Just after reaching a trillion-yuan asset scale, Gf Securities Co.,Ltd. is embroiled in another controversy. The IPO project it sponsored has been found to involve financial fraud, while its executives received significant salary increases last year, with several earning over 3 million yuan annually.
On the evening of May 18th, China International Capital Corporation (CICC) disclosed the core plan for a share swap to absorb and merge with Dongxing Securities and Cinda Securities, bringing the industry closer to the emergence of a new trillion-yuan securities firm. This reshuffling of rankings within the brokerage sector poses a direct threat to Gf Securities.
At the end of last month, Gf Securities announced in its first-quarter report that its assets had surpassed the trillion-yuan mark for the first time. Last year, the company saw substantial growth in both revenue and net profit, securing the fourth position in the industry. However, it remains significantly behind the top two leaders. The impending consolidation of "Huijin System" brokerages is likely to impact the third and fourth positions the most.
With its industry standing under pressure, Gf Securities' investment banking business is now facing new troubles. Following an investigation by the China Securities Regulatory Commission (CSRC), Qingyue Technology was found to have engaged in sustained financial fraud, suspected of fraudulent issuance. As the sponsor for its listing, Gf Securities announced on May 9th that it would initiate advance compensation for investors.
**Swift Compensation** This time, Gf Securities acted quickly. According to the announcement, on May 8th, the company's board agreed to take proactive measures for advance compensation under specific conditions as the sponsor and lead underwriter for Qingyue Technology's IPO.
That same evening, the CSRC published the administrative penalties against Qingyue Technology on its official website. In addition to proposing a fine of 172.88 million yuan for the listed company and imposing fines totaling 33 million yuan and 4-8 year market entry bans on four responsible individuals, the CSRC mentioned that it is currently investigating the conduct of the intermediary institutions.
Qingyue Technology applied for a STAR Market IPO in December 2021 and went public in December 2022, raising approximately 824 million yuan. The investigation revealed that its financial fraud spanned both the IPO stage and the period after listing. In 2021, prior to its listing, the company inflated profits by about 10.6549 million yuan through intentional understatement of inventory impairment provisions and fake chip sales. In the following year and a half after listing, it used similar methods to inflate total profits by approximately 104 million yuan. Subsequently, as the fraud became unsustainable, the company's performance deteriorated sharply.
Whether Gf Securities, as the sponsor, was subjectively negligent or professionally derelict will be determined by regulatory investigations. However, proactively initiating advance compensation may help it avoid more severe penalties. According to relevant regulations, intermediary institutions that promptly rectify issues, proactively provide advance compensation, and cooperate with regulatory investigations may receive lighter penalties, avoiding suspension of business qualifications or short-term restrictions.
For Gf Securities, the "damage" caused by severe penalties has not yet dissipated. As the sponsor for Kangmei Pharmaceutical's 2001 IPO, Gf Securities was investigated by the CSRC in 2019 and penalized the following year with a six-month suspension of its sponsorship qualification and a one-year ban on accepting bond underwriting business documents. Since then, its once-leading investment banking business has declined sharply, with revenue dropping to about 600 million yuan in 2022 and showing no signs of recovery in recent years.
To avoid repeating the "heavy penalty" scenario, the case of Ziguang Storage's fraud from six months ago serves as a reference. Ziguang Storage was the first company suspected of fraudulent IPO under the comprehensive registration system, with sponsorship and underwriting fees totaling 119 million yuan at the time of its listing. China Securities Co., Ltd. (CSC), as the sponsor and lead underwriter, along with three other intermediary institutions, proactively applied to pay approximately 1.275 billion yuan in commitment funds during the CSRC investigation, of which about 1.086 billion yuan was used for advance compensation to investors.
According to the relevant provisions of the Securities Law, after the payment was made, the CSRC terminated the investigation into the four intermediary institutions. Market analysts estimate that, referencing the 1.086 billion yuan in the Ziguang Storage case and Qingyue Technology's 824 million yuan IPO fundraising, the compensation amount is expected to reach the hundred-million-yuan level. These funds will be jointly borne by Qingyue Technology's actual controller, Gf Securities, and Lixin Certified Public Accountants.
**Controversy Over Executive Salary Increases** Being involved in another listed company's financial fraud may not impose as much pressure on Gf Securities as before. Cases like Kangmei Pharmaceutical, Meishang Ecology, and now Qingyue Technology are mostly IPO sponsorship projects from several years ago. The crisis triggered by the failure of the "gatekeeper" role seems to have been largely absorbed by Gf Securities.
In 2016, Gf Securities' investment banking revenue reached 2.738 billion yuan, and in 2017, it ranked first in the number of IPOs sponsored. However, after the exposure of the Kangmei Pharmaceutical fraud case, its investment banking business suffered a severe blow. The number of sponsored projects dropped to zero in 2021 and has since slowly recovered. In 2025, investment banking business revenue rose to 896 million yuan, accounting for only 2.53% of total revenue.
Against the backdrop of an overall tightening of IPO projects, it is difficult for Gf Securities to revive its investment banking business in the short term. Therefore, even if another violation is recorded, the impact on its already sluggish business is far less significant than it would have been a few years ago.
However, compared to the impact on performance, the repeated failures in internal controls in the investment banking business, coupled with significant salary increases for executives last year, have raised concerns about the mismatch between incentives and risks. This issue may require greater vigilance from Gf Securities.
In 2025, the total compensation for Gf Securities' executives reached 45.1191 million yuan, a year-on-year increase of 42.04%. This amount was nearly 20 million yuan higher than that of the second-ranked CITIC Securities. In contrast, among 26 listed securities firms, 22 saw a decline in total executive compensation, with an overall decrease of 8.2%.
At the individual level, salary increases at Gf Securities were particularly notable. Chairman Lin Chuanhui's compensation last year reached 3.617 million yuan, an increase of 1.296 million yuan from the previous year, representing a growth rate of 55.8%. Data shows that the median annual salary for chairmen of A-share listed comprehensive securities firms in 2025 was 1.0486 million yuan, a year-on-year decrease of about 9%. The pre-tax compensation for the chairman of leading firm CITIC Securities last year was 2.3034 million yuan.
In 2025, ten executives at Gf Securities earned over 3 million yuan, with the highest increase reaching 321%, and most experiencing growth of 50%-70%. Notably, executives previously involved in the Kangmei Pharmaceutical fraud case also saw salary increases.
In July 2022, the CSRC penalized relevant responsible persons at Gf Securities, restricting Ouyang Xi, then deputy general manager in charge of related investment banking business, from receiving compensation beyond basic salary for 2014, 2015, and 2016, and Qin Li, then deputy general manager in charge of related investment banking business, from receiving compensation beyond basic salary for 2017 and 2018. Any amounts already received were required to be returned to the company.
In 2025, Qin Li's compensation reached 3.5688 million yuan, a 70% increase from the previous year, while Ouyang Xi's compensation was 3.3608 million yuan, also a significant increase.
External criticism points to Gf Securities' substantial salary increases for executives despite repeated lapses in its compliance and risk control systems. In 2025, Gf Securities frequently received regulatory penalties, including warnings for the IPO of Northern Changlong, which reported losses in its first year of listing; penalties for inadequate due diligence in the IPO sponsorship of Meishang Ecology; issuance of warning letters for violations in branch sales; and interviews with analysts for spreading false information.
**Unstable Position** Before the exposure of Qingyue Technology's financial fraud, Gf Securities was on a strong upward trajectory. In the first quarter of 2026, its total assets reached 1.12 trillion yuan, while previously only three trillion-yuan securities firms existed in the industry. Finally reaching the trillion-yuan scale bolstered Gf Securities' confidence within the top-tier brokerage camp.
Its overall performance also showed robust growth. Last year, Gf Securities' operating revenue reached 35.493 billion yuan, a year-on-year increase of 34.33%, while net profit attributable to shareholders was 13.702 billion yuan, up 42.18%. In terms of revenue and net profit, Gf Securities rose to the fourth position in the industry.
Strong growth in wealth management and proprietary trading businesses supported Gf Securities' fundamental performance. In the first quarter of this year, the company's revenue increased by 61.3% year-on-year, and net profit grew by 70.7%, indicating a thriving business.
However, beneath this prosperity, Gf Securities' position appears unstable. The company's current business focuses primarily on brokerage and asset management, while investment banking, institutional, and cross-border businesses remain weak, making it a "specialized player." In particular, the decline of its once-leading investment banking business has widened the gap with firms like CITIC Securities, CICC, and Huatai Securities in terms of investment banking growth. This has impacted its ability to attract high-net-worth clients and effectively drive wealth management business growth.
Beyond its own business shortcomings, external competition is intensifying. The gap between Gf Securities and the industry's top two leaders remains significant. In 2025, the two leaders, CITIC Securities and Guotai Haitong, reported revenues exceeding 60 billion yuan each, nearly double that of Gf Securities. Both leaders have total assets exceeding 2 trillion yuan, while Gf Securities has just crossed the trillion-yuan threshold. Whether in business expansion or risk resilience, Gf Securities lags behind.
More critically, mergers and acquisitions among securities firms are reshaping the industry rankings. In recent years, Guotai Junan merged with Haitong Securities, Guosen Securities acquired Wanhe Securities, Zhejiang Securities purchased Guodu Securities, Western Securities partnered with Guorong Securities, and the merger of CICC with Dongxing Securities and Cinda Securities, initiated at the end of last year, marks the industry's entry into a new phase of "group-based" competition.
From the development history of international top-tier investment banks, mergers and acquisitions are the most direct and effective means of driving business expansion and upgrading. Goldman Sachs grew through continuous mergers and acquisitions. Consolidation not only enhances scale but also complements weaknesses and amplifies strengths, generally making merged entities more competitive than standalone firms.
After the consolidation of "Huijin System" companies led by CICC, the industry will see the emergence of another new securities firm with trillion-yuan assets. Last year, the combined revenue of these three companies exceeded 37 billion yuan, with net profit exceeding 13.7 billion yuan, placing them above Gf Securities. Each of these three companies excels in different areas and may continue to outperform Gf Securities.
Amid internal and external challenges, can Gf Securities maintain its position?
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