(Yicai Global) March 25 -- Shares in Haitong Securities plunged today after the leading Chinese brokerage received a 12-month suspension of its consulting services on bond issuances for flouting regulations to help Yongcheng Coal and Electricity Group sell bonds that the state-owned coal miner was then unable to repay.

Shanghai-based Haitong Securities’ stock [SHA:600837] was trading down 6.29 percent at CNY11.17 (USD1.71) as of 1:35 p.m. China time today. Its share price has lost 20 percent in value since Nov. 17 when Yongcheng Coal, in whose debt Haitong Securities was the chief underwriter, announced it would default.

In addition, Haitong Securities will be banned from registering new private asset management products for the next six months and must increase the frequency of its internal compliance checks and submit regular reports, the China Securities Regulatory Commission said yesterday. A number of executives involved have also been blacklisted for two years, the watchdog added.

Zhengzhou, central Henan province-based Yongcheng Coal’s CNY1 billion (USD153.1 million) default last November rocked the country’s bond market and was followed by a spate of delinquencies by state owned enterprises, notably Qinghai Salt Lake Industry and Brilliance Auto, sending prices of some bond types into free fall as investors’ faith in the creditworthiness of China’s once unassailable SOEs falters.

A subsequent probe by regulators found Haitong Securities guilty of market manipulation and of violating regulations for the issuance of debt financing instruments of non-financial enterprises in the inter-bank bond market and corporate bonds in the exchange market.

Editor: Kim Taylor