Dongxing Securities Deputy General Manager Zhang Jun Resigns Amid Rumors of Investigation, Shocking the Capital Market

On January 16, 2024, the Chinese Communist Party's Provincial and Ministerial Cadre Finance Seminar opened at the Central Party School in Beijing. All Politburo Standing Committee members, except Li Qiang, were seated on the rostrum. (Video Screenshot)

(November 17, 2024) – Recently, news that another prominent figure in China's investment banking sector was taken away by authorities and went missing has gone viral in the securities industry, causing shockwaves in the capital market. The missing senior executive of the securities firm was previously a review officer at the China Securities Regulatory Commission (CSRC). Several projects at Dongxing Securities encountered issues during his tenure.

Rumors of Zhang Jun's Disappearance; Dongxing Securities Announces His Resignation

On the morning of November 15, reports emerged about the above incident. According to Jiemian News, the individual rumored to be missing is Zhang Jun, Deputy General Manager of Dongxing Securities and head of the investment banking business.

Later that afternoon, Dongxing Securities issued a public announcement stating that company director and deputy general manager Zhang Jun had submitted his resignation letter for personal reasons, resigning from his roles on the board of directors, various board committees, and as deputy general manager.

It is unclear whether Zhang Jun's resignation is related to cooperating with an investigation or due to personal violations of laws and regulations.

Public records show that Zhang Jun was born in May 1975 and is currently 50 years old. He previously worked in the issuance and regulatory department of the CSRC, holding positions such as officer, deputy investigator, and deputy director.

From September 2015 to October 2018, Zhang served as the Chief Risk Officer of Dongxing Securities. Since August 2018, he has been the deputy general manager and is also a board member. Additionally, Zhang oversees the investment banking business and serves as a board member of Dongxing Hong Kong, which is also engaged in investment banking and asset management activities.

According to reports by Blue Whale News, Zhang Jun was reappointed as deputy general manager of Dongxing Securities. In the recent October reshuffling of the board, he was re-elected as a director for a three-year term and was reappointed as deputy general manager. Following Zhang Jun's resignation, Dongxing Securities still has four deputy general managers in office: Niu Nanjie, Chen Hai, Zhang Fang, and Liu Liang.

Analysis: Zhang Jun May Be Linked to the Zhu Congjiu Case

A financial blogger, "Golden Stone Commentary," stated that Zhang Jun's disappearance is related to the investigation of several officials at or above the director level in the IPO Review Committee. The case seems to stem from a deeper investigation into Zhu Congjiu’s case, unraveling layer by layer.

Zhang Jun previously worked at the China Securities Regulatory Commission (CSRC), where he was responsible for IPO Review Committee operations, mainly reviewing IPO listings. During his management of Dongxing Securities' investment banking business, the company experienced rapid growth followed by massive losses and became embroiled in fraudulent issuance. This suggests that Zhang Jun’s disappearance may be connected to issues in the IPO process.

The article further analyzed potential problems linked to Zhang Jun.

Corruption in the issuance process and the transfer of benefits have undoubtedly become a regulatory focus. Since last year, from Feng Henian, Wang Zongcheng, Zeng Changhong to Bao Fan, Cong Lin, Wang Qingshan, and Zhu Congjiu, all incidents have pointed to one central issue: the oversight of regulatory bodies in the issuance process.

Recently, there has been another wave of collective investigations targeting IPO Review Committee officials:

1. October 16: Former director of the CSRC's issuance department, Yang Jiaohong, was unreachable with his phone turned off and was subsequently investigated. Yang worked in the CSRC’s IPO review committee for nearly 20 years and served as the director of Division 4 of the IPO review committee. He abruptly resigned in 2016 and disappeared from public view thereafter.

2. November 15: Former deputy director of the CSRC's issuance department, Li Xiaoqiang, was officially announced to be under investigation. Li joined the CSRC in 1998 and worked there for 20 years, holding key positions such as deputy director of the Shanghai Securities Regulatory Bureau, deputy director of the accounting department, and deputy director of the issuance department.

Li Xiaoqiang became a member of the first ChiNext IPO review committee in 2009 and worked alongside Zhu Congjiu, who was then an assistant to the chairman of the CSRC. At that time, Li was deputy director of the issuance department, while Zhu was assistant to the CSRC chairman, a Party Committee member, and director of the issuance department. Zhu was Li’s direct superior and also supervised Yang Jiaohong and Zhang Jun, who was serving as deputy director of the first division for IPO reviews.

Zhu Congjiu is considered a prime example of corruption in regulatory and financial systems. He joined the CSRC in November 1992 and worked there and at the Shanghai Stock Exchange for nearly 20 years before being transferred to Zhejiang Province as vice governor in May 2012. He oversaw state assets and financial affairs for 10 years before resigning in June 2022. In January 2023, Zhu was elected vice chairman of the Zhejiang Provincial CPPCC, but he was investigated just over three months later while still in office.

Known as a "financial tiger," Zhu’s downfall is closely linked to his involvement in IPO reviews. During his 13 years at the CSRC, 10 years at the Shanghai Stock Exchange, and 10 years in Zhejiang's financial system, how many enterprises benefited from his influence? How many companies gained favorable treatment during his tenure? Under his watch, there were irregularities in Pacific Insurance's IPO and the shocking Zhenggu warrant case that garnered global attention.

In September 2015, Zhang Jun joined Dongxing Securities as Chief Risk Officer with an annual salary of 672,900 yuan (RMB, the same below). However, Zhang's salary skyrocketed in subsequent years, reaching 5.28 million yuan in 2021, making him the highest-paid executive at Dongxing Securities by a significant margin.

By 2022, the company faced a sharp decline in performance. Revenue plummeted to 3.429 billion yuan, a year-over-year decrease of 36.21%. The net profit attributable to shareholders shrank significantly to 517 million yuan, a staggering 68.70% decline.

This downturn led to significant salary cuts within the company. Zhang Jun’s salary was reduced by over 4 million yuan. Despite this reduction, Zhang remained among the top three highest-paid executives at Dongxing Securities.

Multiple Issues Under Zhang Jun's Tenure

During Zhang Jun’s tenure overseeing the investment banking business, Dongxing Securities encountered significant problems in several sponsorship and underwriting projects.

Since 2023, Dongxing Securities has been frequently embroiled in IPO controversies. On March 31, the company received a Notice of Investigation from the China Securities Regulatory Commission (CSRC) for failing to exercise due diligence in sponsorship, underwriting, and continuous supervision responsibilities.

A high-profile fraud case emerged with ZeDa YiSheng, a company sponsored by Dongxing Securities, further exacerbating the situation. Combined with the countercyclical adjustment of IPOs, Dongxing's sponsorship fees plummeted to 146 million yuan. New share fundraising dropped to 2.087 billion yuan, severely impacting the company's equity financing business.

In April 2023, Dongxing Securities disclosed in a public announcement that it was under investigation by the CSRC for failing to fulfill its sponsorship, underwriting, and supervision responsibilities in ZeDa YiSheng’s initial public offering and listing on the STAR Market.

Dongxing Securities also faced issues in its bond underwriting business. The company failed to fulfill its trustee management responsibilities. In April 2024, the Shanghai Stock Exchange issued a written warning to Dongxing for its inadequate performance as the entrusted manager for bonds “2Lvtour02” and “22Lvtour03.”

In November 2023 and January 2024, Dongxing Securities was subjected to administrative regulatory measures, including warning letters from the Gansu Regulatory Bureau and the CSRC, for inadequate performance in bond-related duties.

In 2023, Dongxing Securities' investment banking revenue was 350 million yuan, a 61.45% decline from 2022. The profit from investment banking operations dropped to just 57 million yuan, an 83.48% year-over-year decrease.

Editor-in-Chief: Sun Yun