yuan, turning losses into profits.

However, Zhongshan Securities' improved performance did not change the actual controlling party's intention to sell.

On June 5, Jinlong Co., Ltd. issued an announcement stating that it would transfer all of its approximately 1.206 billion shares of Zhongshan Securities (accounting for 67.78% of Zhongshan Securities' total share capital) through public listing on the Shanghai United Equity Exchange; on July 27, Jinlong Co., Ltd. announced again that as of now, the transaction to transfer 67.78% of its shares in Zhongshan Securities has been pre-listed on the Shanghai United Equity Exchange.

Regarding the sale of Zhongshan Securities shares, Jinlong Co., Ltd. stated that it was to increase the scale of capital recovery and accelerate the company's business transformation, thereby creating favorable conditions for the company's transformation to the real economy and the expansion of new quality productivity.

Written by: Nandu Wancaishe reporter Wu Hongsen