Tianfeng Securities Co.,Ltd. (601162.SH) is facing a critical test of its compliance foundation as regulatory scrutiny intensifies. On the evening of March 13, the company issued four consecutive announcements disclosing penalties from the Hubei and Fujian regulatory bureaus, totaling fines of 19 million yuan. Key executives were banned from the market for life, and certain business operations were suspended, drawing widespread market attention.
As the first listed financial institution in Hubei, Tianfeng Securities had shown positive signals in its operations following its transition from private to state-owned ownership in 2023. The company is projected to return to profitability by 2025. The recent penalties primarily address historical issues left over from the era of its former private shareholders, allowing the firm to shed old burdens and enter a new phase of development.
The penalties are seen as a cleanup of past accounts. Last November, the China Securities Regulatory Commission (CSRC) launched an investigation into Tianfeng Securities for suspected violations in information disclosure and illegal financing. At the time, the market speculated that this might be related to the fund misappropriation by its former major shareholder, Wuhan Contemporary Technology Industry Group Co., Ltd., as disclosed in the 2022 annual report.
Over two months later, on February 13, Tianfeng Securities received the penalties. According to the CSRC, the Hubei bureau proposed a maximum fine of 25 million yuan against Tianfeng Securities and Contemporary Group for their involvement in illegal financing and information disclosure violations. Nine individuals were fined a total of 34.8 million yuan. Ai Luming, the actual controller of Contemporary Group, along with Yu Lei, the then chairman of Tianfeng Securities, and Xu Xin, the then vice president and chief financial officer, were banned from the securities market for life.
Simultaneously with the penalties, the company faced another investigation. On the same day, Tianfeng Securities disclosed a notice of立案 for suspected violations in information disclosure regarding shareholding changes in Fujian Yonglin Forestry (Group) Co., Ltd.
On the evening of March 13, Tianfeng Securities announced that it had received the "Administrative Penalty Decision" and "Administrative Supervision Measures Decision" from the Hubei bureau, as well as another "Administrative Penalty Decision" from the Fujian bureau concerning the Yonglin Forestry shareholding disclosure violations.
The Hubei bureau's decision revealed that between 2020 and 2022, Tianfeng Securities had illegally provided financing to its former major shareholder, Contemporary Group, and failed to disclose related-party transactions as required. As a result, the company was warned and fined 15 million yuan. Several executives, including Yu Lei and Xu Xin, were also warned and fined. As directly responsible persons, Yu Lei and Xu Xin were banned from the securities market for life.
Additionally, due to issues such as improper sales of private funds, Tianfeng Securities received a supervisory measures decision from the Hubei bureau, which suspended its agency sales of private financial products for two years.
Furthermore, the Fujian bureau's penalty decision stated that Tianfeng Securities was ordered to rectify its violations, given a warning, and fined 4 million yuan for information disclosure irregularities in Yonglin Forestry's shareholding changes. Wang Linjing, the company's president, was warned and fined 1.4 million yuan.
The series of penalties exposed deep-seated issues of improper benefit transfers to the former major shareholder. However, these penalties represent a comprehensive cleanup of historical problems from the private shareholder era, marking a complete break from past risks for the brokerage.
In 2023, Hongtai Group, the only state-owned financial services enterprise in Hubei, officially took control, with Contemporary Group exiting entirely. The Hubei Provincial Department of Finance became the actual controller. Under state-owned ownership, Hongtai Group implemented a strategy of "operating while repairing and transforming," providing nearly 10 billion yuan in capital support. A 4 billion yuan private placement in 2025 was fully subscribed by Hongtai Group, increasing its stake to 28.14% and, together with parties acting in concert, to 35.65%, further consolidating its controlling position.
Tianfeng Securities stated that historical risks have been thoroughly resolved, and comprehensive rectification measures have been firmly implemented. The company is now operating smoothly and has entered a new phase of stable development.
With state-owned ownership and the resolution of historical issues, Tianfeng Securities is embarking on a new chapter. It is focusing on its "city investment banking" strategy, deepening its presence in Hubei, and integrating all business lines to provide tailored comprehensive financial services for the province.
However, in 2024, Tianfeng Securities' performance declined significantly, with revenue dropping 21.21% year-on-year to 2.7 billion yuan. Net profit turned to a loss of 30 million yuan, making it the only loss-making entity among 42 listed securities firms, primarily due to a 45.19% decline in investment income.
By business segment, proprietary trading and investment banking revenues fell sharply by 34.71% and 15.75%, respectively. Geographically, revenue from Hubei branches increased by 14.5%, while revenue from outside the province declined by 12.47%, and revenue from headquarters and subsidiaries dropped by 29.51%.
With the completion of the 2025 private placement, Tianfeng Securities' net asset scale improved, and its return on equity (ROE) turned positive in the first three quarters. The company's earlier performance forecast indicated an expected net profit attributable to shareholders of 125 million to 185 million yuan in 2025, achieving a turnaround to profitability, mainly due to increased investment income compared to the same period last year.
Standing at a new starting point with historical issues resolved, Tianfeng Securities has outlined a path for differentiation, focusing on "regional depth and business upgrading" and leveraging state-owned advantages to build core competitiveness. Whether the company can strengthen internal controls and stand out in the intense competition among small and medium-sized brokerages remains to be seen.
In the secondary market, Tianfeng Securities' shares hit a rebound high of 6.12 yuan on August 26, 2025, but have since declined, closing at 3.96 yuan on March 13 of this year.
The securities sector has underperformed the broader market recently, with the Wind Securities Index falling 8.23% year-to-date, while the Shanghai Composite Index rose 3.19% over the same period.
AVIC Securities research suggests that regulators explicitly support leading institutions in enhancing competitiveness through mergers and acquisitions, while encouraging small and medium-sized firms to specialize. Three key themes are highlighted: large and medium-sized brokerages with integration expectations, specialized firms with differentiated competitiveness, and those with significant advantages in international business.
Shenwan Hongyuan Group believes that 2026, as the start of the 15th Five-Year Plan, could see securities firms, as core intermediaries in the capital market, experience a Davis double play driven by policy, capital, and market activity. The first half of the year may see stimulus from quarterly earnings disclosures and policy reforms.
