On December 7, First Capital Securities Co., Ltd. announced that its wholly-owned subsidiary, First Capital Securities Underwriting and Sponsorship Co., Ltd. (hereinafter referred to as "First Capital Investment Banking"), received a "Prior Notice of Administrative Penalty" from the Jiangsu Regulatory Bureau of the China Securities Regulatory Commission (CSRC) on December 5.
The Jiangsu Regulatory Bureau stated that First Capital Investment Banking allegedly failed to perform due diligence during the continuous supervision period of Hongda Xingye's 2019 convertible bond project. The violations included: insufficient verification of the use and repayment of raised funds; failure to issue verification opinions as required, resulting in false records in relevant continuous supervision documents; and failure to fulfill supervision and reporting obligations as stipulated.
The regulator determined that First Capital Investment Banking, as the sponsor of Hongda Xingye's 2019 convertible bond project, failed to act diligently during the continuous supervision period. The sponsor representatives, Fan Benyuan and Song Yao, were identified as directly responsible for the subsidiary's violations.
The Jiangsu Regulatory Bureau proposed the following penalties: 1. Order First Capital Investment Banking to rectify, issue a warning, confiscate sponsorship revenue of 4.245 million yuan, and impose a fine of 12.7359 million yuan, totaling approximately 16.98 million yuan. 2. Issue warnings to Song Yao and Fan Benyuan, along with individual fines of 1.5 million yuan each.
**Hongda's Delisted Bonds Face Default** The convertible bond project involved in the penalty corresponds to the underlying stock of former A-listed company Hongda Xingye, which delisted in 2024 due to its stock price persistently falling below face value. Its convertible bond, "Hongda Convertible Bond," was subsequently transferred to the delisted sector and renamed "Hongda Delisted Bond."
On December 8, Hongda Xingye announced that "Hongda Delisted Bond" would mature on December 16, 2025, with conversion rights ceasing from December 17. The company stated it would handle the delisting procedures in accordance with regulations. However, as of the announcement date, the company had failed to secure funds for principal and interest payments, indicating an expected default on the bond's maturity date.
**Zero IPO Approvals for First Capital** First Capital Securities stated that the proposed penalties would not significantly impact its or its subsidiary's operations, financial condition, or debt repayment capacity. However, Wind data shows that while First Capital's investment banking business turned a profit of 41.5596 million yuan in the first half of 2025 (compared to a loss of 3.1989 million yuan year-on-year), the 16.98 million yuan penalty still significantly erodes its performance.
In terms of IPO sponsorship performance, First Capital Investment Banking has struggled in recent years: of the 8 IPO projects filed since 2022, 6 were terminated, 1 suspended, and 1 remains under review. Notably, Juhe Technology's ChiNext IPO application was terminated after three rounds of inquiries.
First Capital's interim report outlines its vision to "pursue sustainable development and build a top-tier investment bank with a unique business model and strong competitiveness." While the company has made some progress in investment banking, this penalty highlights persistent weaknesses in continuous supervision, project quality control, and compliance mechanisms, indicating a gap between its current standing and its "top-tier" aspirations.
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