A significant case of misconduct at a state-owned enterprise trust company has been brought to light. The firm was found to have illegally distributed trust products worth a staggering 1491.78 billion yuan through an unqualified, non-financial subsidiary it improperly established. Furthermore, after receiving a regulatory order to cease this activity, the trust company continued to make 2.042 billion yuan in prohibited guaranteed payments.
Massive Unauthorized Sales Channel Uncovered, Spanning Two Years
The audit report reveals that from August 2023 to August 2025, a trust company under a financial enterprise sold 1491.78 billion yuan worth of trust products through an unlicensed, non-financial subsidiary. Under current regulations, trust products can only be marketed and sold through the trust company's own direct sales or by licensed financial institutions like banks and brokerages. Ordinary non-financial enterprises lack the necessary risk control and suitability management qualifications and are strictly prohibited from distributing trust products. The trust in question established a new affiliated non-financial subsidiary to create a sales channel, amassing this enormous volume of illegal sales over two years.
This vast scale of unauthorized activity conceals multiple risks. It bypasses standard investor risk assessments, potentially exposing unsuitable investors to high-risk products. The sales process lacks mandatory recording, full risk disclosure documentation, and traceability for mis-selling. Furthermore, fund flows escape the closed-loop supervision of licensed institutions, creating significant risk management gaps. Despite regulators ordering a halt to this channel and demanding comprehensive rectification of existing business, the trust company did not cease its non-compliant operations.
Defying Rectification Orders, Making 2.042 Billion in Prohibited Payments
After regulators explicitly ordered the activity to stop, the trust company continued to make 2.042 billion yuan in illegal guaranteed payments, known as "rigid repayments." Since the implementation of new asset management rules, breaking such implicit guarantees has been a strict requirement for the industry. Regulators have repeatedly prohibited institutions from using their own or affiliated funds to bail out products, insisting on the principles of seller responsibility and buyer risk.
Such guaranteed payments mask the true non-performing status of underlying assets, delaying risk exposure. They distort the market's logic of risk-return matching and foster an incorrect belief among investors that principal is guaranteed. They also tie up significant amounts of institutional capital, weakening overall risk resilience. The trust's continued bailout payments after the regulatory halt and rectification order, involving 2.042 billion yuan, represents a blatant defiance of rules, making the combined violations particularly egregious.
Audit Report Signals Stronger Oversight, End of Reckless Trust Industry Expansion
The inclusion of this case in an audit report submitted to China's National People's Congress Standing Committee, as opposed to a routine regulatory penalty, sends a clear message. It indicates that state-owned enterprise trusts receive no special regulatory leniency, and that audit and financial regulators enforce uniform compliance standards across the entire industry. It also signals that industry-wide special inspections for affiliated channel sales and implicit guarantees are likely forthcoming. The relevant violation clues will be transferred to regulators, and the institution may face multiple penalties including fines, business restrictions, and accountability for senior management.
This case also epitomizes lingering issues from the trust industry's transformation. During its period of rapid expansion, many institutions relied on various gray-area channels to grow their scale and used hidden guarantees to retain clients, often prioritizing size over risk control. With the normalization of audit supervision and the implementation of supporting policies under the new asset management rules, this old, reckless development model is no longer sustainable.
Regarding sales channels, institutions must thoroughly clean up unlicensed affiliated sales channels, retaining only regulator-approved licensed distribution paths, and improve full-process management covering risk assessment, dual recording of sales, and risk disclosure. For risk disposal, the requirement to break rigid repayments must be strictly enforced, with truthful disclosure of underlying asset conditions and the establishment of standardized non-performing asset disposal mechanisms, eliminating any form of bailout. In terms of operations, the industry must abandon the mindset of blindly chasing scale and instead shift focus to actively managed, standardized trust business that serves the real economy, achieving stable and sound operation.
Conclusion
The figures of 1491.78 billion yuan in illegal distribution and 2.042 billion yuan in defiant payments serve as a stark compliance warning for the entire industry. As the trust industry's transformation enters a critical phase, the red lines of unlicensed distribution and illegal guaranteed payments must not be crossed. For industry practitioners, compliance is the baseline for operation. For investors, the notion of guaranteed trust products should be discarded; products should be allocated through licensed,正规 channels to better protect one's rights. Looking ahead, the coordinated efforts of audit and financial regulators will make the standardized, transparent development of the trust industry a long-term trend.
Comments