Author | Xie Mei bath
Edit| Fu Ying
Source | Unicorn Finance
In the past three years since the case was filed, Bohai Rongxing (Shanghai) Trading Co., Ltd. (hereinafter referred to as "Bohai Rongxing") has recently received a fine from the China Securities Regulatory Commission (CSRC) and confiscated about 20.4 million yuan for allegedly manipulating coke and coking coal futures and making illegal profits of tens of millions.
Bohai Rongxing is a listed brokerage company of Northeast Securities (000686. SZ) is a wholly-owned subsidiary of Bohai Futures Co., Ltd. (hereinafter referred to as "Bohai Futures").
It is worth mentioning that, according to the announcement on the official website of the China Securities Regulatory Commission, the "manipulation of futures case" of Bohai Securities has led to the questioning of Northeast Securities' bond issuance. Now that the punishment has landed, Northeast Securities has also become one of the "focuses" of the case.
1
Bohai Rongxing is suspected of "manipulating futures",
It took three years to punish the landing
In December 2021, Northeast Securities issued an announcement saying that the China Securities Regulatory Commission decided to file a case against Bohai Rongxing because it was suspected of manipulating futures contracts.
After nearly three years, the administrative punishment of Bohai Rongxing was officially implemented.
According to the "Advance Notice of Administrative Punishment" issued by the China Securities Regulatory Commission, it was found that from December 29, 2020 to January 15, 2021, Bohai Rongxing used improper means to circumvent position restrictions, formed a position advantage, and carried out a position squeeze, affecting the trading prices of coke 2101 contracts and coking coal 2101 contracts, with illegal gains of 10.1976 million yuan during the period;
Source: Canned Gallery
In terms of the accountability of the person responsible for this case, Yang Huibing, who was the general manager of Bohai Rongxing and the director and general manager of Bohai Rongsheng at the time, was the person in charge directly responsible for the manipulation of the coke 2101 contract and the coking coal 2101 contract in the Bohai Rongxing case; Wang Ye was the head of the Bohai Rongxing black commodity futures trading team at the time, and was the other person directly responsible for the manipulation of the coke 2101 contract and the coking coal 2101 contract in the Bohai Rongxing case; Xiao Jiahua has nothing to do with Bohai Rongxing
At present, on the website of the China Futures Association, the positions of Yang Huibing and Wang Ye, who are responsible for the case, have not been queried.
According to the investigation results of the case, the punishment issued by the China Securities Regulatory Commission was "no one fine", Bohai Rongxing was confiscated of 10,197,566 yuan of illegal gains, and imposed a fine of 10,197,566 yuan, while Yang Huibing and Xiao Jiahua were also punished, fined 200,000 yuan and 100,000 yuan respectively.
In November 2019, the China Securities Regulatory Commission (CSRC) pointed out in the drafting notes of the Provisions on Article 70, Paragraph 5 of the Regulations on the Administration of Futures Trading "Other Futures Trading Price Manipulations" that position squeeze manipulation refers to the act of "using improper means to circumvent position restrictions and form a position advantage and affect futures trading prices when the delivery month is approaching or the delivery month".
Regarding the above-mentioned fine, Northeast Securities said that the proposed punishment targets are the subordinate grandson companies and related personnel of the company's holding subsidiaries, and do not involve the company. At present, the operation of the Company and its subsidiaries is normal, and the matters to be punished in the Advance Notice of Administrative Penalty will not have a material adverse impact on the business activities, financial condition and solvency of the Company and its subsidiaries, and will not cause major internal control deficiencies of the Company.
Source: Canned Gallery
Bai Wenxi, chief economist of China Enterprise Capital Alliance, believes that "the reason for Bohai Rongxing's 'futures manipulation' may be the lack or imperfection of the company's internal control and compliance system, and in addition, the senior management and trading team ignore or deliberately violate market rules, and the pursuit of illegal gains may outweigh the consideration of legal consequences." ”
In response to the impact of this incident on Bohai Rongxing, Zhi Peiyuan, a master's student at the School of Management of China University of Mining and Technology (Beijing) in China and president of Zhongqinnong Co., Ltd., said, "After the disclosure of the Bohai Rongxing futures market manipulation case, it not only exposed the serious misconduct of individual enterprises in market operation, but also warned the lack of corporate compliance culture. ”
Zhi Peiyuan further said, "Violations will undoubtedly damage the company's brand image, weaken customer trust, and may lead to loss of business. In addition to direct penalties, they will also face potential civil claims and other indirect economic losses, and may face stricter regulatory scrutiny and higher compliance thresholds in the future. Poor track record may affect relationships with peers and customers, hindering business expansion. ”
2
The old case caused Northeast Securities to be questioned about the issuance of bonds.
What is the business impact?
According to industrial and commercial information, Bohai Rongxing was established in 2016 with a registered capital of 50 million yuan, and its business scope includes international trade, entrepot trade, trade between enterprises in the zone and trade agency, import and export business of goods and technology, customs declaration business, and inspection agency.
Bohai Futures wholly owns Bohai Rongxing through Bohai Rongsheng Capital Management Co., Ltd., and in June 2023, the legal representative of Bohai Rongxing has been changed from Pu Yan to Cai Rui. Pu Yan is also the director and general manager of Bohai Futures, and Cai Rui is the deputy general manager of Bohai Futures.
Source: Canned Gallery
Northeast Securities holds 96% of the shares of Bohai Futures and is the controlling shareholder of Bohai Futures. Bohai Futures disclosed in its 2024 semi-annual report that Bohai Rongxing had borrowed 100 million yuan from Northeast Securities in two years starting in May 2022, and the principal and interest of the loan had been fully repaid.
Bohai Rongxing's "futures manipulation case" has affected the bond issuance of Northeast Securities.
In January 2022, Northeast Securities was questioned by the regulator about its plan to publicly issue subordinated corporate bonds to professional investors, and the question was that Bohai Rongxing received the Notice of Case Filing for suspected manipulation of futures contracts, and Northeast Securities was required to make supplementary disclosures and explain whether it complies with the provisions of Article 15 (1) of the Securities Law.
Source: The official website of the China Securities Regulatory Commission
The relevant provisions of the Securities Law require "a sound and well-functioning organizational structure". Bai Wenxi believes that in order to strengthen the good operation of the organization, securities companies "should strengthen internal compliance training and improve the legal awareness and professional ethics of employees; Establish a sound risk control system to ensure the effective identification, assessment and control of various business risks; Strengthen the management of subsidiaries and grandchildren to ensure their business compliance and prevent the recurrence of similar incidents; Conduct regular internal audits to identify and correct potential compliance issues in a timely manner; Strengthen information disclosure, ensure transparency, and disclose important information to regulators and the public in a timely manner. ”
In the prospectus for the public issuance of corporate bonds to professional investors in 2024, Northeast Securities pointed out that Bohai Rongxing's operating income is large, but its contribution to the company's profits is small, and the proportion of Bohai Rongxing's net profit, total assets and net assets in the company's corresponding financial indicators is low.
However, at that time, Northeast Securities said that there was still a risk that Bohai Rongxing would be punished by the China Securities Regulatory Commission and cause damage to the company's reputation and financial status.
Source: Canned Gallery
In addition to the fine of 10 million yuan for Bohai Rongxing, the "great-grandson company", the performance of Northeast Securities itself is not optimistic. In the first half of 2024, Northeast Securities' revenue decreased by 26.82% year-on-year, and the net profit attributable to the parent company decreased by 75.83% year-on-year.
Northeast Securities said that the sharp decline in performance was mainly due to the decline in income from investment business and investment banking business, which fell by 16.91% and 65.53% year-on-year respectively.
Specifically, the investment banking business with the largest decline, Northeast Securities' operating income in the first half of this year was 49 million yuan, of which the income from IIPO underwriting and sponsorship business was 0, that is, there was no successful underwriting of listed projects. Zhi Peiyuan believes that "there are factors in this situation due to the market environment, such as macroeconomic fluctuations, stock market downturns, and weakening financing demand, which together play a role in the performance of investment banks; In addition, the leading brokerages rely on their scale and resource advantages to intensify the survival pressure of small and medium-sized brokerages. ”
In addition to the decline of the above two businesses, the wealth business and fund management business of Northeast Securities also declined to varying degrees, down 13.64% and 7.75% year-on-year respectively
Source: Northeast Securities semi-annual report
However, in the first half of the year, the asset management business of Northeast Securities achieved growth, with an income of 312 million yuan, a year-on-year increase of 10.29%. Northeast Securities said that in the first half of the year, Orient Securities Ronghui Securities Asset Management Co., Ltd. (hereinafter referred to as "Orient Securities Ronghui") achieved asset management business income of 199 million yuan, a year-on-year increase of 55.24%.
As of June 2024, the total scale of assets under management of Orient Securities Ronghui reached 85.402 billion yuan, an increase of 6.65% from the end of 2023. Among them, the scale of collective asset management business reached 73.752 billion yuan, an increase of 8.44% from the end of 2023.
Zhi Peiyuan said that with the deepening of the registration system, the competition for high-quality projects has become increasingly fierce, and it has become more challenging for brokerages to find high-value targets
United Credit Rating Co., Ltd. pointed out in the credit rating report of Northeast Securities that as a national comprehensive listed securities company, Northeast Securities has strong regional competitiveness, good diversification of business operations, and its main business rankings are in the upper reaches of the industry, with strong comprehensive business competitiveness.
However, United Credit also said that the operation of Northeast Securities is susceptible to environmental impact, and its main business is highly related to the securities market, and factors such as changes in the economic cycle, fluctuations in the domestic securities market and changes in related regulatory policies may lead to greater volatility in the company's future income.
Have you ever handled business in Northeast Securities, and what is your service ability? When the punishment of Bohai Rongxing's "manipulation of futures case" landed, could Northeast Securities avoid similar incidents? Let's talk in the comment section.