Maintain a dual approach of "pursuing the primary offenders" and "cracking down on accomplices" CSRC strictly investigates and punishes illegal and violations at Tianfeng Securities

According to the news released by the China Securities Regulatory Commission on February 13, the CSRC recently issued an administrative penalty and market ban notice to Tianfeng Securities Co., Ltd. (hereinafter referred to as “Tianfeng Securities”) for providing financing and information disclosure violations related to Wuhan Contemporary Technology Industry Group Co., Ltd. (hereinafter referred to as “Contemporary Group”) and for engaging in illegal activities.

Next, the CSRC will continue to adhere to the principles of “pursuing the primary offenders” and “cracking down on accomplices,” strictly punishing such illegal and irregular behaviors. At the same time, it will urge the securities industry to learn from the case, deeply draw lessons, comprehensively strengthen corporate governance and compliance risk management, promote industry culture construction, and ensure that the industry adheres to the bottom line, does not pursue profit at all costs, avoids rushing for quick success, does not shift from real to virtual assets, and does not act recklessly. The industry should uphold honesty and trustworthiness, profit through righteousness, operate prudently and steadily, uphold integrity and innovation, and comply with laws and regulations.

According to investigations, during 2020 to 2022, Tianfeng Securities illegally provided financing to the former largest shareholder, Contemporary Group, and failed to disclose related-party transactions with Contemporary Group as required. Contemporary Group and Tianfeng Securities jointly engaged in related illegal activities, severely violating securities laws and regulations.

The Hubei Securities Regulatory Bureau plans to impose a maximum fine of 25 million yuan on Tianfeng Securities and Contemporary Group, and a total fine of 34.8 million yuan on nine responsible personnel. The actual controllers of Contemporary Group, Ai Luming, Tianfeng Securities’ then Chairman Yu Lei, and then Vice President and CFO Xu Xin will be subject to lifelong securities market bans. For illegal activities related to business operations and internal control compliance by Tianfeng Securities and involved personnel, the Hubei Securities Regulatory Bureau intends to take administrative regulatory measures such as suspending relevant business activities, ordering responsible personnel to be disciplined, and conducting regulatory interviews. Additionally, the Shanghai Stock Exchange plans to impose disciplinary sanctions on Tianfeng Securities, Contemporary Group, and relevant responsible personnel in accordance with regulations.

It is reported that, earlier, to effectively safeguard investors’ legitimate rights and interests, securities regulatory authorities have continuously enhanced enforcement efficiency. The Hubei Province actively took action, and the equity held by Contemporary Group in Tianfeng Securities has been transferred to relevant enterprises in Hubei Province, ensuring Tianfeng Securities’ operations. The recent penalties will help Tianfeng Securities further solidify corporate governance, improve compliance risk management, and promote stable operation.

The CSRC states that corporate governance is the foundation of high-quality development for listed companies, and compliance risk control is the lifeline of securities firms. From the case of Tianfeng Securities’ violations, on one hand, major shareholders abuse their shareholder rights, illegally use securities firms for financing, and erode securities firms’ interests; on the other hand, securities firms breach compliance bottom lines and cooperate with illegal activities of shareholders. These behaviors are severe and must be punished strictly according to law.

Professor Tian Lihui from Nankai University’s Finance Department told Shanghai Securities News that the strict investigation and punishment of Tianfeng Securities demonstrate a “zero tolerance” regulatory attitude, which has strong warning significance. He believes that this penalty not only achieves a “severe punishment” effect through maximum fines and lifelong bans but also adheres to the principle of “pursuing the primary offenders” and “cracking down on accomplices,” punishing the abuse of power by major shareholders and holding intermediary agencies accountable for crossing bottom lines, thereby cutting off the利益输送链条.