(Yicai Global) Sept. 6 -- Leading Chinese brokerage China Merchants Securities has been penalized CNY63 million (USD9 million) by the country’s securities watchdog for failing to properly perform its duties as the independent financial advisor to a merger and acquisition eight years ago as China steps up efforts to make brokers bear responsibility for the deals they oversee.

The Independent Financial Adviser Report penned by Merchants Securities regarding the takeover of China Security and Fire Technology in February 2014 by a company called Shanghai Feile was based on fraudulent information provided by China Security, the China Securities Regulatory Commission said yesterday. The probe to the broker started last month.

China Security inflated its revenue for 2013 and did not provide true and accurate profit forecasts, the regulator said. Merchants Securities failed in its duty as independent financial advisor to properly vet the figures provided.

“Regulators have been making greater efforts in recent years to hold brokers to account and making punishments more severe,” an industry source told Yicai Global earlier.

The initial public offering applications for more than 20 firms for which Shenzhen-based Merchants Securities is sponsor have been put on hold pending the probe’s results.

It has been a difficult year for the securities firm. Merchants Securities’ net profit slumped 25.4 percent in the first half from the same period last year to CNY4.3 billion (USD620 million), while revenue tumbled 26 percent to CNY10.6 billion (USD1.5 billion).

However, its main businesses, such as asset management, stock trading services and the handling of financial products, are still strong earners, with their income levels among the top 10 in the sector.

Merchants Securities’ share price [SHA:600999] closed up 0.9 percent at CNY13.41 (USD2) today.

Editor: Kim Taylor