Heavy Fine Hits Tianfeng Securities: 9.3 Billion Yuan in Illegal Fund Transfers to Shareholders, Internal Controls Fully Collapsed

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Source: Dongxi Finance

“On March 13, Tianfeng Securities (rights protection) repeatedly disclosed multiple regulatory penalty announcements: within one day, they received several regulatory documents, totaling fines exceeding 40 million yuan, two core executives were banned from market participation for life, and multiple core business qualifications were suspended. This concentrated punishment reveals longstanding compliance issues at this leading securities firm in Central China.”

The China Securities Regulatory Commission (CSRC) and local securities regulatory bureaus’ penalty documents state that from 2020 to 2022, Tianfeng Securities (601162.SH) used multiple nested channels to illegally transfer up to 9.326 billion yuan to the former largest shareholder, Contemporary Group, and related parties, without legally disclosing significant related-party transactions, resulting in major omissions in annual reports over several years.

In fact, this is not Tianfeng Securities’ first time crossing regulatory red lines. Authorities have pointed out violations in private fund distribution, research report practices, and other business lines.

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The story of 9.3 billion in illegal fund transfers,

The secret pathways for shareholders and related parties to drain the securities firm

Since the beginning of 2026, securities regulators have continued to intensify enforcement of compliance, showing zero tolerance for major misconduct such as shareholder capital occupation, illegal related-party transactions, and false information disclosure. Against this backdrop, Tianfeng Securities has become a typical case under strict regulation.

On the evening of February 13, Tianfeng Securities received notices from the CSRC of case filing, the Hubei Regulatory Bureau’s “Administrative Penalty Notice,” and the bureau’s “Administrative Supervision Measures Notice,” announcing penalties and case registration.

A month later, the penalty decisions were finalized. On the evening of March 13, Tianfeng Securities disclosed receiving four regulatory documents from the Hubei Securities Regulatory Bureau: the “Administrative Penalty Decision,” “Administrative Supervision Measures Decision,” and two from the Fujian Securities Regulatory Bureau, covering violations related to illegal fund transfers, information disclosure violations, and operational misconduct, with penalties reaching the highest in recent years for securities firms.

The “Administrative Penalty Decision” from Hubei Securities Regulatory Bureau states that, upon investigation, from 2020 to 2022, under the actual control of Contemporary Group, Tianfeng Securities ignored compliance and risk control requirements, building multiple layered financial channels to transfer a total of 9.326 billion yuan to shareholders and related parties, without approval from the board of directors or shareholders’ meetings, nor disclosure in annual reports, constituting illegal acts explicitly prohibited by the Securities Law.

It is understood that Tianfeng Securities’ fund transfers were not simple direct transfers but disguised as legitimate investments, asset management operations, or equity cooperation, leveraging the firm’s licensed business advantages to evade regulatory scrutiny. The 9.326 billion yuan illegal funds had three major destinations, involving multiple related entities:

First, 8.526 billion yuan was transferred to the original largest shareholder, Contemporary Group, and its related parties. This was the core illegal flow, involving four types of operations: 1) using subsidiaries’ funds and designated rescue projects to directly divert 5.502 billion yuan of own funds; 2) using entrusted client assets to subscribe to related collective trust plans, effectively providing financing of 1.012 billion yuan; 3) actively purchasing bonds issued by Contemporary Group in the primary market, injecting 492 million yuan; 4) engaging in reverse repurchase transactions of bonds issued by Contemporary-related private equity funds, transferring liquidity of 1.52 billion yuan. These operations completely breach fiduciary responsibilities, turning client assets and company funds into “reserve funds” for major shareholders.

Second, 500 million yuan was illegally transferred to Guanggu Financing Leasing, a related party of shareholder Wuhan Commercial Trade. In 2021, Tianfeng Securities transferred large sums to Guanggu Leasing under the guise of capital increase, equity payment, which was essentially interest-free borrowing without effective risk control or repayment guarantees, only gradually recovered after regulatory intervention.

Third, 300 million yuan was illegally transferred to Xue, a related party of shareholder Wenfeng Co., Ltd. During the same period, Tianfeng Securities, together with its property subsidiary Tianrui Property, provided funds to a third-party company designated by Xue, again without approval or disclosure, a typical benefit transfer.

Behind these related-party transactions was a complete failure of Tianfeng Securities’ information disclosure. According to the Securities Law, the Administrative Measures for Information Disclosure of Listed Companies, and securities regulatory rules, transactions involving large amounts and related parties must undergo internal review and be publicly disclosed. Annual reports should fully disclose related-party transactions, fund flows, and risks.

However, Tianfeng Securities deliberately concealed the 9.326 billion yuan related-party transactions, leading to significant omissions in the 2020–2022 annual reports, misleading investors and regulators.

The Hubei Securities Regulatory Bureau determined that such conduct severely damaged the order of securities market information disclosure, infringed on the right of small and medium investors to know, and was a key basis for the maximum fines imposed. To date, Tianfeng Securities has recovered most of the illegal funds, with remaining amounts pursued through judicial channels, but the damage to reputation and regulatory penalties are irreparable.

In addition to the core violation of related-party fund transfers, Tianfeng Securities also engaged in multiple illegal activities in daily operations, covering private fund distribution, research consulting, investment banking, and subsidiary management, reflecting deep-rooted issues of weak internal controls and superficial compliance management. Among these, private fund distribution was a major violation area.

The Administrative Measures for Regulatory Measures issued by Hubei CSRC mention that Tianfeng Securities was found to have the following issues: 1) some employees promoted non-company-distributed financial products and earned commissions illegally, harming client interests; 2) illegally sold the fixed-income private fund FuSheng Anxin Stable No.1; 3) poor decision-making and weak control over subsidiaries and branches, failing to effectively manage risks.

Additionally, the company also had issues such as unpreparedness in 2022 earnings forecast disclosures, irregular research report production and release, non-compliant investment banking practices, inadequate organizational restructuring of private fund business, personnel management and filing issues, and violations related to property subsidiary business scope commitments.

In response, Hubei CSRC imposed strict penalties: a two-year suspension of Tianfeng Securities’ private fund distribution business, and a one-year suspension of new private fund products by its subsidiary Tianfeng Tianrui Investment. This directly cut off a major revenue source, severely impacting brokerage and wealth management operations.

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Core senior management changes,

Governance turbulence heightening compliance risks

The “Administrative Penalty Decision” from Hubei CSRC shows that Tianfeng Securities was warned and fined 15 million yuan; former Chairman Yu Lei and former Vice President and CFO Xu Xin received warnings and fines of 6 million yuan each; Vice President and Executive Vice President Zhai Chenxi received a warning and a 3.3 million yuan fine; Director and President Wang Linjing and Executive Vice President Feng Lin received warnings and fines of 3 million yuan each.

Notably, due to the serious nature of Yu Lei and Xu Xin’s violations, lifetime market bans were imposed on both.

In addition, Tianfeng Securities received a penalty from Fujian CSRC. It is reported that at the end of 2021, Tianfeng Securities acquired 12.29% of Yong’an Forest Industry through judicial debt settlement and received the court’s enforcement ruling, but failed to disclose the change of rights in a timely manner, delaying disclosure until 2022, violating disclosure regulations. The firm was ultimately ordered to correct, warned, and fined 4 million yuan, with then-President Wang Linjing also held accountable, receiving a warning and a 1.4 million yuan fine.

Based on this, Hubei and Fujian regulators together fined Tianfeng Securities and its responsible persons a total of 41.7 million yuan.

The senior executives held responsible for these violations were core management during the period when Contemporary Group’s control was exercised. They led the company for many years and bear unavoidably responsibility for the fund violations and internal control failures.

However, the ongoing compliance chaos is also linked to frequent management changes and instability in key positions. During the 2020–2022 violations, Tianfeng Securities’ vice presidents, executive vice presidents, directors, CIO, compliance director, chief risk officer, and CFO experienced frequent turnover, indicating a lack of stability in core management.

Moreover, senior leadership changes have not stopped in recent years. In January 2024, former Chairman Yu Lei resigned, and Pang Jiemin took over as chairman and party secretary (later, after Chen Zhixiang was appointed university president in June 2024, Pang Jiemin also took on the party secretary role).

In the first half of 2025, Vice Presidents Zhu Junfeng and Mao Zhihong resigned for personal reasons; former directors Wu Yuxiang, Ma Quanyi, and Shao Bo left due to work reasons, replaced by new directors Pan Jun and Cao Yufei.

On October 17, 2025, Vice President Liu Quansheng, Independent Director Jiang Xiao, and Compliance Director Fu Chunming resigned for personal reasons. Liu Quansheng no longer served as director or vice president; Jiang Xiao resigned from the independent director and audit committee; Fu Chunming resigned as compliance director. These core positions involve business management, independent supervision, and compliance/risk control, raising strong concerns about the company’s stability.

As the first responsible person for compliance, the departure of the compliance director amid investigations and risk exposure further exposed weaknesses in the risk control system; frequent turnover of independent directors weakened the board’s independent oversight, impairing checks on major shareholders and management; changes in key business executives led to frequent strategic adjustments, reduced team cohesion, and weakened compliance enforcement.

In October 2025, Tu Jumin was appointed vice president, and Chen Xiaohua (Chief Risk Officer) also took on the role of compliance director, with regulatory approval.

On January 29, 2026, non-independent director Lei Yingchun resigned due to personal reasons.

Facing regulatory penalties and operational crises, Tianfeng Securities initiated a restructuring of equity and management. Contemporary Group gradually exited, and provincial state-owned enterprises took over the shares, pushing the company back under state control and restructuring governance. The new management team pledged to thoroughly address historical risks, rebuild compliance and risk control systems, and focus on steady core business operations.

However, governance recovery is not an overnight process. On one hand, suspension of business, fines, and reputation damage cause short-term impacts on performance; restoring core businesses like wealth management, research, and investment banking takes time. On the other hand, rebuilding internal controls, cultivating compliance culture, and stabilizing teams require long-term institutional development and implementation. Additionally, legacy issues such as debt recovery and investor disputes still need ongoing resolution. The management turbulence has left governance gaps that must be gradually filled by the new team to fully shed the shadow of past violations.

According to Tianfeng Securities’ previously announced 2025 earnings forecast, net profit attributable to the parent company is expected to be between 125 million and 185 million yuan, turning losses into profits compared to the previous year.

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