China’s securities regulator has strengthened its crackdown on margin trading accounts, punishing six more securities firms for violations of margin trading rules.
The China Securities Regulatory Commission (CSRC) announced penalties for Great Wall Securities, Huatai Securities, Guosen Securities, Minmetals Securities, Huaxi Securities and China International Capital Corp after an investigation into margin trading activities at 46 brokerages. The firms were accused of providing margin finance to unqualified investors, issuing expired margin trading contracts to customers and several other violations related to margin trading following the regulator’s on-site investigations in February.
Great Wall Securities was banned from opening new margin trading accounts for the next three months while Huatai Securities was ordered to toughen its own oversight. Both firms were accused of providing margin finance to unqualified or high-risk clients. Guosen Securities was told to increase internal compliance checks.
According to the South China Morning Post, the CSRC says securities firms in China are generally in compliance with margin trading regulations and authorities had made the moves to reassure investors in Chinese securities. The newspaper notes that China’s official news agency, Xinhua, heralded the continuation of a bull market in China and says the CSRC’s move won’t slow share-price gains. Two articles in the official newspaper, People’s Daily, also describe China as ‘decidedly in a bull market,’ the South China Morning Post reports.
The investigation and punishment of the six securities firms follows a similar move in January when the CSRC banned Haitong Securities, CITIC Securities and Guotai Junan Securities from opening new margin trading accounts for three months. The regulator said it had found that some securities firms allow clients to delay repayment of financing longer than regulations allow.
The move in January propelled the Shanghai Composite Index to its biggest one-day drop in six years, although the latest crackdown appeared to have little effect on investors, with the index rising 2.5 percent on the first trading day after the announcement.
