Under the weight of historical burdens, a brokerage firm is undergoing a significant transformation. Recently, news that Zhai Chenxi, former vice president of Tianfeng Securities, was taken away by authorities for investigation has stirred waves in financial circles, once again putting Tianfeng Securities in the spotlight.
Zhai Chenxi, a finance graduate from Central South University's Business School, joined the China Development Bank in 2006 before being invited by Yu Lei, then-chairman of Tianfeng Securities, to join the firm in 2014. She held key positions, including vice president and head of the fixed-income department, as well as chairman of Tianfeng International Securities, co-president of Hengtai Securities, and chairman of the affiliated Xinhua Fund. Known as the "Bond Queen" and "Iron Lady of Finance," Zhai was Tianfeng’s highest-paid executive.
After the collapse of the Contemporary Group’s funding chain, Zhai left abruptly, even resorting to labor arbitration against Tianfeng Securities. Unfortunately, she ultimately failed to make a safe exit.
She is the third senior executive linked to Tianfeng Securities or its former major shareholder to face investigation in the past year. Prior to her, former chairman Yu Lei and Guo Xudong, former IPO review official at the China Securities Regulatory Commission (CSRC) and vice chairman of the Contemporary Group, were also implicated.
Behind these investigations lies Tianfeng Securities’ struggle to shed the heavy legacy of the Contemporary Group after transitioning to state ownership. From "Tianfeng Securities" to its current identity as a "state-backed Hubei brokerage," the firm’s transformation has been fraught with challenges—contingent liabilities, legal risks, and reputational damage.
**Historical Negative Assets: The Contingent Liabilities Left by the Contemporary Group** During its control of Tianfeng Securities, the Contemporary Group funneled massive financing through various channels to sustain itself. Industry experts describe its financing model as a Ponzi scheme, relying on new debt to repay old obligations.
These financing activities fall into three categories, each posing potential burdens for Tianfeng Securities:
1. **Bond Issuance**: As the lead underwriter, Tianfeng Securities facilitated large-scale bond issuances for the Contemporary Group and its affiliates. From 2015 to 2021, Wuhan Contemporary Technology Industrial Group, the group’s flagship, issued corporate bonds totaling 7.88 billion yuan, all underwritten by Tianfeng.
2. **Tianfeng M&A Fund**: In 2016, Tianfeng Securities arranged a 2.7 billion yuan M&A fund through China Merchants Bank and China Merchants Wealth, backed by guarantee letters. While ostensibly for industrial mergers, the fund primarily financed related-party transactions, with most funds flowing to Contemporary Group entities.
3. **Private Wealth Product Sales**: The group sold wealth management products through platforms like Changzhongsuo, with Tianfeng employees privately marketing them to clients. These funds also ended up in Contemporary Group companies.
All three channels raise concerns: bond issuances, though legal, involved related-party transactions; the M&A fund, while nominally compliant, may have violated regulations; and the private sales of wealth products present complex liability questions pending regulatory review.
**The Sword of Damocles: Tianfeng’s Contingent Liability Risks** The Contemporary Group’s financing activities loom over Tianfeng Securities as contingent liabilities—potential obligations that may or may not materialize. Their uncertainty is key: if Tianfeng is cleared of responsibility, the burden vanishes; if held liable, the firm could face massive financial impacts.
Legally, Tianfeng’s liability hinges on several factors: its direct involvement in financing, the enforceability of guarantee letters, whether it profited improperly, and the legality of its participation.
While bond-related risks may be relatively contained after state-backed entities took over some Contemporary assets, the M&A fund’s fate depends on whether courts uphold the guarantee letters. Though such letters may be legally questionable, precedents suggest partial liability. Meanwhile, the wealth product sales could expose Tianfeng to penalties if deemed an organizational failure rather than individual misconduct.
**Reputational Damage: Lingering Political Ties and Executive Investigations** Beyond financial risks, the Contemporary Group’s legacy includes reputational harm from past political connections now under scrutiny.
Since 2024, former chairman Yu Lei and Guo Xudong have been investigated, followed by Zhai Chenxi. Reports also indicate mid-level executives detained in related probes. These cases may involve historical misconduct, such as alleged bribery during Tianfeng’s IPO.
As regulators intensify scrutiny of past irregularities, the investigations continue to tarnish Tianfeng’s credibility—a critical asset in finance.
**The Road to Redemption: Tianfeng’s Self-Reinvention** Post-nationalization, Tianfeng has taken steps to shed its past:
- **Capital Strengthening**: A successful share issuance boosted capital and state ownership, improving its market image. - **Liability Mitigation**: Legal efforts aim to isolate historical liabilities from the "new Tianfeng." - **Image Rebuilding**: Media campaigns emphasize its state-backed transformation, enhanced governance, and growth prospects. - **Rebranding**: Plans to rename the firm could sever ties to the Contemporary era entirely.
**CSRC Investigation: Blessing or Curse?** On November 28, 2025, Tianfeng disclosed a CSRC investigation into alleged disclosure violations and illegal financing. Market reactions are split:
- **Optimists** argue the probe will clarify liabilities, allowing Tianfeng to move forward unburdened. - **Skeptics** caution that investigations inherently signal risk, with outcomes still uncertain.
The probe is a double-edged sword: short-term pain for potential long-term clarity. Tianfeng’s ability to navigate the investigation and reform will determine whether this marks a turning point.
Tianfeng’s journey mirrors China’s evolving financial regulation. Under the principles of "law-based, comprehensive, and stringent oversight," historical issues are being addressed head-on. For Tianfeng, transparency—though painful—may be the only path forward.
Whatever the outcome, this brokerage stands at a critical crossroads.
Comments