(Yicai) Oct. 24 -- China’s securities regulator has named seven securities firms that it is imposing penalties against for loose internal controls and poor business integrity after launching on-site investigations against eight such companies, including ZTF Securities and Huaxi Securities, in December last year to prevent problematic initial public offerings from entering the market.

Vanho Securities has been suspended from undertaking sponsorships and corporate bond underwriting for three months from Oct. 20, China Securities Regulatory Commission said. Vanho failed to execute feedback concerning internal controls and risk management. And its internal control division did not follow up adequately and many of the issues that it deals with were not mentioned in external filings.

And in early September, another six brokerages were named and shamed by the watchdog and penalized.

Guosen Securities did not properly perform due diligence on a certain project, the Beijing-based regulator said. It did not verify the associated parties of major shareholders nor did it examine the abnormal hiking of shareholding ratios by key stakeholders.

ZhongDe Securities failed to fully probe the quality of a project and corresponding risks during quality control checks and did not pay much attention to major problems of companies which then re-apply for listing after withdrawing previous applications.

Around 35 percent of IPO applications were either withdrawn or rejected from 2020 to June 30 this year, amounting to 717, Yicai learned.

Since China introduced the registration-based IPO system, which is a quicker route to getting listed compared to the previous approval-based system, the CSRC has taken action against 67 securities firms engaged in investment banking as well as 364 executives. It has disallowed four brokerages to act as IPO sponsors and written off 54 businesses as unqualified.

The CSRC will continue to tighten regulation, routinely carry out on-site investigations and impose penalties to get brokerages to improve their services, their professional competency as well as their internal controls.

Editor: Kim Taylor