China's securities watchdog disciplines six more brokerages for violating margin trading rules
The mainland's securities regulator has punished six brokerages, including Great Wall Securities and Huatai Securities, for violating rules in their margin trading businesses.
The mainland's securities regulator has punished six brokerages, including Great Wall Securities and Huatai Securities, for violating rules in their margin trading businesses.
The sanctions follow an investigation into the margin trading business of 46 brokerages, launched between February 2 and 15 by the China Securities Regulatory Commission (CSRC).
They came just over two months after the CSRC banned three top brokerages - CITIC Securities, Haitong Securities and Guotai Junan Securities - from opening new margin trading client accounts for three months.
Their rules violations helped fuel stock market speculation by retail investors that has seen the Shanghai Composite Index climb 19.5 per cent so far this year.
The index has surged 94 per cent in the past 12 months.
Great Wall had broken regulations including selling products to unqualified investors, distributing trust products containing multiple types of trusts, and facilitating clients' provision of financing to other individuals, CSRC spokesman Zhang Xiaojun said on Friday.
He said Great Wall's irregularities were relatively more severe, and it would be banned from opening new margin trading accounts for three months.
Zhang said Huatai Securities needed to rectify its processes and strengthen oversight after it sold products to unqualified and higher-risk clients, while Guosen Securities should increase internal compliance checks after providing financing to unqualified clients.
The other brokerages sanctioned included Minmetal Securities, Huaxi Securities and China International Capital.
The outstanding balance of margin debt on the Shanghai Stock Exchange surpassed the trillion-yuan mark for the first time on Wednesday, a nearly fourfold jump from just 12 months ago.
The mainland's stock markets are driven largely by retail investors who have chased bull runs in the past, resulting in frothy stock valuations and extreme boom-to-bust cycles.
More than two thirds of the mainland's new share investors left school by around the age of 15, while more than 30 per cent did not finish secondary school, according to data from the China Household Finance Survey.
The survey was conducted by Southwestern University of Finance and Economics' professor Li Gan at the end of last year, covering some 4,000 households.
The over-the-counter equity exchange, targeting small share issuers that lack access to bank loans and private equity investors, has also been a venue of speculation, with the New Third Board's component index surging 52 per cent and the market making component index soaring 73 per cent last month alone.
