Tianfeng Securities Faces Heavy Penalty, Two Former Senior Executives Bermaned for Life

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Reprinted from China Business Network

Reporter Luo Ji, Beijing report

After more than three months of investigation by the China Securities Regulatory Commission, the illegal financing issues of Tianfeng Securities (601162.SH) have finally been clarified.

On the evening of March 13, Tianfeng Securities issued an announcement stating that the company received the “Administrative Penalty Decision” from the Fujian and Hubei Regulatory Bureaus of the CSRC. The company was fined 4 million yuan for failing to disclose shareholding information in a timely manner, and 15 million yuan for illegal financing and information disclosure violations, totaling a fine of 19 million yuan. Meanwhile, five former senior executives of the company were collectively fined 22.7 million yuan, including former Chairman Yu Lei and former Vice President and CFO Xu Xin, who were both banned from securities markets for life.

In addition to penalties, there were setbacks in business operations. The Hubei CSRC suspended Tianfeng Securities from selling private equity financial products for two years, and its private equity fund subsidiary, Tianfeng Tianrui Investment Co., Ltd., was suspended from establishing new private funds for one year.

The implementation of these penalties marks the conclusion of a regulatory investigation that lasted over three months, and clearly exposes the long-standing compliance failures of this Hubei Province’s only provincial securities firm. Behind the penalties is a detailed picture of how this state-owned provincial broker repeatedly crossed compliance boundaries, leveraging its resources to illegally “inject blood” into the original largest shareholder, Contemporary Group.

Illegal financing to shareholders amounts to up to 9.3 billion yuan

Among recent cases of related-party financing investigations involving brokerages, Tianfeng Securities involved not only a large scale of funds but also highly complex financial instruments.

Investigations show that from 2020 to 2022, Tianfeng Securities used its own funds through subsidiaries’ fund transfers, designated investment rescue projects, private fund products purchasing bonds issued by Contemporary Group or its affiliates, and proprietary reverse repurchase operations, providing a total of 5.502 billion yuan in financing to Contemporary Group. Currently, Tianfeng Securities has recovered 5.253 billion yuan, with remaining 249 million yuan claimed through bankruptcy administrators or courts.

Meanwhile, Tianfeng Securities used managed client assets to subscribe to collective trust plans, providing 1.012 billion yuan in financing; purchased bonds of the Contemporary Group in the primary market, providing 492 million yuan; and engaged in reverse repurchase of bonds with two private funds, providing 1.52 billion yuan.

Additionally, in 2021, Tianfeng Securities participated in the capital increase of Guanggu Financial Leasing, transferring 500 million yuan to related parties of Wuhan Commercial Trade under the name of equity earnest money; in the same year, Tianfeng Securities and its subsidiary, Tianrui Property, provided 300 million yuan in financing to a related company designated by Xue of Wenhui Shares. The above 500 million yuan in equity earnest money and 300 million yuan in financing have been recovered.

In total, Tianfeng Securities used trust, private equity, bonds, equity capital increases, and other financial tools to illegally provide a total of 9.326 billion yuan in financing to shareholders.

Beyond related-party financing, Tianfeng Securities was also involved in a delayed illegal information disclosure case. On December 31, 2021, the Quanzhou Intermediate People’s Court of Fujian Province issued an “Enforcement Ruling,” ordering Su Mouxu and Fujian Nan’an Xiongguan Investment Center (Limited Partnership) to deliver a total of 41.372 million shares of Yongan Forestry (000663.SZ) and dividends to Tianfeng Securities to settle related debts, stating that “the above property rights transfer from the date of service of this ruling.” On the same day, Tianfeng Securities, as the applicant, received the ruling, thereby holding 12.29% of Yongan Forestry’s total shares, reaching the threshold for equity change disclosure. However, Tianfeng Securities only issued “Notification Letter” and “Simplified Equity Change Report” to Yongan Forestry on February 23 and March 7, 2022, respectively, and Yongan Forestry only published relevant disclosures on February 24 and March 9, 2022.

Regarding penalties, Tianfeng Securities was fined 5 million yuan for illegal financing to shareholders or related parties, 10 million yuan for information disclosure violations, and 4 million yuan for illegal disclosure of Yongan Forestry shareholding changes, totaling 19 million yuan.

Five senior executives fined 22.7 million yuan

In addition to penalties on the company level, regulatory actions against former senior executives of Tianfeng Securities serve as a stark warning about compliance culture in the capital market.

According to investigation results, then-Chairman Yu Lei, then-CEO Wang Linjing, then-Executive Vice President Feng Lin, Vice President Zhai Chenxi, and Vice President and CFO Xu Xin all had knowledge of, participated in, or directly executed the violations. However, in the annual reports from 2020 to 2022, Tianfeng Securities deliberately concealed related-party transactions and failed to disclose them as required, resulting in significant omissions.

In terms of specific penalties, Yu Lei and Xu Xin were fined 6 million yuan each and both received lifetime securities market bans; Wang Linjing was fined a total of 4.4 million yuan; Zhai Chenxi was fined 3.3 million yuan; Feng Lin was fined 3 million yuan. The total fines for the five former senior executives amounted to 22.7 million yuan.

The two former executives who received lifetime bans each have clear career trajectories, and their outcomes are quite poignant.

Public information shows that Yu Lei, born in 1978, holds a Ph.D. in Law from Wuhan University. He previously served as the Secretary of the Board of Renfu Pharmaceutical (600079.SH), a company under the “Contemporary System,” and was reported as the “youngest secretary” at age 25. In November 2006, at only 28 years old, Yu Lei became Chairman of Tianfeng Securities, leading the brokerage for nearly 20 years and being a key figure in the “Contemporary System” and Hubei’s capital market ecosystem. Now, he will be completely out of the securities industry due to the lifetime ban.

Similarly, Xu Xin, born in 1975, previously served as Investment Director and Secretary of the Board at Huarong Securities. She joined Tianfeng Securities in 2015 as Vice President and CFO. As the CFO, she played a crucial role in the illegal information disclosure chain; her deep involvement in related financing operations is also evident. The regulatory authorities applied the maximum penalty measures to Xu Xin, reflecting her significant participation in the violations. The differentiated penalties for the five executives also clearly delineate the responsibilities between “knowing participation” and “leading” roles.

The dilemma of a provincial securities firm with dual identities

Tianfeng Securities traces its origins to the Chengdu United Futures Exchange established in 1995. In 2000, it was reorganized and renamed Sichuan Tianfeng Securities Brokerage Co., Ltd., with a registered capital of 77 million yuan. In 2008, then-Chairman Yu Lei led the introduction of Wuhan State-owned Assets Operation Co., Ltd., becoming the largest shareholder, and the company’s registered location moved from Chengdu to Wuhan. At that time, Yu Lei set a clear development direction for Tianfeng Securities—to build a “national comprehensive brokerage”—and completed full licensing within four years.

Subsequently, Yu Lei led Tianfeng Securities on an “acquisition and expansion” path: in 2014, acquiring 29.99% of Heng Tai Securities; in 2015, investing in Lianxun Securities; in 2016, participating in Huaxin Securities’ capital increase. In 2018, Tianfeng Securities was listed on the Shanghai Stock Exchange’s main board, becoming Hubei’s first listed securities firm, with net capital rising from 294 million yuan to nearly 10 billion yuan.

On March 14, Xu Feng, director of Shanghai Jiucheng Law Firm, told China Business Network that as a listed company, Tianfeng Securities should strictly fulfill its information disclosure obligations. Especially as a licensed listed broker, it should adhere to higher standards than ordinary listed companies, implement internal controls, and abide by corporate governance principles.

The compliance failure of Tianfeng Securities reflects a long-standing structural dilemma of this provincial securities firm being caught in capital manipulation. As Hubei’s only provincial securities company, Tianfeng Securities has always aimed to serve the local economy and support the regional capital market. This positioning is understandable; however, when provincial resource advantages and the needs of large local private enterprises intertwine deeply, and boundary management fails to keep pace, compliance risks quietly accumulate.

Between 2015 and 2017, before its IPO application was accepted by the CSRC, the largest private group in Hubei, Ailuming, who was well-versed in capital operations, gradually injected Tianfeng Securities’ shares into multiple companies under the “Contemporary System,” forming a tightly connected shareholding network—Renfu Pharmaceutical (11.22%), the Contemporary Group itself (3.18%), Shanghai Tianhe (2.18%), Sante Slope (0.55%); in 2016, another “Contemporary System” listed company, Contemporary Cultural and Sports (600136.SH), also appeared as a shareholder with 1.05%. When combined, by the end of 2017, the “Contemporary System” held over 17% of Tianfeng Securities’ shares, ranking second after the four state-owned shareholders holding a combined 30.89%, thus exerting substantial control beyond mere shareholding percentages. Dispersing holdings across multiple subsidiaries is consistent with Ailuming’s capital operation logic and results in the “Contemporary System” having a much deeper actual control over Tianfeng Securities than any single shareholding figure suggests.

In 2022, the asset scale of the “Contemporary” Group, exceeding 100 billion yuan, suddenly “blew up,” with bonds defaulting one after another and assets being liquidated. In September 2024, the group filed for bankruptcy reorganization due to insolvency. As the “collapse” of the Contemporary Group unfolds, the hidden details of Tianfeng Securities’ illegal “blood transfusions” to shareholders finally come to light.

This regulatory heavy penalty may mark a pivotal moment for Tianfeng Securities to heal and rebuild its compliance bottom line—yet, the heavy price of this overdue reckoning has already been paid.

(Edited by Xia Xin, reviewed by He Shasha, proofread by Yan Yuxia)