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Wuhan Securities, a debt-ridden medium-sized domestic broker based in Central China, was ordered to close by market watchdog China Securities Regulatory Commission (CSRC), according to an announcement published yesterday.
"CSRC has ordered Wuhan Securities' business license to be revoked, and the brokerage shut down," liquidator Beijing Forever Law Firm said in a statement published in the Shanghai Securities News.
The liquidator also said creditors would be allowed to claim debt from the broker from August 22 to November 21.
Late last month, the central bank announced it will loan money to financial institutions to help them pay off the debts to individual investors.
Thus, the small investors would get back most of their deposits from the broker, said Xu Gang, an analyst in CITIC Securities.
But until the small investors' protection fund is established later, the fund will have to repay the loan to the government.
Early this month, Guangzhou-based Guangfa Securities was allowed by CSRC to take over the brokering business of Wuhan Securities, which had a debt of about 4 billion yuan (US$ 493 million).
Founded in 1988, Wuhan Securities is one of the country's first brokers. It has 25 trading offices, including 12 in Wuhan. Due to investment failure and irregularities such as misappropriation of clients' guarantee funds, the broker has been debt-ridden since 2002.
Guangfa Securities has 78 outlets mainly scattered in the east, south and northeast of China. Market observers said Guangfa would be strengthened after acquiring the trading offices of Wuhan Securities in central China.
The regulator has been revamping the country's brokerage sector, which has been in a consecutive four-year slump due to market doldrums and irregularities.
Ninety percent of China's 130-odd brokers lost a combined 15 billion yuan (US$ 1.85 billion) last year.
In the first half of this year, about 70 percent of the 64 inter-bank member brokers came up with a red balance sheet.
(China Daily August 19, 2005)
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