Aijian Securities illegally borrowed more than 2 billion yuan from off book borrowing funds to speculate in stocks and was suspected of misappropriating social security funds. According to the news, the stock of Aijian Securities fell sharply, and then Liu Shunxin, the number one figure of Aijian Securities, was detained for criminal offences... The statistics of the securities firms that exposed the underground financing showed that the scale of private equity funds floating inside and outside the market was about 400 billion yuan, and the scale of the underground financing market was shocking. At the same time, securities companies conducted underground financing in violation of regulations, and the events of speculation in stocks were exposed one after another, leading to the frequent closure of securities companies. On January 2, Southern Securities was administratively taken over by the government due to huge losses caused by illegal agency financing and historical legacy problems. On December 5, 2003, Xinhua Securities was revoked by the China Securities Regulatory Commission (CSRC) due to its illegal repo financing of government bonds and its speculation of Encyclopedia Pharmaceutical. So far, many securities companies, including China Economic Development Trust and Investment Corporation, Anshan Securities, Dalian Securities, Fufu Securities, Jiamusi Securities, Xinhua Securities and Nanfang Securities, have been closed, revoked or taken over in connection with underground financing. From the perspective of closed or revoked securities companies, there are mainly four illegal financing: illegal financing for clients; Misappropriating the customer's deposit without authorization; Illegal treasury bond repurchase; Illegal financing in the name of borrowing and issuing bonds. There is no way to finance but to take risks "Everyone knows the consequences of illegal financing, but the financing task assigned by the headquarters every year is very heavy, and you must try to complete it; moreover, for the past two years, the operation of the business department has been very difficult, the headquarters will not take money to support us, and the business department's self financing is also to survive." The head of the business department of GF Securities said sadly that for a long time, The general manager of the sales department has been living under the pressure of profit indicators. "It is really a must to take risks and raise funds in violation of regulations, because the market continues to be depressed, and the capital is always in short supply, and there is a huge pressure to survive." A deputy general manager of Dapeng Securities in charge of financing admitted that since there are almost no financing channels for securities companies, and their own funds are very limited, to expand business, there is a lack of sufficient capital operation, so things naturally developed. An insider said that in general, securities companies borrow funds from banks. Due to the strict supervision of bank credit funds, the amount of funds they can get is limited. They have no choice but to carry out illegal financing activities through the securities business department, because the business department has many financing channels, such as joint private placement funds, misappropriation of customer deposits, illegal treasury bond repurchase, etc, So the business department becomes the main window for underground financing. An analysis report of securities companies shows that the total number of securities companies is 131 at present, and the basic trading volume for their survival should be 60 billion to 70 billion yuan per day. In fact, at present, there are only less than 20 billion yuan of daily trading volume in Shanghai and Shenzhen Stock Exchanges, which means that two-thirds of the securities dealers are in a loss state. Gong Maoquan, a senior financial consultant of Walter Financial Group, pointed out that although the losses of Chinese securities companies in the whole industry were related to the general climate, institutional defects, internal regulatory chaos and corruption of senior management were the causes that could not be ignored. Underground financing varies "A private fund with more than 2 billion yuan keeps in touch with us all the year round. When the market is good, it will work together to make stocks. Because it is an old relationship, the financing conditions are relatively easy to negotiate." A person in charge of the business department said that underground private funds have basically become a tacit financing activity of securities dealers. In the entrusted wealth management business, some illegal "off book wealth management" businesses continue to cause fraud and fraud, and investors often suffer losses without knowing it. Previously, in the investigation of closing Anshan Securities, it was found that Fujian Cement's entrusted wealth management fund of 34 million yuan was privately misappropriated by Anshan Securities. With Anshan Securities being closed by the CSRC, this huge sum of money of Fujian Cement is likely to be gone forever. Illegal treasury bond repurchase is another financing "black hole" for securities companies. Fuyou Securities repurchased government bonds in violation of regulations, raising up to 3.9 billion yuan, of which about 2 billion yuan was used to hype XCMG Technology; As a result, XCMG Technology had seven consecutive decline limits, with its share price plummeting from 18.36 yuan to 8.39 yuan, a 54% decline. With the break of Fuyou's capital chain, the circulation market value of XCMG Technology lost more than half, and investors suffered heavy losses. According to the investigation, dozens of institutions including commercial banks, state-owned enterprises and listed companies were involved in the illegal repurchase of treasury bonds by Fuyou Securities; Among them, Shanghai Rural Credit Union is the largest customer, involving an amount of up to 1.7 billion yuan, accounting for nearly half of the total amount of government bonds misappropriated by Fuyou Securities. Zhao Xijun pointed out that the amount of illegal financing of securities companies is huge and the tactics are hidden, and the situation is often difficult to deal with after the incident. In order to ensure the normal operation of the securities market and protect the interests of investors, the management should dredge the normal financing channels as soon as possible and strictly regulate the system. The securities companies are not guaranteed, and they directly force the bank security "It's hard for us to imagine that such a big thing will happen to Southern Securities." A deputy general manager of the Corporate Business Department of the Head Office of ICBC said that it is still difficult for large comprehensive securities firms to be independent, and those of small scale may be more serious. We have to re-examine the impact of securities companies' operations on bank security. The CBRC solemnly warned the whole industry to reduce the financing cooperation between banks and securities companies before identifying the losses or potential losses caused to banks by securities companies' loans. It is obviously a response to the problems of Southern Securities. "Now, the loan business of securities companies is under tight control, and they are basically not allowed to do so," said a staff member from the head office of Bank of Communications, "The management means to pause for a while." "Recently, due to the continuous accidents of securities companies, the CBRC began to worry about how deep the banks were trapped in the risk vortex of securities companies and how involved they were," said the head of the Banking Supervision Division of the CBRC. On January 8, 2004, the CBRC urgently convened an internal meeting of major banks, ordered banks to shrink the financing loan business of securities dealers, and thoroughly checked the true situation of the financing services provided by banks to securities dealers. The meeting stressed that "OTC one-day position lending" with the nature of illegal financing is the key point of inventory. Data shows that on the very day of the meeting, credit lending in the interbank lending market reached 9.976 billion yuan, a decrease of 8.393 billion yuan from the previous trading day; On January 9, the transaction of interbank borrowing was 7.930 billion yuan, a decrease of 2.046 billion yuan, while the average interest rate of interbank borrowing rose from 2.1203% to 2.1837%, an increase of 6.34 basis points. In the treasury bond repo market, the most active R007 variety on the 8th and 9th saw a sharp reduction of 70% in trading volume and a sharp rise of 50% in interest rates. This shows the attitude and speed of banks in self-protection. If the current situation is allowed to develop, the domino of securities dealers' underground financing will inevitably turn to the bank. Government takeover of securities firm failure On January 2, Southern Securities was administratively taken over. "Customers whose margins have been misappropriated can finally rest assured; the huge debts of institutional creditors, also due to the intervention of the government, will be put on account in a fair way." A person who has left China Southern Securities explained that the government had to accept the offer because of the large scope involved. According to Caijing, China Southern Securities lost more than 3 billion yuan in self operation and misappropriated 1.9 billion yuan of customer deposits. The acceptance of the offer by the government means that these arrears will be properly arranged by the government. On December 5, 2003, Xinhua Securities was revoked, with a deficit of 1.8 billion yuan. The People's Bank of China allocated 1.45 billion yuan in a lump sum to fill the margin holes of the company's customers, and the Jilin Provincial Government gave 400 million yuan in cash to cover the company's entrusted wealth management deficit. "This has actually put great pressure on the issuance of basic currency by the People's Bank of China," said Fan Jianjun, a researcher at the Financial Research Institute of the Development Research Center of the State Council. After the bankruptcy of securities firms, the government took over. Although it avoided turbulence, the problem is whether the government's bill paying behavior is fair to the tax paying public. Event observation: broaden financing channels "One of the reasons for the current underground financing is the bottleneck of securities firms' financing desire." Li Xunlei, Director of Guotai Jun'an Research Institute, believes that securities companies are the bridge and link for the operation of the securities market, and smooth financing channels are the guarantee for its smooth operation. If there is no such channel, or if the channel is not smooth, it may force it to make significant adjustments to its business, or engage in illegal acts such as misappropriation of deposits. For a long time, financing channels have been blocked, which is one of the important institutional reasons that restrict the normal functioning of securities companies. Director Li pointed out that compared with the increasing financing demand of securities companies, the existing short-term financing channels are just a drop in the bucket, so many securities companies do not use this frequently. In addition, due to the high threshold conditions, the number of securities companies that can engage in collective asset management business is also quite limited. Zhao Xijun, from the Financial Securities Research Institute of Renmin University of China, pointed out that important changes have taken place in the business development of securities companies, so the regulatory authorities need to re understand the financing capacity, financing scale and financing structure of securities companies and make reasonable institutional arrangements in due course. First, the term demand of securities companies' financing tends from short-term to long-term; Second, the scale demand of securities companies' financing should match the expansion speed of the securities market; Third, the structural demand for financing of securities companies should be coordinated with the diversification trend of securities companies' business.