Recently, the China Securities Regulatory Commission (CSRC) has taken administrative supervision and management measures against Industrial Securities by issuing a warning letter. This not only reveals serious deficiencies in the internal control of the company's investment banking business but also has sparked widespread market concern about the operational status of this established securities firm.

As a well-known domestic securities company, Industrial Securities has been repeatedly penalized for business violations in recent years, with frequent issues in investment banking and research business, while the company's performance has also been under continuous pressure, highlighting the challenges it faces in management, operation, and risk control.

Internal control failures have led to repeated penalties. The main reasons for the CSRC to issue a warning letter to Industrial Securities this time include incomplete disclosure of project initiation, quality control, and internal review issues in some project issuance sponsorship reports, as well as the unreasonable design of the compensation assessment system. These issues directly point to the core links of investment banking business, reflecting serious deficiencies in internal control at Industrial Securities.

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In fact, this is not the first time Industrial Securities has been penalized for violations in investment banking business. Public information shows that the company has been subject to regulatory penalties on multiple occasions:

In March 2024, the Beijing Stock Exchange required Industrial Securities to submit a written commitment due to violations in sponsorship business;

In February 2024, Fujian Senda Electrical Co., Ltd., sponsored by Industrial Securities, withdrew its application for issuance and listing.

In fact, as early as 2022, the Fujian Securities Regulatory Bureau issued a warning letter to Industrial Securities because it failed to discover the financial issues of the issuer during the sponsorship of Weizhi Co., Ltd.'s IPO.

These penalties reflect ongoing issues with Industrial Securities in project screening, due diligence, and risk control. According to Wind data, as of October 20, 2024, Industrial Securities has only completed 4 equity underwriting projects this year, raising a total of 929 million yuan.

What is more concerning is that among the 13 sponsorship projects announced by Industrial Securities this year, as many as 5 projects have been withdrawn voluntarily, with a project withdrawal and rejection rate of 38.46%.It is worth mentioning that a recent listing sponsorship letter released by Industrial Securities shows that the person in charge of the signed sponsorship business is the company's vice president, Kong Xiangjie. However, Kong Xiangjie's resume indicates that his past experience is mainly focused on the brokerage business field.

In addition to investment banking business, Industrial Securities' research business has also repeatedly become the focus of regulatory penalties. At the beginning of 2024, a penalty notice disclosed by the China Securities Regulatory Commission (CSRC) revealed a case involving the manipulation of listed company stock prices, which mentioned that analysts from Industrial Securities and other institutions cooperated with listed companies to frequently release research reports, attracting investors to buy related stocks.

In August 2023, the Fujian Securities Regulatory Bureau also took measures to issue a warning letter to Industrial Securities and related securities analysts, pointing out that the company has deficiencies in internal control and compliance management of customer service behavior in the securities research report business, and some analysts' speech content is not cautious enough.

These issues reflect that Industrial Securities has serious defects in the independence, objectivity, and compliance management of the research business, which may damage investor interests and affect the company's reputation.

Performance continues to be under pressure, and operations face challenges.

While frequently encountering regulatory penalties, Industrial Securities' operating performance is also under great pressure. Starting from 2018, the company's performance has shown a clear trend of fluctuation:

2018: Revenue of 6.499 billion yuan, a year-on-year decrease of 26.31%; net profit attributable to the parent company of 135 million yuan, a year-on-year decrease of 94.08%.

2022: Revenue of 10.66 billion yuan, a year-on-year decrease of 43.81%; net profit attributable to the parent company of 2.637 billion yuan, a year-on-year decrease of 44.40%.

2023: Revenue of 10.627 billion yuan, a year-on-year decrease of 0.30%; net profit attributable to the parent company of 1.964 billion yuan, a year-on-year decrease of 25.51%.

The 2023 annual report shows that Industrial Securities' net income from fees and commissions and investment income are both on a downward trend, and government subsidies are also decreasing. Among them, net income from fees and commissions is 6.15 billion yuan, a year-on-year decrease of 13.83%; investment income is 76 million yuan, a year-on-year decrease of 69.87%; other income is 188 million yuan, a year-on-year decrease of 47.98%.The business situation in 2024 is even more severe. The first-quarter report shows that Xingye Securities' revenue for the first quarter was 2.377 billion yuan, a significant decrease of 42.99% year-on-year; the net profit attributable to the company was 328 million yuan, a significant decrease of 60.38% year-on-year. It is particularly noteworthy that the company's investment income loss for the first quarter was 1.602 billion yuan, a decrease of 661.77% year-on-year, mainly due to the significant reduction in investment income from trading financial instruments.

In the first half of 2024, Xingye Securities' performance still showed no significant improvement. The semi-annual report shows that the company achieved a total operating income of 5.391 billion yuan, a decrease of 22.3% year-on-year; net profit was 942 million yuan, a decrease of 47.57% year-on-year. Looking at the main business, except for the overseas business which achieved a growth of 17.01%, the other four core business segments all experienced varying degrees of decline:

Securities and futures brokerage business: revenue of 1.324 billion yuan, a decrease of 22.58% year-on-year;

Asset management business: revenue of 1.144 billion yuan, a decrease of 31.20% year-on-year;

Institutional services business: revenue of 1.821 billion yuan, a decrease of 10.29% year-on-year;

Proprietary investment business: revenue of 1.132 billion yuan, a decrease of 20.26% year-on-year.

These figures reflect the severe challenges Xingye Securities faces in multiple business areas, especially in traditional brokerage and proprietary investment businesses, where performance is poor.

As a veteran domestic securities firm, Xingye Securities has frequently encountered regulatory penalties and performance declines in recent years, reflecting the company's severe challenges in internal control management, business transformation, and risk control.

Against the backdrop of increasingly fierce competition in the financial market and increasingly strict regulation, Xingye Securities urgently needs to reshape its internal management system, enhance compliance awareness, and optimize its business structure in order to regain market confidence and achieve long-term sustainable development. For investors, it is also necessary to closely monitor the company's subsequent rectification measures and performance, and prudently assess investment risks.