Regulatory Violations Expose Internal Control Weaknesses as Non-GAAP Net Profit Drops 30%
SHANGHAI, June 3 (Securities Star) – Huatai Securities is confronting significant operational and regulatory challenges following the disclosure of a 16-year insider trading scheme by a former executive, coinciding with a 29.9% decline in 2024 core profitability despite superficial revenue growth.
The “Rat Trading” Scandal
Jilin regulatory authorities revealed on May 30 that former research head Shao exploited internal systems for illegal gains:
| Violation Period | Key Metrics | Regulatory Action |
|---|---|---|
| 2008-2024 (16 years) |
|
¥881,800 fine + confiscation |
This follows multiple 2023 violations including:
- Improper OTC options trading (December warning)
- Financial product mis-selling (November corrective order)
- Unauthorized client trading (branch employee sanction)
Financial Performance Concerns
While 2024 results showed:
- Total revenue: ¥41.47B (+13.37% YoY)
- Net profit: ¥15.35B (+20.40%)
Critical weaknesses emerged:
| Metric | 2024 Performance | YoY Change |
|---|---|---|
| Non-GAAP Net Profit | ¥9.03B | -29.90% |
| Wealth Management Revenue | — | -14.27% |
| Institutional Services | — | -28.29% |
The profitability decline was masked by a one-time $1.79B gain from selling U.S. subsidiary AssetMark.
Investment Banking Struggles
Key capital markets metrics deteriorated:
- Equity underwriting volume:
- IPOs: -49.17%
- Follow-ons: -70.01%
- 2 major regulatory warnings for due diligence failures
Strategic Implications
The dual challenges raise questions about:
- Governance: Effectiveness of compliance systems after repeated violations
- Core Competitiveness: Sustainability beyond one-time asset sales
- Strategic Execution: “Dual Engine” strategy underperformance
Analysts suggest the firm needs urgent operational restructuring and cultural reform to address both regulatory and profitability challenges in China’s increasingly competitive securities landscape.
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