CSRC vows tough action on violators

Sealand Securities’ registration of asset management products for one year and will ban the firm from opening new securities accounts for its clients for one year.

The penalties also included suspension of its bond underwriting business for one year.

The bond financing scandal that engulfed Sealand Securities shocked the market last year. The firm said it faced heavy losses for trading bonds through high-risk leveraging tools. Later it claimed that the trading contracts were fake documents drafted by former employees who forged the firm’s official seal.

“The regulator carried out a comprehensive inspection into Sealand Securities and found that the firm has weak internal controls and ineffective risk management and it has violated regulations repetitively,” CSRC spokesman Zhang Xiao- jun said at a news conference.

Separately on Friday, the regulator punished Sinvo Fund for its default in high-leveraged bond trading by suspending its registration of asset management products and its sale of new mutual fund products for six months.

The move by the CSRC came as China’s top leadership has made prevention of financial risks and reduction of leverage a top priority. Financial regulators have stepped up regulation on high-leverage risky business carried out by the country’s financial players.

“Securities firms and fund management companies should not abandon their responsibility as asset managers by carrying out ‘channel business’,” Zhang said.

He warned about harsh penalties on market players that violate compliance rules and create spillover of risks.