"Investor Network" Meng Hong

GF Securities Co., LTD. Co., Ltd. (hereinafter referred to as "GF Securities Co., LTD.", 000776.SZ) administrative penalty landed, causing market attention.

GF Securities Co., LTD. announced that the CSRC believes that in the process of providing sponsorship services for the 2018 non-public offering of shares of listed company Meishang Ecological Landscape Co., Ltd. (hereinafter referred to as "Meishang Ecology", 300495.SZ), there are illegal acts such as false records of documents such as letters of recommendation and failure to carefully verify the authenticity and accuracy of Meishang Ecological offering documents.

The CSRC decided to order GF Securities Co., LTD. to make corrections, give a warning, confiscate about 943400 yuan of sponsor business income, and impose a fine of about 943400 yuan; confiscate about 7.8302 million yuan of illegal proceeds from underwriting stocks, and impose a fine of 500000 yuan, resulting in a total forfeiture of 10.217 million yuan.

In this regard, GF Securities Co., LTD. said that at present, the company's business situation is normal, and the company will continue to follow the sound business philosophy of compliance, further strengthen the internal control mechanism of investment banking business, enhance the awareness of standardized operation, and earnestly fulfill the obligation of diligence and conscientiousness. improve the quality of investment banking business in an all-round way.

At the previous investment forum, some investors asked about the development of the company's investment banking business. GF Securities Co., LTD. said that the company continues to strengthen the reserve of high-quality equity projects, effectively promote the landing of projects, and strengthen the control and control of the whole process of investment banking business quality. effectively improve the practice quality of investment banking business. In the first half of 2023, the company completed 7 main underwriters of equity financing, the main underwriting amount of equity financing was 8.178 billion yuan, and the main underwriting amount was 92.587 billion yuan.

Sponsor business violation

With regard to this administrative penalty, GF Securities Co., LTD. received the "notice of filing a case" and the "notice of Administrative punishment in advance" issued by the CSRC on April 17 and July 17 this year respectively.

The CSRC found that GF Securities Co., LTD. had the following illegal facts: GF Securities Co., LTD. served as the sponsor (main underwriter) of Meishang Ecology's non-public stock offering project in 2018, and there were false records in documents such as the letter of recommendation issued by the company.

At the same time, GF Securities Co., LTD. did not do his duty diligently during his tenure as a sponsor (lead underwriter), including: the program design for checking large bank deposit accounts was not in place, and the implementation of the deposit letter certificate procedure for Meishang Ecological Bank was not in place; the procedures for correspondence and due diligence corresponding to account receipts were not implemented properly; and the interview procedures for investment raising projects of non-public offerings in 2018 were not implemented properly. The inspection of the loan contract of Meishang ecological important bank is not in place, and the contents without the professional advice of securities service institutions in Meishang ecological application documents and securities issuance and offering documents have not obtained sufficient due diligence evidence and made independent judgment.

In fact, before GF Securities Co., LTD. formally received the CSRC's "decision on Administrative punishment", Meishang Ecology had disclosed the relevant illegal facts in detail. In fact, the controller was also banned from the securities market for life.

According to the announcement issued by Meishang Ecology, it has been identified by the Securities Regulatory Commission that the total net profit of Meishang Ecology reached 457 million yuan between 2012 and June 2020, resulting in false records in the relevant prospectus, periodic reports and issuance documents.

In addition, Meishang Ecological non-public offering was approved by the Securities Regulatory Commission in September 2018 and successfully raised 930 million yuan in March 2019. However, when submitting the non-public offering documents, Meishang Ecology did not truthfully disclose the occupation of non-operating funds by Wang Yingyan, the actual controller, and the false records in the triennial financial statements on which the issuance application documents were based, which constitute fraudulent means to obtain approval for issuance.

Revenue growth of investment banking business

Judging from GF Securities Co., LTD. 's performance, the company's operating condition does not seem to be affected by regulatory penalties. According to GF Securities Co., LTD. 's semi-annual report, the company's total operating income in the first half of the year was 13.238 billion yuan, an increase of 4.20 percent over the same period last year, while the net profit attributed to shareholders of listed companies was 4.538 billion yuan, an increase of 8.11 percent over the same period last year.

During the reporting period, the company's net income in handling fees and commissions decreased by 474 million yuan, or 5.80%, compared with the same period last year; net interest income decreased by 297 million yuan, or 14.69%, compared with the same period last year, mainly due to the increase in interest expenses on the sale and repurchase of financial assets; investment income increased by 1.032 billion yuan over the same period last year, an increase of 62.97%, mainly due to the increase in investment income from the disposal of transactional financial instruments.

It should be noted that GF Securities Co., LTD. 's loan balance increased in the first half of the year. According to the semi-annual report, as of December 31, 2022, the company's audited net assets were 124.793 billion yuan and the loan balance was 314.208 billion yuan. As of June 30, 2023, the company's loan balance was 351.273 billion yuan, an increase of 37.065 billion yuan over the end of the previous year.

In terms of specific business, in the first half of the year, GF Securities Co., LTD. 's investment banking business achieved revenue of 298 million yuan, an increase of 8.71% over the same period last year, a total expenditure of 292 million yuan, an increase of 26.15% over the same period last year, and an operating profit margin of 1.90%, a decrease of 13.56% over the same period last year.

A number of securities firms were fined for violating the rules in their investment banking business.

Since the beginning of this year, regulators have continued to maintain strict supervision over the investment banking business of securities firms. According to incomplete statistics, since the beginning of this year, 30 securities firms have received fines from regulators for violating laws and regulations in investment banking business. On September 8 alone, the CSRC has taken regulatory measures against Sino-German Securities, Huachuang Securities, Zhongtian Guofu Securities, Western Securities, Huaxi Securities and other securities firms.

Not only the CSRC, but also the exchanges have made frequent moves. On September 25, Chen Zhaojun and Yao Zhaowu, representatives of Galaxy Securities and company sponsors, were notified and criticized by the Shenzhen Stock Exchange; on September 27, the Shenzhen Stock Exchange disclosed two fines, and Northeast Securities was taken self-regulatory measures with written warnings. Five sponsor representatives, namely, National Day, GE Jianwei, Zheng Keguo, Zhang Xudong and Fu Tan, were punished with notification of criticism.

Some analysts pointed out that the intensity of supervision is increasing, prompting intermediary agencies to return to their responsibilities, improve the quality of service, and play the role of "gatekeeper". However, improving the practice quality of securities investment banks is a long-term process, and it is necessary to adhere to the principle of return of responsibility of intermediary institutions, impartiality and strict governance for a long time in order to achieve long-term stability. (produced by thinking Finance) ■