Chinese regulators slap US$7.8m penalty on Guotai Haitong arm amid capital flow crackdown

The violations involved several QDII products offered between 2019 and 2022, which have ‘since been rectified’, Guotai Haitong said

An asset-management arm of Guotai Haitong Securities, a leading Chinese brokerage, was ordered to pay 52.5 million yuan (US$7.8 million) in fines and penalties for activities undertaken by its offshore investment business as Beijing tightens its scrutiny of capital flows.

Guotai Haitong Securities Asset Management was fined 25.9 million yuan and ordered to forfeit 26.7 million yuan in illegal gains for breaching foreign-exchange rules governing the Qualified Domestic Institutional Investor (QDII) programme and failing to properly report cross-border transactions, according to the company’s interim report and the State Administration of Foreign Exchange (SAFE).

The regulator, which posted the decision on the website of the Shanghai branch of SAFE, did not disclose details of the transactions involved.

Guotai Haitong did not immediately reply to a request for comment on Friday.

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.

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