China Punishes Six Brokerages for Violating Margin-Finance Rules

China punished six brokerages, including Great Wall Securities Co. and Huatai Securities Co., for violating rules on margin-finance and securities lending businesses.

Great Wall Securities was suspended from adding margin-finance and securities lending accounts for three months after selling services to unqualified investors and distributing so-called umbrella trust products, the China Securities Regulatory Commission said on its microblog Friday. Huatai Securities was told to fix the violation within a certain period, while Guosen Securities Co. was required to increase the frequency of internal checks.

China’s securities regulator is scrutinizing margin trading that has helped to spur the Shanghai Composite Index to its highest level since March 2008. The outstanding balance of margin debt on the Shanghai Stock Exchange has climbed almost fourfold to surpass 1 trillion yuan ($161 billion), on speculation of further monetary easing by the central bank.

The regulator also warned Minmetals Securities Co., Huaxi Securities Co. and China International Capital Corp. for violating the rules, including letting customers delay repaying financing for longer than they were supposed to.

The CSRC, which in January suspended three of the nation’s biggest brokerages for violating rules on margin finance, said it will further step up supervision of brokerages’ lending business to fend off systemic risks.

— With assistance by Jun Luo

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