CLS(SZ:002945) Guan Cha Zhe Wang·2025-10-27 06:39Core Viewpoint - The recent warning letter issued by the Tibet Securities Regulatory Bureau to Huayin Securities highlights three core issues: inadequate execution of personnel recruitment and compensation management authorization systems, improper payment of employee severance by Shenzhen Liyue Group, and involvement of Liyue Group staff in company operations. This reflects deeper governance issues and blurred boundaries between the controlling shareholder and the listed brokerage [1][3][6]. Group 1: Regulatory Issues - Huayin Securities has received three warning letters from the Tibet Securities Regulatory Bureau in 2024, indicating a rise in the frequency and severity of regulatory penalties, including improper disclosure of performance forecasts and inadequate risk control reporting [1][2]. - The core issue identified is the inappropriate interference of the controlling shareholder, Liyue Group, in the management of Huayin Securities, which violates the independence requirements of listed companies as per the Company Law and Securities Law [3][6]. Group 2: Management and Governance - Since 2019, Huayin Securities has changed its CEO six times, with the longest tenure being two years and the shortest around six months, indicating significant management instability [2][13]. - The dual role of Lin Li as both the chairman of Liyue Group and Huayin Securities exacerbates governance issues, blurring the lines between the two entities and raising concerns about independent decision-making [6][15]. Group 3: Financial Performance - In 2024, Huayin Securities reported a revenue of 1.435 billion yuan, a year-on-year increase of 41.35%, and a net profit of 353 million yuan, a staggering increase of 1014.54% [2][13]. - The growth is primarily driven by a strategic shift towards technology-driven financial services, with wealth management revenue reaching approximately 899 million yuan, up 9.74% year-on-year, and online wealth management revenue growing over 31% [13][14]. Group 4: Compliance and Internal Control - The company has significant compliance issues, including failures in personnel recruitment and compensation management, which indicate a lack of effective internal management systems [8][12]. - Inaccurate reporting of risk control indicators and other compliance failures have led to public reprimands for the chairman, highlighting the critical importance of risk management in financial institutions [9][12]. Group 5: Future Outlook - Despite impressive financial performance, ongoing regulatory penalties and governance issues pose risks to the sustainability of Huayin Securities' growth. The company must address its governance and compliance challenges to ensure long-term viability [15].