Everbright Securities, the old master encountered new problems?

After two consecutive days of fines, the credibility of Everbright Securities is facing another challenge.

In the capital market, Everbright Securities (601788.SH) has the aura of "famous family"-it is backed by Everbright Group and was established in 1996. It is one of the first three innovative pilot companies approved by the China Securities Regulatory Commission. It has gone through 27 springs and autumns.

Behind the halo, it also carries the expectations of the market and Everbright for this "golden sign": professionalism, diligence, and due diligence...

Recently, however, Everbright Securities has been fined one after another, and there has been another "Oolong incident". How can the old-line brokerage firms keep flashing red lights on compliance issues? How can professional institutions make low-level mistakes again?

The two tickets that followed.

In June, Everbright Securities received two tickets in succession.

first, on June 5, Everbright Securities was seriously warned and ordered to make corrections by the China Interbank Market Association because there were many problems in the issuance of debt financing instruments related to Siping Urban Development Investment Holdings Co., Ltd. (Siping City Investment).

This matter dates back to the beginning of this year, when the Dealers Association issued a self-regulatory sanction against Siping City Investment; the recent punishment of Everbright Securities is a follow-up to this incident.

Everbright Securities in this case, the "four crimes" were disclosed. First, they knew and participated in the collection of large amount of financial assistance from Siping City Investment by two investors, promoted the illegal issuance of relevant debt financing instruments and interfered with the issuance interest rate, which violated the principles of fairness, impartiality and openness. Second, the information provided in the self-discipline inquiry stage is untrue, inaccurate and incomplete. Third, the issuance pricing work did not follow the principle of fairness. Fourth, the disclosure of underwriting methods in the issuance plan is inaccurate.

Everbright Securities responded to the incident, saying that the company attached great importance to and carried out comprehensive self-examination and self-correction, in-depth rectification, to avoid the recurrence of similar problems, and to seriously pursue accountability of relevant responsible persons.

on June 6, Everbright Securities received another warning letter from Jiangsu Securities Regulatory Bureau, because Everbright Securities, as the initial listing sponsor of Suzhou Naxin Microelectronics Co., Ltd. (Naxin Micro, 688052.SH) and Wuxi Dike Electronic Materials Co., Ltd. (Dike, 300842.SZ), had violated regulations. In view of its failure to strictly fulfill the relevant requirements of continuous supervision, Jiangsu Securities Regulatory Bureau took administrative supervision measures to issue warning letters to Everbright Securities.

What is "failure to strictly fulfill the relevant requirements of continuous supervision"? In short, Everbright Securities said "no problem" in the supervision report, but the actual situation was found to have defects. Such "face-to-face behavior" is the main problem involving violations of Everbright Securities.

Jiangsu Securities Regulatory Bureau also listed the "four sins" of Everbright Securities: First, in November 2021, Everbright Securities said in its continuous supervision report on Dico that the company's disclosed announcement was consistent with the actual situation, but the content of the announcement was not consistent with the actual situation. Second, in August 2022, Everbright Securities said that there was no problem with the establishment and implementation of the internal system of Dico, but Dico's internal control self-evaluation report for the same year said that its financial reporting internal control was flawed. Third, the follow-up report of Everbright Securities' continuous supervision of Naxin Micro 2022 shows that its internal control over its subsidiaries is sound and effectively implemented, but the fact is that the above work is flawed. Fourth, Everbright Securities did not diligently fulfill its prudential verification obligations in the verification of the impairment test of Nanxin Micro's goodwill and the independence of Diko's personnel, and the verification conclusions were not rigorous.

"these fines will not have a direct impact on the current business of Everbright Securities ...... but in the medium and long term, it may face doubts in the fight for new customers, for new business and other scenarios," the Beijing Business Daily quoted Wang Jianhui, a senior researcher in industrial economy.

Fu Xuejun, a registered international investment analyst, also commented that Everbright Securities' repeated fines may affect customers' trust in it.

This is not the first time Everbright Securities has encountered compliance issues. Not long ago, on February 20, Everbright Securities, as the host securities firm of Yingding Education, was also issued a warning letter by the Shanghai Securities Regulatory Bureau due to violations during the continuous supervision period. It was also pointed out that it failed to fulfill its prudent verification obligations diligently and found that the company had inflated its business income.

BT Finance also found that there was a recent Oolong incident that "hurt" the trust of Everbright Securities.

Another Oolong.

a good listed company was misinformed to delist, which is the recent "Oolong incident" of Everbright Securities ".

in early may, golden sunshine APP, owned by Everbright Securities, showed that shares of Tianbang Food (002124.SZ) were suspended and the company may be terminated from listing.

this is by no means a joke. tianbang food quickly announced and clarified that the above matters are all false information. the company has communicated with everbright securities for the first time to urge the latter to delete the above false information.

"false information actually appeared on the brokerage APP interface"-the Securities Times issued such a comment.

Why did the professional Everbright Securities make such a low-level mistake? According to the China Fund News, a number of investors believe that the "Oolong incident" may have confused Tianbang Food and Zhengbang Technology (* ST Zhengbang, 002157.SZ), which was indeed warned of the risk of delisting. A number of netizens said in the investment forum that "this is a rumor-mongering listed company" and "to compensate investors for their losses".

the problem lies in the third-party supplier-Everbright Securities later responded to the media in this way. However, this mistake may have affected the judgment of investors. On May 4, Tianbang food went down all the way after opening, and finally closed down.

In terms of information services, Everbright Securities spends a lot of money every year, and it even makes such an own goal. According to "China Net Finance", Everbright Securities' 2022 annual report showed that the company's total information technology investment that year was about 0.47 billion yuan, a year-on-year increase of more than 20%.

regarding the word "oolong", Everbright Securities has an even more painful memory, that is, the "816 oolong incident" that shook the financial market in 2013 ".

Ten years ago in 2013, on August 16, A- share helicopter-style volume soared in early trading. Many large-market financial, real estate, and oil stocks rushed up, and high weights drove the main stock indexes up-but the market was confused., Can't find the reason for the surge.

In the afternoon, Everbright Securities quietly suspended trading and immediately issued an announcement acknowledging an error in the company's arbitrage system. A few days later, the CSRC announced the verification results, the above-mentioned stock index large changes from the Everbright Securities proprietary account of a huge amount of buying, the company arbitrage strategy system has a program call error, in addition to the quota control and other design defects, triggered by the chain, resulting in the generation of a huge amount of orders, the actual turnover of up to 7.27 billion yuan.

later, the CSRC also found that Everbright Securities' remedial measures after the "816 own finger incident" were suspected of insider trading, and took measures to confiscate illegal income and fine it. Yang Jianbo, then head of the company's strategic investment department, was suspended and assisted in the regulatory investigation. Soon after, Xu Haoming, then director and president of the company, also resigned...

According to historical reports from the "Interface" and other media, until 2015, two years later, the echo of this "Oolong Finger Incident" was still there. The Shanghai Second Intermediate People's Court successively sued investors against Everbright Securities in two batches. The civil claim case of insider trading was pronounced, which became the first insider trading claim case in the history of A- share securities that an investor won.

The incident finally settled slowly, and the vitality of Everbright Securities was damaged. The "816 Oolong Finger Incident" has also become a typical case in China's financial history.

at that time, I'm afraid Everbright Securities did not expect that the road ahead is still not good.

stepping on mine overseas sports media company

in 2016, everbright capital, a wholly-owned subsidiary of everbright securities, and storm group jointly invested 0.26 billion yuan, leveraging more than 5 billion yuan to complete the majority equity acquisition of overseas sports media company MP & Silva Holding S.A.(I .e. "MPS").

In this investment, Everbright Capital played the role of "inferior partner. The so-called "inferior partner" is a "safety cushion" role, although the expected return will be higher, but also bear a higher risk, that is, in the event of risk priority repayment of funds.

the risk events that no one wants to see still appear. After the MPS core management cashed in and fled, the company's value plummeted and its operations were in trouble. The failure of the project also involved a series of corruption cases. According to official reports, Xiang Tong, the former investment director of Everbright Capital and head of the international M & A business, who was responsible for the MPS project in April 2019, was arrested by the prosecutors, and Feng Xin, CEO of Storm Group, was also suspected The crime was taken compulsory measures by the public security organs in July 2019.

Everbright Capital eventually became a "bottom-up" buyer, bearing billions of dollars in capital losses.

In April 2019, Xue Feng stepped down as chairman of Everbright Securities. At that time, the outside world interpreted it as resigning because of the MPS incident. In 2022, the Shanghai Securities Regulatory Bureau issued a warning letter to Everbright Securities and the Shanghai Stock Exchange issued a circular criticism of Everbright Securities and Xue Feng.

In August 2020, Everbright Securities announced that it received a judgment from the Shanghai Financial Court that its wholly-owned subsidiary Everbright Capital paid a total of more than 3.4 billion yuan to China Merchants Bank and Huarui Bank.

The "pit" that this incident smashed out of performance is still faintly visible in 2021. According to Sino-Singapore Jingwei, the impact of the MPS acquisition on the performance of Everbright Securities was not gradually released until 2021, when MPS accrued a projected liability of $0.732 billion due to mine-stepping. The loss of Everbright Capital, which is deeply affected by this project, has decreased year by year from 2018 to 2021, recording about 1.6 billion yuan, 2.9 billion yuan, 2.1 billion yuan and 0.5 billion yuan respectively.

MPS incident still let Everbright Securities aftershocks. On May 30, 2023, Everbright Securities was still announcing new developments in the MPS incident, and the appeal filed by the company's subsidiary against the execution of an outsider was rejected...

Are there new risks in the business?

2022, performance in capital markets is a drag on couponsUnder the overall performance of the business industry, Everbright Securities' revenue fell about 35% year-on-year to 10.78 billion yuan, ranking 15th among nearly 50 listed securities firms.

Horizontal comparison, Everbright Securities is in the middle of the industry position of "less than the top, more than the bottom. Although Everbright Securities is still among the "10 billion revenue clubs", it is still far from the revenue volume of over 65 billion yuan of CITIC Securities (600030.SH), the industry leader. Behind Everbright, most of them are Soochow Securities, Northeast Securities, Caitong Securities, Shanxi Securities and other regional securities firms.

in recent years, securities firms have been competing for the direction of investment banking business. Everbright Securities recorded a net income of 1.282 billion yuan in 2022, ranking outside the top 10 in the industry.

according to the 2022 financial report of Everbright Securities, the change of the company's operating income in that year was affected by many factors, of which the net interest income was 2.1 billion yuan, a decrease of 0.4 billion yuan or 16% from the same period of last year, mainly due to the decrease of margin trading and bond interest margin. Net fee and commission income was 6.2 billion yuan, a decrease of 1.7 billion yuan or 21% from the same period of last year, mainly due to changes in brokerage business and investment bank fees; investment income and fair value change income were 1.2 billion yuan, down 0.3 billion yuan or 20% from the same period of last year, which was affected by poor market conditions and investment product structure. Other income was 0.38 billion yuan, up 0.12 billion or 43% from the same period of last year, benefiting from government subsidies. Other business income was 0.92 billion yuan, down 3.8 billion yuan or 80% from the same period of last year, because of the change in commodity base trade income for the year.

In addition to the pressure of performance growth, another risk point that the market is also concerned about is that Everbright Securities' Hong Kong business may record huge losses.

According to the "Interface" report, in early 2023, Everbright Securities will conduct a new round of capital increase in its wholly-owned subsidiary Everbright Securities Financial Holdings Co., Ltd. (the original "Guangzheng Financial Holdings" and now "Guangzheng Holdings"). The amount is 0.3 billion US dollars. The reason for the capital increase may be that there is loan pressure on the companies under the company of Optical Securities Financial Control, and the capital increase of the parent company can reduce the financial cost. In addition, at the end of 2021, the asset-liability ratio of Guangzheng Gold Control exceeded 87%, and the capital increase was forced to be met.

"the operation of optical securities financial control in Hong Kong is not optimistic," Li Mingming, Chief Executive Officer of optical securities financial control, stressed at the meeting, according to the interface.

The above information was verified in the 2022 financial report of Everbright Securities. The report shows that in 2022, the total assets of Guangzheng Holdings were 15.801 billion yuan, the net assets were 0.884 billion yuan, and the net loss was 0.338 billion yuan in 2022.

there are reports in early 2023 that there is a serious loss of personnel in the light of the financial control, including its CFO. "If the internal and external environment and improvement measures do not improve, the performance of the parent company may continue to be dragged down in the future," a Hong Kong employee who has left the organization told the media.

The more worrying "thunder" for the market is that the related goodwill impairment will have a negative impact on performance.

in 2015, optical securities gold control acquired sun hung kai financial group twice for a total consideration of hk $6.745 billion. this transaction generated nearly 1.347 billion yuan of goodwill on the book of Everbright securities. Everbright Securities later recorded goodwill impairments of $0.166 billion, $0.217 billion and $0.264 billion for this asset group in 2014, 2017 and 2019, respectively, for a total of $0.681 billion. Although the following two years, the above-mentioned assets did not continue to be goodwill impairment, but the "Caixin News Agency" and other media pointed out that the acquisition did not meet expectations, the corresponding goodwill is still facing hundreds of millions of yuan of impairment pressure. The total annual loss and goodwill impairment may be a large number, which may drag down the full-year performance of Everbright Securities.

"Xue Feng buries thunder again"-According to Interface, the acquisition of Hong Kong's Sun Hung Kai is an acquisition completed during the reign of former chairman of Everbright Securities, Xue Feng. The acquisition was also "as famous" as the MPS project mentioned earlier ".

2022 results show that Everbright Securities recorded a goodwill of 0.8347 billion yuan, a decrease of more than 9000 million yuan from 0.9283 billion yuan in the same period in 2021.

it can be seen that Everbright Securities frequently lights up red lights in terms of compliance, or due to continuous pressure on performance, it is also a key node for the industry to accelerate reshuffle and easily fall behind in the industry. As a veteran brokerage firm, Everbright Securities wants to make a breakthrough in the industry's "counter-cycle", first of all, it must do a good job in the business foundation of compliance.

Wen yi BT finance Han