The China Securities Regulatory Commission has revoked the licence and ordered the closure of Dalian Securities, a small brokerage in Liaoning province, South China Morning Post said. Analysts believed that the decision to proceed to closure was based on the brokerage's issue last year of debt instruments that guaranteed higher interest rates to retail investors. The company had pledged to use the proceeds for treasury bond repurchases, but instead it poured them into the equities and property markets. This led to a cashflow crisis, which precipitated its downfall. An official involved in the liquidation said that the People's Bank of China had provided Yn600m to settle Dalian's outstanding debts to retail investors.
This was the first major executive action taken by the commission since Shang Fulin took over as chairman from Zhou Xiaochuan. Analysts said that it was intended to show the commission's resolve to deal with irregularities in the securities markets. China has some 124 brokerages servicing a market with only 1,232 listed companies and a market capitalisation of Yn4,700bn. The government wants to consolidate the industry to improve efficiency and competitiveness.