Recently, the China Securities Regulatory Commission (CSRC) issued an administrative penalty against Qingdao Morgan Stanley Securities Investment Co., Ltd. (hereinafter referred to as Morgan Stanley Securities Investment). The company was found to have violated regulations by failing to preserve and deliberately destroying relevant documents and materials, as well as submitting reports with significant omissions to securities regulators. Given the substantial financial impact and severity of the violations, the CSRC revoked the company’s securities investment consulting business license.
The CSRC conducted an investigation into Morgan Stanley Securities Investment’s regulatory breaches, notifying the involved parties of the facts, legal basis, and their rights in accordance with the law. At the request of the company, a hearing was held where the parties and their representatives presented their arguments. The case has now concluded.
The investigation revealed two major violations: 1. **Failure to Preserve and Destruction of Documents**: Since 2020, Morgan Stanley Securities Investment’s Jinan branch provided investment consulting services—including course sales, information dissemination, and interactive chats—via its WeChat public account "Morgan Index." The company also engaged third-party firms for promotional services. However, Morgan Stanley Securities Investment failed to retain records of these promotional activities and service logs, and intentionally deleted partial data from its database. The violations involved a large number of clients and significant financial transactions, constituting severe misconduct.
2. **Material Omissions in Regulatory Filings**: Both the Jinan and Jimo branches of Morgan Stanley Securities Investment are subsidiaries of the company. From September 2022 to August 2024, the company submitted monthly financial reports—including balance sheets and income statements—to the CSRC but excluded the financial data of its Jinan and Jimo branches. This resulted in unreported revenue totaling 485 million yuan over the period from August 2022 to July 2024. The prolonged duration and substantial financial scale of these omissions further aggravated the violations.
The CSRC confirmed these violations with evidence such as interview transcripts, internal records, transaction logs, and audit reports.
The CSRC determined that Morgan Stanley Securities Investment’s actions violated Article 162 of the *Securities Law* and constituted serious misconduct under Article 214. Additionally, the material omissions in regulatory filings breached Clause 1, Article 33 of the *Interim Measures for the Administration of Securities and Futures Investment Consulting* (1997).
**Penalties Imposed**: - **Morgan Stanley Securities Investment**: A fine of 3 million yuan and revocation of its securities investment consulting license. - **Wang (Operations Supervisor, Jinan Branch)**: Warning and a fine of 600,000 yuan for direct oversight of promotional activities and knowledge of data deletion. - **Li (Legal Representative & General Manager)**: Warning and a fine of 500,000 yuan for managerial negligence. - **Li Tong (Technician, Jinan Branch)**: Warning and a fine of 400,000 yuan for executing the data deletion. - **Guo (Deputy General Manager & Compliance Head)**: Warning and a fine of 300,000 yuan for failing to ensure regulatory compliance.
Founded in 1997 with a registered capital of 52 million yuan, Morgan Stanley Securities Investment previously held qualifications for securities investment advisory and research report services. The company is privately held.
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