In recent years, China's A-share IPO and refinancing policies have emphasized "strict oversight across the entire process" alongside "targeted facilitation." Regulators have tightened listing standards, enforced accountability from the filing stage, and increased on-site inspections to hold issuers and intermediaries responsible, particularly cracking down on "problematic filings" and "withdrawals upon scrutiny." Meanwhile, resources are being channeled toward advanced manufacturing and hard-tech sectors aligned with national strategies, exemplified by the relaunch of the fifth listing standard on the STAR Market. Additionally, regulators are encouraging mergers and acquisitions and streamlining overseas listing procedures to diversify capital pathways.
As a key intermediary, brokerages’ due diligence in underwriting directly impacts secondary market investors. While underwriting standards have improved under stricter oversight, some projects—whether in review or already listed—still exhibit red flags.
In 2025, only one brokerage—First Capital Securities’ subsidiary, First Capital Investment Banking (FCIB)—has faced regulatory investigation for underwriting violations (excluding prior-year cases penalized this year). Notably, both of FCIB’s current equity underwriting projects carry significant flaws: one involves blatant non-compliance yet claims otherwise, another misaligns with exchange positioning, and a third withdrew after major financial restatements.
FCIB’s past underwriting projects also raise concerns. For instance, Hongda Xingye’s (delisted) 2019 convertible bond, linked to FCIB’s investigation, defaulted on repurchase payments and was penalized for severe internal control failures and accounting fraud—issues FCIB allegedly overlooked. Similarly, FCIB underwrote *ST Dongtong’s 2022 private placement, which raised RMB 2.2 billion amid financial misstatements, effectively aiding fraudulent issuance.
**Problematic Underwriting: How Much in Compensation?** FCIB is under investigation for inadequate post-issuance supervision of Hongda Xingye’s 2019 convertible bond. Authorities found that Hongda diverted RMB 1.69 billion (70% of proceeds) to parent company use without disclosure. From 2020–2023, Hongda inflated revenue by RMB 3.5 billion and profits by RMB 4.08 billion via fabricated accounts, with overstated profits representing 94.1%–618.7% of reported figures. The company also failed to disclose RMB 2.7 billion in lawsuits and RMB 1.79 billion in guarantees.
Hongda’s bond later defaulted on RMB 183 million in 2024 repurchases and RMB 91.65 million in 2025. Investors who held Hongda shares/bonds between January 2020–September 2023 and suffered losses are eligible for compensation. With its stock plunging 50% (RMB 6 billion market cap loss) and bond defaults totaling RMB 270 million, FCIB faces substantial liability. Precedents like CITIC Securities’ (紫晶存储) RMB 1.09 billion settlement and Dongxing Securities’ (泽达易盛) RMB 340 million fund suggest FCIB may need similar provisions.
**Ongoing Projects Under Scrutiny** FCIB’s two current Beijing Exchange IPO candidates—Dingxi High-Strength Fasteners and Jinwanzhong Machinery—also raise doubts. Dingxi High-Strength failed to fully insure employees yet claimed compliance, while Jinwanzhong’s R&D spending (RMB 15.54 million over three years, 10%–14% of peers’) falls short of innovation benchmarks. Another FCIB-backed firm, Shandong Canon Tech, withdrew its IPO after slashing 2021 net profit by 61% post-restatement.
**2024 IPOs: Rapid Performance Collapse** All three companies FCIB underwrote in 2024—Sichuan 6912 Communications, Kangnong Seeds, and Yunxingyu—reported steep profit declines or losses in 2025’s first three quarters. For example, 6912’s revenue dropped 15.35% YoY, swinging to a RMB 24 million loss, while Yunxingyu’s net profit fell 63.05%.
With zero equity underwriting deals in 2025 (Jan–Oct), FCIB’s reputation and business prospects face mounting pressure amid regulatory scrutiny and investor compensation demands.
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