(Yicai) Aug. 5 -- As Chinese regulatory authorities continue to tighten oversight on financial gatekeepers, small brokerage companies are struggling with their initial public offering business.

The China Securities Regulatory Commission has penalized six securities firms for investment banking breaches by either sending them warning letters or ordering them to rectify violations, holding three investment banking department heads accountable, the watchdog said on July 31. Two other brokers are under investigation.

All six of the securities firms penalized for investment banking misconduct but GF Securities are mid- or small-sized firms. Their violations mainly stemmed from inadequate on-site quality control verification and insufficient disclosures in their sponsor reports.

Several of the penalized brokers have posted nearly no income from their IPO business in recent years, Yicai noticed. Not only have they failed to bring any sponsored projects to listing, but they have also withdrawn some previously filed IPO projects.

For instance, Guoyuan Securities has sponsored the listing of only four IPO projects since 2023, with no new ones since early last year. Guorong Securities has not sponsored a single listed IPO project in nearly three years. The three IPO projects filed by Yongxing Securities and accepted by the Beijing Stock Exchange between May 2023 and July 2025 have all been withdrawn by applicants for various reasons.

“The trend of investment banking business concentrating among top-tier brokerages is an industry-wide shift,” Xu Da, former IPO sponsor representative, told Yicai. “Survival of the fittest is inevitable.”

Substantial work remains to be done to boost information disclosure quality for IPO projects and strengthen the independence and effectiveness of internal quality control systems, Xu noted.

While leading brokerages generate billions of Chinese yuan, equal to hundreds of millions of US dollars, in investment banking revenue, many smaller ones secured less than CNY200 million (USD29.6 million) in investment banking fees last year. For example, Pacific Securities’ investment banking revenue plunged 57 percent to CNY75 million (USD11.1 million) in 2025 from the previous year.

Editors: Tang Shihua, Futura Costaglione