A Hong Kong subsidiary of China Southern Securities Co (CSSC), one of China's biggest brokerages, has conducted at least two merchant banking activities in the past 10 months without proper registration.
China Southern Corporate Finance was the co-underwriter of H-share flotations of Anhui Expressway in October last year and Shenzhen Expressway in March, even though an SFC spokesman said it was not a registered dealer.
As a general rule, companies taking part in the underwriting of stock sales had to be registered dealers, the SFC spokesman said.
It is unsure whether an SFC inquiry into two CSSC subsidiaries in Hong Kong has to do with the involvement in one of the underwriting jobs by one of its subsidiaries. On Wednesday, it was reported that the SFC had been to two CSSC subsidiaries in Hong Kong regarding alleged unauthorised securities activity.
The subsidiaries were CSSC International, CSSC's representative office in Hong Kong, and China Southern Corporate Finance, a CSSC International subsidiary.
Neither CSSC International nor China Southern Corporate Finance had registered as securities dealers or investment advisers, the SFC spokesman said.
CSSC International's two other subsidiaries also were not licensed to run securities businesses, the spokesman said.
CSSC International was set up in 1993 as CSSC's representative office in Hong Kong. The Shenzhen-based brokerage has a registered capital of one billion yuan (about HK$929 million).
Among the active mainland players on the local securities markets, Shenyin Wanguo (HK) has three trading seats on the Hong Kong stock exchange through a subsidiary that has a registered dealing licence.
China Everbright Securities (Hong Kong) has two trading seats, while J&A Securities (Hong Kong) and Shanghai Shenyin Securities (HK) have one each.
All four are licensed investment advisers.