Top Biz News

Nation's securities brokers to be halved

By Zhang Ran (China Daily)
Updated: 2006-07-20 08:57

The government plans to halve the number of securities brokers by the end of the year.

As the number of brokers is reduced, a dozen powerful players will be assisted in consolidating their strength in the opening sector.

"Only around 50 qualified brokers will survive in the market, the others will have to quit trading or  be purchased," He Jiawu, a director of the Securities Association of China (SAC), said yesterday.

Currently the China Securities Regulatory Commission (CSRC) and the SAC have qualified 32 brokers, meaning around 90 firms are left competing for the last 18 available qualifications.

Brokers without qualifications will be banned from the securities trade after 2006, according to He.

"Actually, the CSRC has already set October 1 as the deadline for brokers to meet certain requirements, otherwise, they will have to quit the business," an industry source told China Daily.

In order to qualify, securities firms must return any money they have embezzled from clients' deposits, they must not have heavy debts and their net capital must meet certain standards.

Securities firms will also have to submit monthly reports on their net capital and risk controls.

"The requirements are quite strict, considering many brokers' current situation," said Dong Chen, an analyst with CITIC China Securities. "Brokers who don't meet the requirements will have to restructure or quit the industry forever."

The regulator has taken over or shut down more than 20 securities firms over the past three years, because of irregularities such as misappropriation of clients' funds, illegal acquisitions and mismanagement.

And its drive to clean up the industry will intensify in the second half of this year, as the government tries to turn the securities business into a healthy industry.

In the current pressurized environment, securities firms are busy restructuring or seeking support from local governments and major shareholders.