CSRC to Punish 258 Firms Illegally Financing Margin Trading

Source: Regulation Asia Editors, Regulation Asia 2020-07-10

The CSRC warns that illegal lenders are offering margin loans via websites, mobile apps and social media, promising investors 10 times leverage and high profits.

The CSRC (China Securities Regulatory Commission) has named 258 unlicensed firms that it says it will punish for illegally financing margin trading through private loans to stock traders.

Since 2015, only licensed brokerage firms have been allowed to provide margin lending, after a market collapse wiped out USD 5 trillion in market cap. At the time, lenders were providing margin loans up to 20 times deposits.

“Securities financing and securities lending business is a franchise business of securities companies, and no unit or individual may conduct business without the approval of the CSRC,” the regulator said in a statement.

The CSRC warns that illegal lenders are offering margin loans via websites, mobile apps and social media, promising investors 10 times leverage and high profits.

“We ask investors to raise their risk prevention awareness and actively avoid margin financing in order to prevent losses,” the CSRC said.

The warning was prompted by a 14 percent run-up in the Shanghai Composite Index over six trading sessions to Tuesday (7 July), which sparked concerns of an impending sell-off that could hurt investors. Margin loans in China are at a five-year high.

The Shanghai Composite Index extended its winning streak to eight sessions on Thursday (9 July), closing at multi-year highs.

China Securities Regulatory Commission

CSRC to Punish 258 Firms Illegally Financing Margin Trading

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