Great Wall Guorui Securities Hit with Five Fines Over Rebate Scandal Involving Compliance Staff

September 22 (Caixin) — Reporter Gao Yanyun — On September 21, the Xiamen Office of the China Securities Regulatory Commission (CSRC) issued five penalty notices to Great Wall Guorui Securities. Among them, Zhang Chaozhi, a securities broker at the company's Xiamen Xiahe Road business office, was subjected to regulatory interview measures; the business office itself, compliance manager Wu Yishuai, employee Xiao Ming, and broker Huang Chunge were each issued warning letters.

The penalties directly target illegal commission rebates in the securities brokerage business. The sanctions involve two business offices — Xiamen Xiahe Road and Lianqian East Road — and not only named two brokers for illegal rebates but also exposed internal staff, including compliance manager Wu Yishuai, who knowingly introduced clients and accepted commission kickbacks.

When compliance personnel, whose duty is to supervise, become part of the profit chain, it reflects not merely individual professional misconduct but a systemic failure of compliance controls at the brokerage's grassroots business outlets.

Regulatory scrutiny of disguised commission rebates is intensifying, with penetrating investigations targeting gray-area profit chains. So far this year, 17 securities firms have received a total of 29 penalty notices related to commission violations, sending a strong signal of stricter enforcement against brokerage business irregularities.

From Brokers to Compliance Staff: Full-Scale Involvement

According to the regulatory penalties, the specific violations of the four individuals are as follows:

• Zhang Chaozhi: While serving as a securities broker at Great Wall Guorui Securities' Xiamen Xiahe Road business office, he transferred improper benefits to certain clients and other interested parties by returning a portion of his commission income.

• Huang Chunge: While serving as a securities broker at the company's Xiamen Lianqian East Road business office, he transferred improper benefits to individual clients and other interested parties by returning a portion of his commission income.

• Xiao Ming: While employed at Great Wall Guorui Securities, he violated internal management regulations by introducing clients to securities brokers at the business office and accepting commission kickbacks from them.

• Wu Yishuai: While serving as compliance manager at the Xiamen Xiahe Road business office, he introduced clients to securities brokers and accepted commission kickbacks from them.

Additionally, the Xiamen Xiahe Road business office had individual brokers transferring improper benefits to clients and other interested parties through commission rebates, and individual employees introducing clients to brokers in exchange for commission kickbacks — indicating inadequate compliance controls at the office.

From "Individual Violations" to "Systemic Misconduct"

Notably, all four individuals involved are industry veterans with 15 to 17 years of experience, yet their career trajectories show an unusual "reverse flow" contrary to normal workplace progression.

Xiao Ming: "From Core to Periphery" — Xiao Ming has worked at Great Wall Guorui Securities for over 15 years. According to the Securities Association of China (SAC) website, he was first registered as a general securities business professional on July 19, 2011. He subsequently served as an investment advisor for approximately two years (March 15, 2013 – May 20, 2015) and as an investment manager for three and a half years (May 31, 2015 – November 30, 2018). Since 2018, for nearly eight years, his registration category has reverted to general securities business.

Wu Yishuai: "15 Years Without Progress" — From July 21, 2011, to the present, Wu Yishuai's registration at Great Wall Guorui Securities has remained as "general securities business."

Zhang Chaozhi and Huang Chunge: "Collective Reclassification in 2016" — Zhang Chaozhi was previously a regular employee of Great Wall Guorui Securities with 17 years of experience. From September 4, 2009, to November 3, 2016, his registration category was "general securities business," a period lasting seven years. From November 20, 2016, to the present, he has been a securities broker for nearly ten years.

Huang Chunge was also a former regular employee with 17 years of experience. From June 23, 2009, to September 20, 2016, his registration category was "general securities business (securities brokerage marketing)." From November 2, 2016, to the present, he has been a securities broker at Great Wall Guorui Securities.

Intensifying Crackdown on Disguised Commission Rebates

As of September 22, approximately 29 penalty notices related to commission violations have been issued this year, involving 17 securities firms. Violation methods include inducing trades, off-book rebates, splitting and cashing out commissions, private profit-sharing, transferring commissions to related parties, and disguised commissions through private client profit-sharing agreements. The use of securities brokers to illegally extract commissions has become a major problem, with related penalties particularly concentrated in August.

On August 17 this year, the Hunan CSRC office reported that a branch manager and business office head at one securities firm used broker identities to register clients and siphon commission rewards. The Jilin and Ningbo CSRC offices also disclosed cases where brokers had long transferred commissions to specific related parties. Additionally, a Beijing business office of one securities firm provided disguised rebates to private equity firms through consulting fees and commissions between 2017 and 2024. All violators received warning letters and were ordered to rectify.

A veteran broker told Caixin reporters that regular employees receive approximately 10% commission, while brokers typically receive over 30%. This significant disparity has given rise to a "white glove" model: internal staff channel clients to high-commission brokers, who then return funds privately, enabling disguised salary payments or benefit transfers. Brokers effectively become conduits to bypass internal controls, with their high commissions serving merely as "toll fees" for fund transfers.

The spread of this gray-area model reflects both the industry's distorted ecology under the dual pressures of declining commissions and salary caps, as well as internal personnel exploiting institutional loopholes for personal gain. Some business outlets, in an effort to maintain teams or secure channels, have turned marketing expenses into vehicles for benefit transfers. Other employees simply use "white gloves" to siphon funds for personal enrichment. This not only distorts financial records and causes tax leakage but also drives price competition underground, severely undermining fair competition.

Regulators are reportedly intensifying investigations into commission rebates and splits. The recent spate of penalties indicates a fundamental shift in regulatory logic: no longer limited to checking superficial compliance items like contracts and invoices, authorities are now conducting "substantive penetration" through fund flow tracking and related-party relationship checks.

Integrity in Practice Elevated to Compliance Baseline

These penalty notices are a typical example of stricter oversight of integrity in professional practice. In recent years, regulators have elevated integrity from a moral recommendation to a compliance baseline, implementing "two-way penetration and simultaneous accountability" for both institutions and individuals, sending a clear signal of "zero tolerance."

Institutional frameworks are also being strengthened. On September 14, the SAC solicited opinions from securities firms on a revised version of the Detailed Implementation Rules on Integrity in Practice for Securities Institutions and Their Staff. The draft revision explicitly introduces a salary clawback mechanism for the first time, adding a provision to the existing human resources clause: if an institution confirms that a staff member has violated integrity rules, it may implement salary clawbacks against the responsible individual in accordance with labor contracts and company policies.

Additionally, the draft revision requires institutions to conduct scientific and systematic integrity risk assessments across all business types, segments, and related activities, to identify integrity risk points annually and formulate targeted preventive measures, and to strengthen position checks and balances and internal oversight mechanisms.