Guolian Minsheng Securities Underwriting and Sponsorship Co., Ltd. (formerly "Huaying Securities"), which recently completed a legal representative change, received a court judgment shortly after the transition.

After three years of litigation, the financial fraud case of Shandong Longli Biotechnology Co., Ltd. ("Longli Biotechnology"), which has been delisted for five years, reached a first-instance judgment. The dispute involving 1,618 investors as plaintiffs seeking 916 million yuan in compensation concluded with investors receiving 275 million yuan in damages.

As the sponsoring institution, Guolian Minsheng Securities Underwriting and Sponsorship was ordered to bear joint liability within 5% of the damages for failing to fulfill its due diligence obligations, involving 13.75 million yuan. This marks the first time Guolian Minsheng Securities' (stock code "GLMS SEC", 601456.SH, 1456.HK) investment banking division has been ordered to compensate investor losses due to financial fraud following the reorganization.

Additionally, Minsheng Securities, which was acquired in the first half of the year, is involved in 4 other lawsuits, with 7 penalty notices issued. Will Guolian Minsheng Securities become the "ultimate payer"?

**Half-Year Involvement in 5 Disputes with Case Values Exceeding 100 Million Yuan**

Longli Biotechnology's financial fraud involved extended periods and substantial amounts.

Longli Biotechnology was once a well-known biomass energy company in China. In August 2011, the "first biofuel stock" Longli Biotechnology was sponsored by Huaying Securities for listing on the Shenzhen Stock Exchange SME Board, raising over 1 billion yuan. From 2015 to the first half of 2017, Longli Biotechnology systematically inflated profits through deleting and modifying financial accounting records to conceal operating losses.

According to CSRC investigations, Longli Biotechnology's fraudulent financial behavior continued for years. The company inflated bank deposits by 746 million yuan, understated loan principals by 9.836 billion yuan cumulatively, understated financing costs related to loans by 670 million yuan, inflated profits by 670 million yuan, failed to timely disclose major guarantee matters totaling 2.186 billion yuan, and failed to timely disclose major litigation and arbitration situations with cumulative litigation amounts of 2.843 billion yuan. Additionally, Longli Biotechnology unauthorized changed the use of funds raised from its initial public offering.

In June 2020, the Shenzhen Stock Exchange decided to terminate "ST Longli's" listing, entering the delisting arrangement period. In July 2020, "Longli退" was officially delisted from the Shenzhen Stock Exchange and transferred to the New Third Board.

In 2021, the CSRC issued administrative penalty decisions, imposing the maximum fine of 600,000 yuan on Longli Biotechnology, fining actual controller Cheng Shaobo 1.5 million yuan personally, and imposing total fines of 3.38 million yuan on 18 responsible personnel.

Delisting and penalties were not the end, as investor civil compensation claims began.

According to the first-instance judgment by the Jinan Intermediate People's Court in Shandong Province, 1,618 plaintiff investors collectively hold investment loss claims of 275 million yuan against Longli Biotechnology, with defendant Cheng Shaobo bearing joint liability for Longli Biotechnology's debts.

Regarding intermediary institutions, Guolian Minsheng Securities Underwriting and Sponsorship bears joint liability within 5% of plaintiffs' losses, while Lixin Certified Public Accountants bears joint liability within 30% of plaintiffs' losses.

For sponsoring the Longli Biotechnology project, Huaying Securities at the time received underwriting and sponsorship fees totaling 65.114 million yuan. Although Guolian Minsheng Securities emphasized that both plaintiffs and defendants can appeal and the company's current financial condition is stable, expecting the judgment result will not have significant adverse effects on current or future profits, the case undoubtedly exposed deficiencies in sponsorship business internal controls. Even with potential appeals, the outcome remains uncertain, becoming a "sword of Damocles" hanging overhead.

Guolian Minsheng Securities Underwriting and Sponsorship was renamed from Huaying Securities. In 2011, Huaying Securities, jointly funded by Guolian Securities and Royal Bank of Scotland (RBS) with 800 million yuan, officially opened for business, with shareholdings of 66.7% and 33.3% respectively.

In 2017, Guolian Securities acquired all RBS equity, making Huaying Securities a wholly-owned subsidiary of Guolian Securities. Eight years later, in April 2025, Guolian Securities acquired 99.26% equity of "Panhai Group's" Minsheng Securities and renamed it "Guolian Minsheng Securities."

After the "Panhai Group" and Minsheng Securities story concluded, Guolian Minsheng Securities began business integration of Minsheng Securities. The 14-year-old Huaying Securities brand officially exited, with its underwriting and sponsorship business formally renamed as Guolian Minsheng Securities Underwriting and Sponsorship.

However, beneath the glamour lies shadows. Both former Huaying Securities and newly merged Minsheng Securities have left "burdens" for Guolian Minsheng Securities.

Besides the Longli Biotechnology dispute, Guolian Minsheng Securities and its subsidiaries face 4 other lawsuits, covering stock pledge, contract, tort, and bond trading disputes.

Among these, stock pledge business disputes are particularly noteworthy.

According to the semi-annual report, regarding the stock pledge-style repurchase transaction dispute between Guolian Minsheng Securities and Guangzhou Huiyin Huahe Investment Enterprise (Limited Partnership) and Zhang Guizhen, the Wuxi Intermediate Court dismissed all plaintiff Zhang Guizhen's litigation claims on July 8, 2025. The plaintiff has appealed, and the case remains under review.

As an important component of credit trading, Guolian Minsheng Securities' stock pledge balance was 1.255 billion yuan in the first half, declining from year-end 2024. Investment-type (on-balance-sheet) stock pledge-style repurchase business balance was 1.131 billion yuan, down 199 million yuan from 1.33 billion yuan at 2024 year-end. Management-type (off-balance-sheet) stock pledge-style repurchase business balance was 124 million yuan, down 67 million yuan from 191 million yuan at 2024 year-end.

Stock pledge-style repurchases are also a "disaster area" for securities company litigation, with multiple securities firms already "stumbling" here. This case's second-instance judgment result will be a focus of industry attention, potentially affecting subsequent similar business risk definitions.

Subsidiary Minsheng Securities has also caused lawsuits.

In the tort liability dispute case where Minsheng Securities was defendant against plaintiff Zhang, after losing the first instance, Minsheng Securities narrowly "turned around" in the second instance.

On February 6, Taiyuan Xiaodian District Court ruled in the first instance that Minsheng Securities and Taiyuan Changzhi Road Business Department should compensate Zhang 34.9029 million yuan, after which the business department appealed. On August 27, Taiyuan Intermediate People's Court reversed the first-instance judgment in the second instance, dismissing all plaintiff's claims.

In the contract dispute case between Minsheng Securities and Liaocheng Heshan Haibo Technology Consulting Partnership Enterprise (Limited Partnership), the plaintiff withdrew the lawsuit. However, as defendant, this "close call" dispute also sounded alarms for the company regarding preliminary contract clause design, evidence retention, and management.

The "tug-of-war" in bond trading is even more complex.

On April 25, in the bond trading dispute execution case where Minsheng Securities was plaintiff against defendant Wuhan Contemporary Technology Industry Group Co., Ltd. ("Contemporary Group"), execution procedures were suspended because Contemporary Group entered reorganization.

Looking back to July 2019, Minsheng Securities subscribed to Contemporary Group's "19汉当科MTN001" bond, investing 60 million yuan principal. In April 2022, Contemporary Group founder Ai Luming issued a "Guarantee Commitment Letter" to Minsheng Securities, promising to bear guarantee responsibility for bond redemption. However, just one month later, Contemporary Group defaulted, and Minsheng Securities filed a lawsuit requiring payment of bond principal, interest, and overdue default penalties, with Ai Luming bearing joint liability.

In July 2023, the court ruled that Contemporary Group should pay bond principal, interest, and overdue bond redemption default penalties, while dismissing Minsheng Securities' other litigation claims. Both Minsheng Securities and Contemporary Group appealed. In December that year, the court dismissed appeals and upheld the original judgment, with Minsheng Securities immediately applying for enforcement.

Unexpectedly, on September 30, 2024, Wuhan Intermediate Court ruled to accept Contemporary Group's reorganization application. Whether this bond investment can be recovered has become uncertain.

In comparison, the equity repurchase dispute between Minsheng Securities and Huang Qizhen was "clearing the clouds to see the moon."

In May 2024, because Huang Qizhen failed to fulfill equity repurchase obligations as agreed, Minsheng Securities applied for arbitration with the China International Economic and Trade Arbitration Commission, demanding Huang Qizhen pay 27.2767 million yuan in equity redemption payments, late fees, and arbitration costs. On December 5 that year, the arbitration commission ruled in favor of Minsheng Securities' arbitration request. On April 15, 2025, both parties signed a "Settlement Agreement," concluding this nearly year-long dispute.

As of the August 29 close, Guolian Minsheng Securities A-shares closed at 12.23 yuan per share, up 0.25% from the previous trading day, with a total market value of 69.474 billion yuan.

**Seven Penalties in First Half, Involving IPO, Convertible Bonds, and Beijing Stock Exchange Projects**

Simultaneously, Guolian Minsheng Securities must bear the penalty consequences for Huaying Securities and Minsheng Securities.

On January 17, the CSRC issued a decision to issue a warning letter to Huaying Securities. This warning letter involved its sponsored Chunqiu Electronics convertible bond project. Since Chunqiu Electronics' operating profit declined by more than 50% in its listing year (listed December 12, 2017) compared to the previous year, both Huaying Securities and sponsor representatives Peng Guo and Zi Shuai received warning letters.

In February, the CSRC pointed out that Minsheng Securities' bond business had "imperfect internal controls, irregular due diligence, and inadequate trustee management." For example, individual projects failed to track and implement quality control opinions and failed to adequately monitor changes in issuers' debt repayment capacity. Minsheng Securities was ordered to make corrections. As a securities firm with first-half bond underwriting scale of 73.988 billion yuan, bond business compliance risks directly affect project reserves and issuance efficiency. Can standardized management be achieved going forward to reduce operational risks?

On April 30, the Shenzhen Stock Exchange issued penalties for Dijia Pharmaceutical Group Co., Ltd.'s IPO project. Due to multiple violations in Dijia Pharmaceutical's IPO project, sponsor institution Minsheng Securities received a regulatory letter, while sponsor representatives Bao Jingjing and He Runyong received public criticism.

On May 15, the Beijing Stock Exchange issued disciplinary measures against Minsheng Securities as sponsor institution and its sponsor representatives Liang Jun and Zhu Zhanpeng for failing to exercise due diligence and failing to ensure the authenticity, accuracy, and completeness of Audiowell's listing application documents and information disclosure.

Regarding the above letters, Minsheng Securities has penalized relevant project personnel, including warning sponsor representative Zhu Zhanpeng, withholding Zhu Zhanpeng's risk responsibility payments, and canceling his 2025 annual evaluation qualification. Another sponsor representative Liang Jun left in July 2024, with deferred bonuses fully withheld.

On June 25, the Beijing Stock Exchange issued disciplinary measures against Minsheng Securities as sponsor institution and its sponsor representatives Cao Wenxuan and Liu Na for failing to discover proxy signing in public listing application documents without authorization letters and failing to exercise due diligence in sponsorship business. Minsheng Securities has penalized relevant project personnel.

Guolian Minsheng Securities also received 2 penalty notices.

Jiangsu Securities Regulatory Bureau noted that in January, Guolian Minsheng Securities violated derivatives trading regulations, and in June, due to failure to report major matters and imperfect integrity internal controls, the company was ordered to make corrections in both cases.

Multiple penalties for investment banking business and internal control loopholes exposed in bond and derivatives business reflect deficiencies in project screening, due diligence, execution quality, and information disclosure processes for both Guolian Minsheng Securities and its subsidiaries. How to maintain compliance baselines remains a challenging task.

**Intensive Senior Management Adjustments**

Since this year, against the backdrop of equity changes at Guolian Minsheng Securities and subsidiaries, senior management has also undergone intensive adjustments.

Among these, the legal representative of Guolian Minsheng Securities Underwriting and Sponsorship changed from Ge Xiaobo to Xu Chun on August 22. However, Ge Xiaobo remains company chairman.

On August 8, due to work adjustments, Ge Xiaobo resigned as chairman of Guolian Minsheng Securities while continuing as executive director and president. Simultaneously, the board of directors agreed to elect Gu Wei as Party Secretary and new chairman, with terms until the fifth board of directors expires.

After leaving CITIC Securities in 2019, Ge Xiaobo joined former Guolian Securities as president. During his tenure, he facilitated Guolian Securities' A-share listing, initiating Guolian Securities' transformation, including capital increases, acquiring Guolian Fund, employee stock ownership plans, and establishing asset management subsidiaries.

Gu Wei currently serves as Party Deputy Secretary, Director, and President of Wuxi Guolian Development (Group) Co., Ltd. ("Guolian Group") and Chairman of Minsheng Securities. Guolian Group and 6 other parties acting in concert are controlling shareholders of Guolian Minsheng Securities, with Wuxi State-owned Assets Supervision and Administration Commission as the ultimate controller.

An internal source at Guolian Minsheng Securities believes that generally, having Party Secretaries serve as chairmen is normal for state-owned securities firms and beneficial for corporate governance.

On August 8, Guolian Minsheng Securities also appointed Xiong Leiming as Executive Vice President and Zheng Liang and Hu Youwen as Vice Presidents. All three new senior executives came from Minsheng Securities. Ma Qunxing no longer serves as Vice President due to work adjustments.

Additionally, Guolian Minsheng Securities' board of directors elected Xu Huimin as director of the fifth board in August 2025, replacing Zhu Hehua as independent director and member of the board's audit committee and strategy & ESG committee.

According to sources close to Guolian Minsheng Securities, after this senior management team adjustment, Guolian Minsheng Securities' complete senior management team has been formally determined, marking the integration entering a new phase.

**First Half Net Profit Growth Exceeds 11 Times, Investment Banking Business Noteworthy**

After merger and renaming, Guolian Minsheng Securities delivered its first interim report "report card" on the evening of August 28.

As of the first half year-end, Guolian Minsheng Securities' total assets joined the trillion-yuan club, with total assets of 185.397 billion yuan, up 90.72% from 97.208 billion yuan at 2024 year-end. In performance, the company achieved operating revenue of 4.011 billion yuan in the first half, up 269.4% year-on-year, and net profit of 1.127 billion yuan, up 1,185.19% year-on-year.

In main business segments, Guolian Minsheng Securities' investment business had the highest year-on-year operating revenue growth of 14,052.11%, achieving revenue of 1.687 billion yuan. The company stated this was mainly due to fully capitalizing on rising market conditions since the second quarter, focusing on non-ferrous metals, pharmaceuticals, and military industries, achieving higher investment returns.

Brokerage & wealth management business and investment banking business operating revenue both increased over 200%, growing 215.76% and 214.94% respectively, achieving revenues of 1.195 billion yuan and 544 million yuan respectively. Meanwhile, credit trading business achieved revenue of 300 million yuan, up 136.1% year-on-year.

In brokerage & wealth management business, the company added 117,600 new customers during the reporting period, with cumulative total customers of 3.4559 million. Financial product sales scale (excluding cash management products) was 87.02 billion yuan, with period-end financial product holdings of 31.436 billion yuan. As of the reporting period end, fund investment advisory holdings scale was 9.708 billion yuan.

In investment banking business, during the reporting period, Guolian Minsheng completed 6 IPO and refinancing projects (including M&A supporting financing), with total underwriting amount of 2.62 billion yuan. As of the reporting period end, the company had 1 approved IPO project and 12 IPO projects under review. For refinancing business, as of the reporting period end, there were 5 refinancing projects under review.

In debt financing business, during the reporting period, the company completed 245 debt projects with total underwriting amount of 73.988 billion yuan. As of the reporting period end, the company had 61 debt projects with approvals awaiting issuance and 21 debt projects under review.

However, during the reporting period, Guolian Minsheng Securities' asset management & investment business and other businesses both showed year-on-year revenue declines of 8.23% and 50.64% respectively, with operating revenues of 294 million yuan and 33.3964 million yuan respectively.

Guolian Minsheng Securities stated that in the second half, China's A-share market will face a series of marginally improving factors. Domestic macroeconomic fundamentals will stabilize under anti-involution background, Fed rate cut expectations will further increase, and relatively loose internal and external liquidity patterns will further enhance market risk appetite. The company's equity investment business will further optimize current position structure, further select growth stocks, focus on industry targets with reversal or long-term growth potential, supplemented by private placement, convertible bonds, and other multi-strategy investment models to achieve risk-return balance and steadily develop stock investment business.

Dongwu Securities research reports predict that considering active market trading and Guolian Minsheng Securities' highly elastic proprietary trading business, they have raised previous profit forecasts, expecting 2025-2027 company attributable net profits of 21.6, 21, and 22.1 billion yuan respectively, compared to previous values of 8.78, 10.07, and 10.76 billion yuan, corresponding to year-on-year growth rates of 444%, -3%, and 5% respectively. The company's current market value corresponds to PB valuations of 1.33x, 1.29x, and 1.25x respectively. They remain optimistic about the company's subsequent integration effects with Minsheng Securities and maintain a "Buy" rating.

The first half has concluded, and facing litigation involving Guolian Minsheng Securities and subsidiaries as well as received penalty notices, how to strengthen internal controls, enhance risk management capabilities, optimize business processes, and continue standing firm in the competitive securities market?