Hundsun Technologies Inc., partly owned by Jack Ma’s financial investment arm, said it will stop opening new accounts on its trading system following a crackdown by China’s securities regulator on information-technology companies that offer share-dealing facilities.
Hundsun Technologies, which runs a financial-investment trading platform knowns as HOMS, will also prevent any existing clients from adding new money into their accounts, and will shut down any accounts with zero balances, the company said in a Shanghai exchange filing on Thursday. Hundsun shares sank by the 10 percent daily limit as of 9:50 a.m. local time.
The move will have a “significant impact” on the earnings of Hangzhou Hundsun Networks Technology Services Co., the developer of the HOMS system in which Hangzhou-based Hundsun Technologies owns a 60 percent stake, according to the statement. Hundsun Networks had a loss of 15.1 million yuan ($2.4 million) in the first half of the year.
The China Securities Regulatory Commission on July 12 banned information technology companies from “illegal” activity in the securities business, and told brokerages to ensure they were aware of the identity of their customers when they facilitate stock transactions via external trading systems run by technology companies. The regulator said on Monday that it sent an enforcement team to Hundsun Technologies to check that the company is following market rules.
Hundsun Technologies’ share slump on Thursday added to a 10 percent slide the previous day. The stock had rallied by the daily limit on Monday and Tuesday.
The HOMS system is widely used by private-equity funds, trust firms and online lenders to provide trading services to their clients, as it enables a registered trading account to be divided into sub units managed by different people. As China stocks surged earlier this year, some online lenders started to use HOMS to create margin-trading accounts outside the control of the brokers, who were only able to oversee the main account, not the sub units.
Hundsun Technologies is 20.6 percent owned by Zhejiang Ant Small & Micro Financial Services Group Co., an affiliate of Jack Ma’s Alibaba Group Holding Ltd.
— With assistance by Jun Luo