On September 11, the Inner Mongolia Securities Regulatory Bureau publicly disclosed three administrative supervision measure decisions, targeting compliance issues in the bond underwriting business of Guorong Securities Co., Ltd. The penalties come at a critical juncture for the firm, which was recently acquired and consolidated by Western Securities (002673.SZ) and had just reported robust revenue and profit growth for the first half of 2026.
From a standalone perspective, Guorong Securities generated revenue of RMB 577 million in the first half of 2026, equivalent to 50.98% of its full-year 2025 figure, while net profit reached RMB 113 million, or 144.7% of the 2025 annual total. On a consolidated basis as audited by Western Securities, the performance was even stronger, with revenue of RMB 648 million and net profit of RMB 120 million.
On one hand, the regulatory scrutiny acts as a tightening constraint; on the other, the post-consolidation period marks a fresh start. The question remains whether these penalties stem from isolated oversights or deeper institutional weaknesses, especially as oversight of investment banking practice quality continues to intensify.
Bond Underwriting Violations Trigger Dual Penalties, Three Individuals Held Accountable
According to the announcements, Guorong Securities was found to have two major problems in certain bond underwriting projects. First, inadequate due diligence, failing to exercise diligence and prudence in verifying issuers' significant equity investments, financial information, corporate governance, and internal controls. Second, weaknesses in the execution of internal control mechanisms, with irregular procedures in project initiation and quality control, and a failure to strictly separate primary and secondary bond market operations.
The Inner Mongolia bureau decided to impose supervisory talks on Guorong Securities as an administrative supervision measure and record the matter in the securities and futures market integrity file. Accountability did not stop at the corporate level but was further traced to specific responsible individuals.
Zhang Zhihe, then president of Guorong Securities, oversaw the fixed income division from 2017 to March 2018. Li Tao, then head of the fixed income division (also assistant president) and later vice president, took over supervision of the division from March 2018 onward. Both were ordered to make corrections and had the penalties recorded in their integrity files. Additionally, project leader Li Rui was ordered to make corrections due to inadequate due diligence and failure to fulfill duties diligently.
Among the three named individuals, Zhang Zhihe and Li Tao currently remain in senior management positions at Guorong Securities, while Li Rui's current whereabouts have not been publicly disclosed. Zhang Zhihe is a veteran of the firm, having previously served as general manager of CITIC WanTong Securities and president of Datong Securities. He became president and CFO of Guorong Securities in January 2016 and succeeded Hou Shoufa as chairman in April 2023. After Western Securities completed the acquisition in October 2025, the board was reshuffled, with Huang Bin appointed as chairman from outside and Zhang Zhihe transitioning to vice chairman. Liu Xiang was hired as president.
Li Tao brings roughly 15 years of experience as a practicing lawyer, with deep expertise in private equity funds, corporate mergers and acquisitions, financing, and corporate legal risk control. He has served clients including Hebei Jiantou Chuangfa Fund, Inner Mongolia Hetao Water Group Huameng Fund, Bohai Bank, and Bohai Trust. In March 2018, Li Tao was promoted to vice president of Guorong Securities while concurrently heading the fixed income division. The penalty period identified in the current sanction aligns with his oversight role beginning in March 2018. As of October 2025, corporate disclosures show Li Tao still serving as vice president.
Notably, this is not the first penalty for Guorong Securities' underwriting and sponsorship business this year. On July 31, 2026, the China Securities Regulatory Commission ordered corrective measures against the firm for inadequate due diligence in sponsorship projects, lax quality control and internal review, and improper management of submitted materials.
Yu Fenghui, a special researcher at the China Financial Think Tank, noted that the practical deterrent effect of "corrective orders plus integrity file records" on senior executives depends on how much their future qualifications and career mobility are restricted. For Zhang Zhihe and Li Tao still employed at Guorong Securities, integrity file records will directly affect their annual qualification reviews for executive positions and the approval of new business licenses. If violations recur, penalties could escalate rapidly to designating them as unsuitable persons or even imposing market bans. This individual accountability can serve as a direct deterrent to sitting executives, but the key to curbing recurring violations lies in whether accountability penetrates to the core of business decision chains rather than merely punishing signatories. Regulatory practice has now entered a norm of dual penalties against both institutions and individuals, with the substantive binding force of personal accountability strengthening.
First-Half Revenue of RMB 648 Million, Underwriting Business Below 5% of Total
Beyond the penalties, the operational performance of Guorong Securities warrants attention. Founded in Hohhot with registered capital of RMB 1.783 billion, the firm was formerly known as Rixin Securities. In September 2025, it completed the equity transfer under the Western Securities acquisition, becoming a controlling subsidiary with Western Securities holding 64.6%.
Over a longer timeline, the brokerage has traversed a path from turning profitable to volatility and then consolidation over the past three years. In 2023, Guorong Securities generated operating revenue of RMB 967 million, up 38.42% year-on-year, with net profit attributable to shareholders of RMB 39 million, achieving a turnaround. In 2024, revenue further rose to RMB 1.119 billion, up 15.73%, with net profit of RMB 86 million, up 104.35%. The two consecutive years of recovery provided a benchmark for 2025 performance.
In the first year of consolidation by Western Securities, Guorong Securities reported 2025 revenue of RMB 1.238 billion, up approximately 10.64% year-on-year, with consolidated net profit of RMB 40.74 million, up 228.21%. The wealth management business served as the primary growth engine, generating approximately RMB 500 million in revenue, accounting for over 40% of the total, with assessment profits (before incentive distribution) doubling and profitable branches increasing by 15 year-on-year.
According to Western Securities' 2026 interim report, Guorong Securities achieved first-half revenue of RMB 648 million, equivalent to 57.2% of its full-year 2025 figure, and net profit of RMB 120 million, equivalent to 154.9% of the 2025 annual total. In financial market operations, fixed income captured rebounds through allocations in undervalued convertible bonds, maintained short-duration strategies in pure bonds for positive returns, and kept high positions in proprietary equity trading. In asset management, fixed income plus products optimized allocations and built positions at low levels to enhance returns, while accelerating new product launches and expanding distribution channels to drive simultaneous growth in scale and income, improving profitability.
Western Securities noted that in investment banking during the first half of 2026, Guorong Securities achieved year-on-year growth in NEEQ and financial advisory segments. The equity business strengthened revenue expectation management, steadily advanced reserved Beijing Stock Exchange refinancing projects, and filled gaps in related business areas.
However, Wind data shows that as of September 14, 2026, Guorong Securities sponsored two projects over the past year - Guangxi Baifei Dairy Co., Ltd. and Dalian Ruike Technology Co., Ltd. - with a 100% withdrawal rate. According to the firm's semi-annual regulatory report for 2026, cumulative net investment banking revenue stood at approximately RMB 49.85 million, of which underwriting net revenue totaled approximately RMB 27.63 million. Within the company's RMB 648 million in half-year revenue, underwriting net revenue accounted for less than 5%.
Industry-wide, the Matthew effect in bond underwriting is intensifying. In the first half of 2026, among 90 brokerages participating in bond underwriting, the top five collectively captured over 50% of market share. CITIC Securities led with RMB 1.19 trillion in underwriting volume, followed by Guotai Haitong and CITIC Construction Investment, with the scale gap between leading institutions and smaller brokerages continuing to widen.
The current penalty deals another blow to Guorong Securities' already modest underwriting business. Yu Fenghui pointed out that the core tension for small and mid-sized brokerages balancing compliance under bond origination pressure lies in scarce projects and thin revenue, where the marginal temptation of individual non-compliance is high while compliance costs represent a significant burden. The penalty against Guorong Securities for specific projects demonstrates that smaller brokerages are already at a disadvantage on the origination side, and the path of relaxing due diligence standards to secure project resources is no longer viable. The way forward for smaller firms is not to compete on underwriting scale but to consolidate their focus, concentrating on traditional strengths such as regional urban investment bonds and policy-supported debt instruments. By leveraging deep knowledge of regional issuers instead of expansive scale growth, they can conduct thorough due diligence on limited projects and transform compliance capability into differentiated competitiveness.
Old issues from eight years ago have resurfaced, with three former executives held accountable - a signal of tightened regulation and an opportunity for Guorong Securities to address compliance shortcomings. Following consolidation under Western Securities, the company reported first-half revenue of RMB 648 million and net profit of RMB 120 million, with notable strengths in wealth management and fixed income. While underwriting revenue remains small, this also implies ample room for adjustment.