Chinese brokerage Guotai Haitong fined 52.5 million yuan for offshore investment violations

Guotai Haitong Securities Asset Management must pay 52.5 million yuan (US$7.8 million) to Chinese authorities after the State Administration of Foreign Exchange found it breached rules governing offshore investments and failed to properly report cross-border transactions.

The asset-management arm of the leading Chinese brokerage will hand over 25.9 million yuan in fines and forfeit another 26.7 million yuan in illegal gains, according to the company's interim report and SAFE. The penalties stem from violations of foreign-exchange rules under the Qualified Domestic Institutional Investor programme.

Violations spanned three years

The infractions involved several QDII products the firm offered between 2019 and 2022, which have "since been rectified", Guotai Haitong stated in its interim report released on Wednesday. The company said the penalty would not affect its existing QDII qualification or normal operations.

SAFE's Shanghai branch posted the decision on its website but did not disclose details of the transactions involved. Guotai Haitong did not immediately reply to a request for comment on Friday.

Scrutiny intensifies over capital flows

The enforcement action comes as Beijing tightens its scrutiny of capital flows. QDII allows approved Chinese financial institutions to raise domestic funds and invest them in overseas securities within quotas granted by regulators. The programme is considered an important part of China's managed opening of its capital account.

Source: South China Morning Post