China Securities, the sixth-largest brokerage in mainland China, is facing significant backlash after an intern leaked sensitive client information, further destabilizing the country’s embattled securities industry. The Beijing-based brokerage announced on Friday that an unauthorized video clip featuring the company’s name and logo was filmed by an intern, leading to the inadvertent disclosure of client details.
In a statement, China Securities emphasized that the content of the video breached the company’s compliance rules by revealing sensitive customer information. “We have launched a procedure to hold relevant people accountable for the mistake,” the company said, adding that it would enhance internal management and implement disciplinary actions to prevent future leaks.
The leaked video, which featured at least two documents detailing clients’ fundraising plans and the logo of another client, was shared by a university student showcasing his internship experience at China Securities. The video quickly went viral on major Chinese social media platforms such as Douyin and Xiaohongshu, prompting thousands of comments questioning the company’s professionalism.
“The securities sector, due to a beleaguered stock market, has been surrounded by criticism as millions of retail investors are licking their wounds,” said Wang Feng, chairman of Shanghai-based financial services group Ye Lang Capital. “A lack of oversight caused the leak and exposed China Securities’ chaotic management.”
The incident comes at a time of low confidence in the market. The benchmark Shanghai Composite Index, which fell below the crucial 3,000-point level on June 21, has remained under this threshold amid concerns over weakening consumer sentiment, falling housing prices, and declining foreign investment. On Friday, the index inched up by 0.1 percent to 2,890.90.
Institutional and individual investors are bracing for further declines in key indicators, as securities firms continue to suffer from the underperforming A-share market. These firms have seen a drop in brokerage fees and a decline in income from investment banking activities. Of the 24 securities companies listed on the Shanghai and Shenzhen stock exchanges, 16 have issued profit warnings for the first half of 2024, indicating lower net profits compared to the same period last year.
Efforts by Beijing to halt the slide in mainland-listed A shares, which have been among the worst-performing globally this year, have thus far been ineffective. The market downturn has significantly eroded the wealth of the nation’s 220 million investors.
In response to the widening wealth gap, top regulators plan to cap annual salaries of financial workers at around 3 million yuan (US$413,702). This initiative is part of President Xi Jinping’s “common prosperity” campaign, which aims to promote equitable wealth distribution and curb extravagance in the financial sector.
The scandal at China Securities underscores the need for stricter oversight and better management practices in the industry, especially during times of economic uncertainty.
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