With immediate effect, foreign investors can control domestic securities companies, and joint venture securities companies can loose their licenses! The wolf is coming? not necessarily

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With immediate effect, foreign investors can control domestic securities companies, and joint venture securities companies can loose their licenses! The wolf is coming? not necessarily

2018-04-30 00:25:00 279 ℃

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Since China’s accession to the WTO, the “wolf has come” in the financial industry has finally opened its doors to the securities industry. Foreign-controlled securities companies have opened up and joint venture securities companies have loosened their licences.

However, there are two things that need to be checked in the securities industry: First, the "wolf" outside the country. Whether it will really come in groups or not, and second, whether overseas “wolf” will remain wild after arriving in China remains to be seen.

Foreign-invested domestic securities companies have fully loosened their bonds

In order to implement the spirit of “it's not too soon but should not be too late”, the securities industry is opening up to the outside world. Major progress. Brokerage reporters in China were informed that on the night of April 28, the China Securities Regulatory Commission formally issued the “Measures for the Administration of Foreign-invested Securities Companies” to explicitly allow foreign-invested holdings of joint-venture securities companies, gradually liberalize the business scope of joint-venture securities companies, unify listing of foreign-funded securities and make them unlisted. The proportion of equity in the two types of securities companies further improves the conditions for overseas shareholders.

In late-night synchronization, the Securities Regulatory Commission issued a review of the establishment of a securities company, changes in its business scope, and changes in its holdings of more than 5% The updated version of the Administrative Licensing Service Guidelines, such as shareholders and change of actual controllers, clarified that the change in the status of the actual controller of the domestic shareholders resulted in changes in the nature of domestic-funded securities companies.

This is a distance of more than one month from the CSRC's "Measures" release on March 9 this year. , can be described as "amazing speed."

More importantly, from today (April 28th) onwards, qualified foreign investors can submit changes to the company's actual controllers to the Securities and Exchange Commission in accordance with the requirements of the Measures and Service Guide. Or set upApplication materials for joint venture securities companies. Eligible domestic-funded entities may transfer equity of the securities company according to law, and may also participate in the establishment of a joint-venture securities company.

Secretary of the China Securities Regulatory Commission revealed that during the “Measures” soliciting opinions, many large financial institutions in Europe and Asia had already obtained information from the Securities Regulatory Commission about the company’s establishment and changes in equity. Said that it is actively preparing related materials and plans to submit relevant applications. After the SFC receives their formal application documents, it will actively advance the review work according to the Measures.

Allow foreign-funded joint-venture brokerage firms

"The securities company license moat will soon be filled, and the wolf really comes!" An investment banker from a large listed brokerage in South China told brokerage reporters in China.

This heavyweight policy of expanding the opening up of China's securities industry was formally launched on April 28 and will be implemented immediately. The name of the document is that the foreign investment is controlled by the participation of the company, which is changed from the "Regulations for Establishing Foreign-shared Securities Companies" to the "Administrative Measures for Foreign-invested Securities Companies."

First look at the "methods" referred to as foreign investment securities companies, refers to the following three categories:

(1) Overseas shareholders and domestic shareholders jointly funded according to law Established securities companies;

(2) Foreign investors are legally permitted to acquire shares of domestic-funded securities companies, and securities companies with domestic-funded securities companies are changed according to law;

(3) Domestic-funded securities companies The actual controller of a shareholder was changed to a foreign investor and a securities company with a domestic-funded securities company changed according to law.

A comparison of brokerage Chinese reporters found that, unlike the "Draft for Comment" issued on March 9, the new regulation reads Article 7: "Overseas shareholders should invest in freely convertible currencies. Accumulated by foreign shareholders (The proportion of equity of foreign-invested securities companies (including direct holding and indirect control) should be in line with the state's arrangements for the opening up of the securities industry."

The “Exposure Draft” was deleted: “Overseas shareholders hold The shareholding of foreign-invested securities companies (including direct holdings and indirect controls) shall not exceed the commitments made by China's securities industry for opening to the outside world and shall not be less than 25% in principle. If a domestic-funded securities company is changed to a foreign-invested securities company according to law, The lower limit of shareholding of shareholders is not limited by 25%."

This also means that the restrictions on the proportion of joint-stock brokers held by overseas shareholders are further relaxed.

According to the announcement by the Governor of the People’s Bank of China, Yi Gang, at the Boao Forum for Asia on April 11th, “Specific measures and timetable for further opening up of the financial sector”: Securities companies, fund management companies, and The upper limit of foreign shareholding ratios of futures companies and life insurance companies is relaxed to 51%, and no restrictions will be imposed after three years. Third, no more than one stockholder of a joint-venture securities company is required to be a securities company.

It is worth mentioning that the proportion of single foreign investment in shares of listed securities companies has also been further relaxed.

The new rules remove “through the stock exchange’s securities transactions or agreement purchases, held by a single foreign investor, or held jointly with others through agreements and other arrangements” in the “Draft for Comment”. The proportion of shares issued by a securities company must not exceed 30%."

The new rules make it clear that overseas investors can hold shares in listed domestic securities companies through securities transactions on stock exchanges or with listed domestic securities companies. Established a strategic partnership and approved the China Securities Regulatory Commission to hold shares in listed domestic securities companies. If an overseas investor holds or shares more than 5% of the shares of a listed domestic-funded securities company with others through securities transactions through stock exchanges or through agreements or other arrangements, it shall meet the following six conditions for overseas shareholders of foreign-invested securities companies:

(a) The country or region where it is located has comprehensive securities laws and regulations, and the relevant financial regulatory agencies have signed agreements with the China Securities Regulatory Commission or the China Securities Regulatory Commission. Establish a memorandum of understanding on securities regulatory cooperation and maintain an effective regulatory cooperation relationship;

(2) For financial institutions legally established in the country or region where they are located, financial indicators in the past three years are in line with the country or region where they are located. Legal requirements and requirements of regulatory agencies;

(3) The securities business has continued to operate for more than five years and has not been punished severely by the supervisory authorities or administrative and judicial authorities of the country or region where it is located in the past three years. Major violations of laws and regulations are being investigated by relevant authorities;

(4) Having a sound internal control system;

(5) Having a good international Reputation and operating results, business scale, income, profit ranking in the forefront in the past three years, nearly three years of long-term credit protectionMaintained at a high level;

(6) Other prudential conditions stipulated by the China Securities Regulatory Commission.

In respect of the conditions for the establishment of a foreign-invested securities company, the new regulations deleted the “mandatory person for qualification” in the “Draft for Comment”. No less than 30 people and necessary accounting, legal and computer professionals."

Breaking the single-business restrictions of joint venture brokers

In these years, my country The current status of the joint venture brokerage companies is not satisfactory. The reasons are diverse, both because of the dissatisfaction of water and soil, as well as the reasons for the low proportion of equity and limited business scope.

For example, the previously stipulated “individuals holding total shares of listed domestic-funded securities companies shall not exceed 25% of the regulations”, which limits the ability of joint-venture securities companies to issue listing financing overseas.

It is more obvious that the scope of business is limited. Except that CICC and UBS are full-licensed joint venture securities firms, Ruixin Founder can carry out brokerage business in Shenzhen Qianhai. Other joint venture securities companies such as China and Germany , Eastern Citigroup, I. Morgan, etc. can only focus on the investment banking business, especially the lack of brokerage licenses.

The new rules are clear and will gradually release the business scope of joint venture securities companies. The newly established joint venture securities company is allowed to apply for securities business in an orderly manner in accordance with its own circumstances. The initial business scope must match the securities business experience of the controlling shareholder or the largest shareholder.

This means that the regulatory authority will no longer set limits on the scope of business of joint venture securities companies in the future.

A number of investment bankers analyzed with brokerage Chinese reporters that they have broken the dual limits of foreign shareholdings and business scope, and it is expected that the joint venture brokers' strategic positioning, business model, and management and management will be different in the future. Resolve and gain greater room for development. The new regulation unifies the proportion of foreign ownership of listed and unlisted securities companies, and adjusts the proportion of all foreign investors holding shares in listed domestic securities companies to “should comply with the state’s arrangements for the opening up of the securities industry”. p>

For some domestic-funded institutions also have the intention to enter the securities industry, a spokesperson of the Securities Commission said that eligible domestic-funded entities may transfer equity in securities companies according to law, and may also participate in the establishment of joint-venture securities companies.. Recently, the China Securities Regulatory Commission is publicly soliciting opinions on the "Provisions on Securities Company Equity Management" to further improve the conditions for shareholders' qualifications and requirements related to equity management. After the regulations are issued, the SFC will further co-ordinate the overall arrangements.

“Wolf” comes or not to look at the status of 11 joint venture brokers in China

In 1995, China International Capital Corporation (referred to as “CICC”) ) Established and became the first Sino-foreign joint venture investment bank in Mainland China. After more than 20 years of development, there have been 11 domestic joint venture securities companies that have been established and are in normal operation.

Of the 11 joint venture brokers, the proportion of foreign ownership has actually exceeded 50%, but only HSBC Qianhai Securities has one, and the remaining 10 foreign ownership ratios are the highest at 49%.

HSBC Qianhai Securities was formally established at the end of 2017, and its business scope has also exceeded the single business license limit, and it has three licenses for securities brokerage, securities investment consulting and securities underwriting sponsorship. However, the future development of the joint venture securities company has become the first "wolf" to break into China, and at least it has not revealed the wild nature of the "wolf."

At the beginning of last year, there were reports that both Morgan Stanley and Swiss Bank are planning to increase their shareholdings in Chinese joint venture securities companies. Investment bankers in the industry analyzed with brokerage Chinese reporters that Morgan Stanley Huaxin Securities and UBS Securities are the two joint venture brokers with the most certain foreign capital increase after the issuance of the new rules on the management of foreign investment securities companies. They are also expected to benefit the most quickly. In the New Deal.

It is worth mentioning that among the 11 Chinese joint venture brokerage firms, relying on the Mainland and Hong Kong to establish closer economic and trade relations There are four joint venture brokers approved under the Huigang policy, namely Shengang Securities, Huajing Securities, and East Asia Qianhai Securities (all three are fully-licensed brokers) and HSBC Qianhai Securities (business scope is securities brokers). , securities investment consulting, securities underwriting and sponsorship).

HSBC Qianhai Securities and East Asia Qianhai Securities were approved on June 30 last year and are currently the two newly approved joint venture securities firms. HSBC Qianhai Securities and East Asia Qianhai Securities all have a background in Hong Kong capital shareholders, according to the “Closer Economic Partnership Arrangement” (CEPA) between the Mainland and Hong Kong in August 2013The establishment of Supplementary Agreement X was unveiled in December last year.

The joint venture securities companies in China are generally divided in their operating conditions, and financial supervision continues to be under pressure in their main business under severe conditions.

The latest rankings of securities companies' operating performance released by the China Securities Industry Association show that in the first half of 2017, four joint venture securities firms suffered losses:

1 • Huajing Securities recorded a loss of 70.18 million yuan (formally opened on November 29, 2016), ranking 128th in the industry;

2. Morgan Stanley Huaxin Securities lost 39.75 million yuan in the first half of last year. Ranked No. 124;

3. Shen Heng Securities (opened on October 18, 2016) had a loss of RMB 33 million in the first half of last year, ranking 123rd in the industry;

4. Letter Founder Securities had a loss of 21.06 million yuan in the first half of last year, ranking 121th in the industry.

A number of investment bankers analyzed with brokerage Chinese reporters that the majority of joint venture brokers in China are currently constrained by severe licensing management, lack of control, and other factors. Business development, business scale is difficult to grow, strength is basically difficult to enter the ranks of domestic large brokers, and the foreign brokers with shares in the overseas reputation and strength is difficult to match.

In addition, there are four companies that have been transformed from joint venture brokers into pure mainland brokerage firms.

One is the original Hua-Ou International Securities (later renamed Fortune CLSA), now known as Watson Securities. After the establishment of the company, it not only obtained the investment bank license, but also got it later. The brokerage business license in the Yangtze River Delta region, but since the establishment of the business development is also very general, and later the foreign investment initiative to withdraw, the equity was all transferred by the private company Shanghai Huaxin Group, changed its name to Watson Securities.

The other is Haidai Daiwa Securities, which is now Zhongtian Guofu Securities. The company was originally a joint investment banking joint venture established by Shanghai Securities and Daiwa Securities. It was also difficult to sustain the business because of its poor performance. After the contract expired, the foreign party voluntarily requested to withdraw from the joint venture broker to become a pure domestic brokerage firm.

The third is Hua Ying Securities, and Hua Ying Securities is funded by 66.7% from Guolian Securities and 33.3% from Royal Bank of Scotland. andIn September 2017, the equity of Royal Bank of Scotland was acquired by Guolian Securities. Huaying Securities bid farewell to the joint venture brokerage status and became a wholly-owned subsidiary of Guolian Securities.

The fourth is the first venture JP Morgan Securities. The company was established in 2011 and completed the equity change on July 3, 2017. JP Morgan Chase Group officially withdrew, and has changed its name to the first venture securities underwriting sponsorship limited liability. The company is referred to as "a creative investment bank". On October 23 last year, the original ICBC Morgan received a new business license renewed by the Beijing Municipal Bureau of Industry and Commerce. JMC's 33.30% stake in Morgan Stanley has been transferred to the first venture, creating a new investment bank. A wholly-owned subsidiary of a startup.

18 joint venture brokers lined up for review

Although there are already four joint venture brokers that have converted into pure domestic brokers with foreign investment exit The 11 joint venture benefits did not reveal "wolf" sex, but these did not seem to prevent foreign investors from coveting the Chinese stock market.

The latest information released by China Securities Regulatory Commission official website shows that as of April 29 this year, a total of 18 joint venture securities companies are still queuing up to set up. Among them, Sunshine Securities and Guangdong Hong Kong Securities have completed the review of the “acceptance” link and entered the “first feedback” link during the review period.

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However, compared with the ranking list for the first half of last year, three of the former brokers on the list have disappeared.

The first is Hengheng Securities. The application was accepted on August 12, 2016. There are Chairman of China Ping An Ma Mingzhe, Alibaba Chairman Ma Yun, Tencent Chief Ma Huateng, Hengda Chairman Xu Jiayin. , Public Security Online Eurasian Equities several big brothers figure. Currently it is not listed in the waiting list.

The second is Guangdong Guangdong-Hong Kong Securities, which is the first Guangdong-Hong Kong joint venture securities company established under the Guangdong-Hong Kong Joint Venture Full-licensed Securities Company Project. Hong Kong-owned licensed financial institutions Asset Management Co., Ltd. invested 250 million yuan, accounting for 51% of the shares, Guangdong Rongsheng Micro Wire Materials Co., Ltd. invested 150 million yuan, accounting for 30%. Currently it is not listed in the waiting list.

The third is Hengqin Hainiu Securities. There is very little public information about Hengqin Ningxu Securities.The company plans to settle in Zhuhai Hengqin Free Trade Zone. “Hengqin” refers to the Hengqin New District of Zhuhai, a state-level open new area in China, and the “sea cow” is also a rare marine mammal known as the “mermaid”. Hengqin Hainiu Securities has also disappeared, and the reason for “disappearance” is unknown.

Reliance of joint venture securities firms on domestic brokerage firms is more pressured

For the securities industry to open up to foreign capital, Guo Dejun's chairman Yang Dehong had previously received an exclusive interview with the Securities Times. It is inevitable that investment banks will open up to the outside world sooner or later. Foreign investment banks are entering China, and they are both pressure and motivation for domestic brokers such as Guotai Junan.

Yang Dehong said that taking Guotai Junan as an example, opening up to Guotai Junan is first of all a matter of pressure, but in the end it is the driving force. Guotai Junan will not be afraid. Yang Dehong believes that the competition between companies is one of cultural competition. The culture of Guotai Junan is advanced, good, and combative. The second is service competition and customer competition. “We are a comprehensive investment bank that is rooted in China and rooted in the country and ready to go international, so first of all it is to serve Chinese customers. I believe in our long-term practical experience in this area, including the effective system we have now built. And for the technical input, including the input on the product, I think we are completely competitive, we are very confident."

Yang Dehong believes that foreign investment banks enter the Chinese market China's investment banks, especially well-prepared investment banks, will have some pressure, but they will be more motivated. This trend should be very clear after 3-5 years.

Cui Hongjun, vice president of Eastern Citi Securities, combined the company’s cooperation with Citibank and domestic and overseas business development over the years, and believes that the joint venture brokers’ release into China is not so terrible. According to Cui Hongjun, Eastern Citi Securities has a lot of cooperation with foreign investment banks in cross-border mergers and acquisitions business during these years. In particular, when domestic listed companies acquire overseas assets, most of the overseas bids are in cooperation with foreign banks such as Citibank. Foreign banks are familiar with local companies; overseas companies have acquired domestic assets, and many overseas investment banks will take the initiative to seek Eastern Citi to help find the domestic targets.

Cui Hongjun believes that knowing the laws and regulations of a country or a region is not a matter of overnight, regardless of whether Chinese companies go out.It is a foreign-funded company that comes in. If it is not familiar with the local situation, choosing and working with this organization is actually the best choice. Even if a foreign company holds a joint venture brokerage company, the undertaking of doing business in China still needs to adapt to Chinese laws and regulations, and it is impossible to completely duplicate the overseas model.

An executive of an unnamed listed brokerage firm is even more direct. He said: "With the strict supervision of the securities companies in China's regulatory authorities, it is estimated that wolfing foreign investment will come to tame into the Havanese. Saying that foreign investment banks will enter China is a wolf. I don't think so.”

Not only that, but another phenomenon worth noting is that these brokerage firms have landed in Hong Kong in the past few years, regardless of investment banks or brokers, Chinese brokerage firms. In Hong Kong, as hungry wolf preempts its market share, Hong Kong’s market share, whether it is a foreign-invested investment bank or a local investment bank in Hong Kong, is no longer a rival of Chinese securities firms.

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