Securities Firm Default

Securities firms refer to financial institutions engaged in securities issuance, underwriting, agency, self-operation, margin financing and securities lending, investment consulting and other businesses. They play an important role in the capital market. However, in recent years, some securities firms have violated laws and regulations, violated professional ethics, manipulated the market, insider trading, defrauded customers and other bad behaviors, which have caused serious social and economic impacts. This is the phenomenon of securities firms failing their responsibilities.

Reasons for failure of securities firms

The main reasons for the failure of securities firms are as follows:

Laws and regulations are incomplete or enforcement is not strict. The securities laws and regulations in some countries or regions are not yet complete, and there is a lack of clear norms and requirements for the establishment, management, supervision and punishment of securities firms, giving some unscrupulous securities firms opportunities to take advantage of them. On the other hand, even if relevant laws and regulations are in place, it will be difficult to effectively supervise and crack down on illegal activities of securities firms if the law enforcement departments lack sufficient manpower, material resources, and technical support, or are affected by problems such as corruption and interest transfer.

Market competition and profit driven. With the development and expansion of the capital market, competition among securities firms has become increasingly fierce. In order to compete for market share and customer resources, some securities firms do not hesitate to use various unfair means, such as false propaganda, low-price competition, and secretly collecting kickbacks. etc., and even colluded with some listed companies or major shareholders to participate in activities such as market manipulation and insider trading to seek illegitimate interests. At the same time, some senior managers or employees of securities firms are also tempted by personal interests and take advantage of their positions to engage in illegal activities such as defrauding customers, misappropriating funds, and leaking information.

Lack of professional ethics and risk awareness. Some securities firms have not established a sound corporate culture and professional ethics, and have not paid enough attention to the education and training of employees. As a result, employees lack understanding and respect for customer interests, market order and social responsibilities, and only focus on their own short-term interests, regardless of the long-term. s consequence. On the other hand, some securities firms have not established effective risk management and internal control mechanisms, have insufficient ability to predict and respond to market changes and risk events, or cover up problems that occur and evade responsibility.

Consequences of securities firms’ default

The consequences of a securities firm’s default mainly include the following aspects:

Harm the interests of customers. The failure of a securities firm to perform its duties may result in the loss or infringement of the client's funds, assets or rights. For example, the securities firm may provide clients with wrong investment advice, conceal important information, charge excessive commissions or handling fees, or manipulate the client's personal information without authorization. accounts or funds, etc., causing customers to bear unnecessary or unreasonable risks or losses.

disrupt market order. The failure of securities firms to fulfill their responsibilities will affect the fairness, transparency and efficiency of the market. For example, securities firms may use inside information or collude with others to manipulate market prices or trading volumes, affect market supply and demand, create false market signals, etc., and destabilize the market. It cannot truly reflect the relationship between supply and demand and value assessment, and interferes with the normal operation of the market.

Damage social trust. Failure of securities firms to fulfill their responsibilities will reduce society’s confidence and trust in securities firms and the capital market. For example, securities firms may engage in dishonest behaviors such as fraud, forgery, and concealment, violating social ethics and legal regulations, causing social dissatisfaction and Protests affect social stability and development.

How to prevent and resolve securities firms’ defaults

In order to prevent and solve the problem of securities firms’ default, we need to start from the following aspects:

Improve laws, regulations and regulatory systems. Relevant laws and regulations need to be formulated or revised to clearly stipulate the rights and obligations of securities firms, conditions for establishment and exit, business scope and specifications, supervision, management and penalty measures, etc., and strengthen law enforcement and efficiency, and severely crack down on illegal activities of securities firms. , protect customer interests and market order.

Strengthen market competition and self-discipline. It is necessary to promote market opening and competition, improve competitiveness and service levels among securities firms, and encourage securities firms to establish self-regulatory organizations or join industry associations, formulate or abide by self-regulatory rules, strengthen industry exchanges and cooperation, and enhance industry image and credibility.