The China Securities Regulatory Commission has ordered Hai Tong Securities and Northeast Securities to suspend operations of their branches where illegal activities including the sale of fake national bonds had been uncovered. Local units of the regulator suspended Hai Tong's branch in Shanxi province for three months because of poor internal management. Some salesmen were found to have carried out illegal financial transactions outside their official accounts. Operations at the branch will be halted until the end of September, and the brokerage must make a complete internal audit and submit a report to the commission before it can be reopened. The CSRC also ordered Northeast to close its Shanghai branch for one month after some salesmen were found to have sold fake bonds, and to hand in a report. The central government has been cleaning up the securities industry and has set up an investor protection fund as it tries to improve corporate governance and boost confidence in the market. Mainland brokerages were largely unprofitable last year because the domestic stock markets were hit by a government-mandated reform to convert all state-owned shares into tradable ones. The government plans to merge three failed brokerages - Guangdong Securities, Centergate Securities and China Sci-tech Securities - which are insolvent and have been taken over by the investor protection fund. According to the Securities Times, the three firms will form a new brokerage with more than 100 branches across the country and set up a headquarters in Shenzhen, where Guangdong Securities is based. Centergate and China Sci-tech are based in Beijing. The merger was being arranged by the investor protection fund, the newspaper reported.