The negative impact of LeTV continued. The breach of contract due to stock pledging resulted in an increase of RMB 1 billion in receivables from Western securities. On June 3, due to the imperfections of internal controls and major flaws in the risk control system, Western Securities announced that it was certified by the Shaanxi Securities Regulatory Commission. Bureau will be punished.
According to the supervisory level, “restricting business activities, ordering corrections within a time limit and disposing of relevant person-in-charge notifications”, Western Securities intends to suspend the company's stock pledged repo transaction for 6 months, and orders the deadline to correct and dispose of relevant personnel.
An analyst from South China told the “Investor” reporter that the supervisory authorities pointed out that the West Securities stock pledged repurchase transaction, fixed income, self-employment, and other business did not perform due diligence. The penalty was not light, but the current leverage In the background, corporate storms are frequent and it is more important to enhance risk management awareness.
Regarding the rectification measures and other issues after the penalties, the “Investor” reporter sought confirmation from the Western Securities Executive Secretaries, but unfortunately, as of press time, no relevant reply was received.
Supervision details 'Six sins'
According to the announcement, the Shaanxi Securities Regulatory Bureau considered that there were six violations in Western Securities:
First, some risk control indicators for the stock pledged repurchase trading business are not prudent, business decision-making standards are not strictly enforced, due diligence is insufficient, transaction tracking management is incomplete, and business risks are high;
Second, the fixed income department has not strictly implemented the separation wall system, bond underwriting, bonds self-operating, and there exist mixed personnel operations among investment consulting businesses, and mutual transaction status.
Third, the self-support business failed to achieve centralized and unified management over a long period of time, and investment decisions were made. The internal control mechanism for transaction approval has not been effectively implemented;
Fourth, as underwriters of many corporate bonds such as '16 Sichuan', '16 Jiandong', '15 Jingang', trustees, insufficient due diligence, incomplete manuscripts, inaccurate disclosure information in the prospectus, entrusted management The work was not able to perform due diligence. There was a tripartite regulatory agreement that did not sign the special fund for raised funds. It failed to discover or disclose that the issuer had not used the raised funds according to the agreed purpose, and the raised funds were mixed with the daily operating funds.
Fifth, the use and approval procedures of multiple large-sum private funds do not meet the requirements of the financial management system;
Sixth, the chief risk officer holds other positions that conflict with the responsibilities. The risk management information technology system does not fully cover all types of business.
In response, the Shaanxi Securities Regulatory Bureau believed that the above-mentioned acts of Western Securities respectively violated the “Regulations on the Supervision and Administration of Securities Companies” and the “Detailed Rules for the Implementation of Securities Company's Directed Asset Management Business” and many other relevant regulations, reflecting the imperfections of Western Securities’ internal control. The system has major deficiencies and other issues. In response, the Shaanxi Securities Regulatory Bureau plans to suspend the Western Securities Pledged Repo transaction between June 25, 2018 and December 25, 2018, order the company to make corrections and receive a decision. The person responsible shall be dismissed within 10 working days from the date of the book.
However, from the perspective of limited business, the penalty will not have much impact on the performance of western securities. According to last year's annual report data, its credit trading business income accounted for 20% of its total operating revenue for the whole year. Affects about 10% of revenue.
Leshi pledged 1 billion yuan in equity pledges for breach of contract
Western Securities was established in early 2001 and registered in Xi'an, Shaanxi Province. It is the only local listed company with full license in Shaanxi Province. In May 2012, it was the 19th listed securities company in Shenzhen Stock Exchange. On June 4th, the stock price of the stock fell 12% on the 5th.
Along with the notice of punishment, there is also a reply to the Shenzhen Stock Exchange's "Announcement on the Reply to the 2017 Annual Report Inquiry Letter." According to the inquiries of the supervisory level, it is not difficult to see that the specific reason for western securities being punished is 'threatening the thunder'.
In 2017, the book balance of Western China's securities receivables was 1.093 billion yuan, an increase of 123% from the beginning of the period; bad debt provision was 446 million yuan, a 77-fold increase from the beginning of the period. For the huge increase in accounts receivable, Western Securities stated that it was because In 2017, the credit trading business of LeTV.com pledged its customers for breach of contract. The margin financing and securities lending customer funds increased by RMB1.019 billion from the beginning of the year.
In response to possible bad debts, Western Securities was forced to withdraw RMB 439.4 million in asset impairment reserves, which has exceeded 30% of the company's 2017 audited return to home equity.
In response, Western Securities also stated that it has filed four lawsuits against LeTV.com, requesting Jia Yueting, Jia Yuemin, Liu Hong, Dan Lihuan, Yang Lijie, and Zhao Long to pay the financing principal, interest, and liquidated damages. As of now, Western Securities and LeTV.com's equity pledge default dispute is still in the process of trial.
New management challenges
For the decline in performance last year, the Shenzhen Stock Exchange also asked Western Securities to make an explanation. According to statistics, as of the end of 2017, Western Securities' operating income was nearly 3.2 billion yuan, a year-on-year decrease of 6.9%; net profit was 750 million yuan, a year-on-year decrease of 33%. The decrease in revenue was mainly due to the brokerage business of the company. The net fee income from investment banking services dropped significantly year-on-year, and both were higher than the average decline of listed securities companies. The decrease in net profit was due to the provision of the company’s entire stock pledged for repurchase of customers’ breach of contract. The substantial increase in losses caused the operating expenses to increase more than in the previous year. The reason for the sharp decline in net profit was due to LeTV.com's pledged share repurchase breach.
However, Western Securities also gives the overall performance of the securities industry to support its own decline. This is not an example. It is reported that of the 28 listed brokerage firms, the operating income of 13 securities companies decreased year-on-year; the net profits of 18 securities companies appeared year-on-year. decline.
However, even if there is no LeTV product impact this year, the performance of Western Securities has not improved. According to statistics, in April, Western Securities (parent company) realized operating income of 143 million yuan, a decrease of nearly 19% year-on-year; net profit of 36.95 million yuan. A year-on-year decrease of 29.5%.
It is worth noting that the western securities executives have also undergone major changes recently. In March of last year, Western Securities Director and General Manager Zhu Jian resigned from Western Securities for 7 years. At the end of April this year, a director resigned, May 8th. Liu Jianwu, chairman of Western Securities for nearly 13 years, also submitted a written resignation due to the 'reason of changes in work arrangements'.
According to the announcement, Liu Jianwu served as chairman and legal representative of the company since October 2005. Under his leadership, Western Securities successfully implemented interbank acquisitions and completed listings, witnessing the growth of Western Securities from a regional brokerage firm to a comprehensive listed brokerage firm. The company has made important contributions in promoting corporate governance, formulating corporate development strategies, promoting the company's market-oriented mechanism, promoting the company's transformation and innovation, and strengthening the compliance and risk control system.
Earlier media reports said that the new Western Securities chairman will be served by Xu Zhaohui, the current chairman of Western Trust Co., Ltd. Faced with punishment rectification, the performance of the market downturn caused no improvement and other issues, the new management how to lead the western securities out of the trough needs to wait and see .