On September 26, 2025, the Zhejiang Securities Regulatory Bureau issued two fines to Caitong Securities, directly pointing out multiple compliance loopholes in its management of overseas subsidiaries. Caitong Securities and its assistant general manager, Qian Bin, who was the chairman of Caitong Securities (Hong Kong) at the time, were subjected to administrative regulatory measures in the form of warning letters. This incident not only cast a shadow over Caitong Securities, a brokerage whose overseas revenue surged nearly ninefold year-on-year in the first half of the year, but also sparked deep industry reflection on how brokerages can balance "going far" and "managing tightly" in cross-border business. Particularly noteworthy is that Caitong Securities (Hong Kong) had just obtained the qualification for virtual asset ETF client trading in June of this year, raising concerns about whether this fine would impact its layout in the digital asset field.

1. Caitong Securities' Overseas Subsidiary "Stepping on a Landmine": Three Major Compliance Loopholes Exposed

According to the fines disclosed by the Zhejiang Securities Regulatory Bureau, Caitong Securities has three prominent issues in the management of its overseas subsidiaries:

Lack of tracking and evaluation of decision implementation: The company failed to effectively establish a tracking system for the implementation of decision-making matters and an evaluation system for decision-making effectiveness covering overseas subsidiaries. This means that the parent company lacks an effective follow-up supervision and evaluation mechanism for major decisions regarding overseas subsidiaries, leaving the execution and effectiveness of decisions in a vague or uncontrolled state.

Inadequate risk control mechanism: This is the core issue of the punishment, as the regulator clearly pointed out that Caitong Securities failed to establish an effective risk isolation and control system for its overseas subsidiaries, leading to an expanded risk exposure in cross-border operations.

Oversight gaps in director qualification reviews: Some nominated directors of the overseas subsidiaries do not meet the corresponding qualification requirements. This exposes the most basic aspect of corporate governance, where there are gaps in the review of director qualifications, potentially resulting in insufficient professional capability in the decision-making layer of overseas subsidiaries, further amplifying operational risks.

The Zhejiang Securities Regulatory Bureau pointed out that as the assistant general manager of Caitong Securities and the then chairman of Caitong Securities (Hong Kong), Qian Bin bears management responsibility for the aforementioned situations and is required to "take it as a warning, seriously identify and deeply rectify the problems, and effectively enhance the company's compliance management level."

2. Explosive Performance and Regulatory Fines: Caitong Hong Kong's "Ice and Fire Duality"

On one hand, there is zero tolerance from regulators for shortcomings in risk control, and on the other hand, the internationalization layout is beginning to show results, Caitong Securities (Hong Kong) is experiencing an "ice and fire duality."

Explosive performance growth: According to the 2025 semi-annual report, Caitong Hong Kong achieved revenue of 44.188 million yuan in the first half of the year, a nearly ninefold increase compared to the same period in 2024, leading the industry in growth rate.

Breakthroughs in business qualifications and core operations: Behind the explosive performance, Caitong Hong Kong has made continuous breakthroughs in business qualifications and core operations in recent years. In February 2025, the company was approved for a Vietnam securities trading code, becoming one of the few Chinese brokerages with direct trading qualifications for all varieties in Vietnam; in June, it obtained the qualification for virtual asset ETF client trading, becoming one of the first Chinese institutions to provide brokerage services for Bitcoin and Ethereum-related ETFs.

Clear strategic positioning: The rapid development of Caitong Hong Kong stems from the deep integration of the company's clear strategic positioning and resource endowment. Leveraging Zhejiang's "outward-oriented" economic advantages, the company focuses on the cross-border financing and global asset allocation needs of Zhejiang merchants and enterprises, forming a differentiated competitive advantage. The approval of trading qualifications in Vietnam and the layout of virtual asset business are concrete practices of its "internationalization and innovation dual-wheel drive" strategy.

However, the arrival of this fine undoubtedly casts a shadow over Caitong Hong Kong's rapid development, and whether its layout in the virtual asset field will be affected has become a focal point of market attention.

3. Common Issues in Brokerages' Cross-Border Business: Risk Control Challenges and Talent Gaps

Caitong Securities is not an isolated case. According to incomplete statistics, in 2024, regulators issued a total of 12 fines regarding overseas subsidiaries of securities companies, a significant increase compared to 2023, which saw no penalties for overseas subsidiaries of securities companies.

In terms of violations, the main issues concentrated on the failure to conduct departure audits or reviews for some directors, senior management, and key personnel of overseas subsidiaries, inadequate compliance management and risk management of overseas subsidiaries, and the failure to effectively establish a tracking system for the implementation of decision-making matters covering overseas subsidiaries.

Why are brokerages frequently penalized for cross-border business? The underlying reasons can be summarized into three core issues:

Extended management radius leading to diminished control effectiveness: Overseas subsidiaries have significant differences from the parent company in terms of geography, legal environment, market rules, and cultural background. Physical distance and institutional differences make it easy for the parent company's management intentions and risk control requirements to be diluted in actual transmission and execution.

Complexity of risks far exceeding traditional business: Overseas business typically involves more complex financial products, a more open market environment, and new risk factors such as geopolitical issues, exchange rate fluctuations, and international sanctions. This places extremely high demands on risk identification, measurement, and control, while some brokerages' risk management systems have not kept pace with the internationalization of their business.

Talent gap: Effectively managing overseas subsidiaries requires composite talents who are familiar with international financial market rules, deeply understand the parent company's risk control requirements, and possess cross-cultural management capabilities. The scarcity of such talents makes it difficult for some brokerages to appoint heads of overseas institutions, directors, or build professional management teams, leading to situations like Caitong Securities' "nominating directors who do not meet qualification requirements."

4. Regulatory Tightening: Emphasizing Transparency and Accountability

The Zhejiang Securities Regulatory Bureau's "double penalty" against Caitong Securities and the directly responsible executives clearly conveys the regulatory authority's zero-tolerance stance towards the risks of brokerages' overseas businesses and the regulatory direction of strengthening institutional and individual accountability.

Shift in regulatory focus: The regulatory focus has shifted from pre-establishment approval to ongoing supervision and risk prevention during and after operations.

Transparent regulation: The parent company is required to penetrate multiple layers of corporate structures to substantively grasp and manage the business risks and compliance status of overseas subsidiaries.

Accountability to individuals: Not only are institutions penalized, but responsible executives are also held accountable simultaneously, aiming to solidify management responsibility and compel them to genuinely enhance compliance and risk control awareness, internalizing risk management requirements into daily operational decision-making.

Conclusion:

Caitong Securities received a fine due to risk control issues in its overseas subsidiaries, highlighting the significant challenges brokerages face in the process of "going out." In the digital asset field, as Caitong Hong Kong obtains the qualification for virtual asset ETF client trading, balancing its exploration of innovative business with compliance and risk control will become particularly important. This fine will undoubtedly prompt more brokerages to reassess their management models and risk control systems for cross-border business to ensure that while pursuing internationalization and innovative development, they can "manage tightly" and uphold compliance standards.

Related Reading: The International Operation Center of Digital Renminbi "Sets Sail" in Shanghai, Accelerating the Internationalization of the Renminbi

Original article: “Caitong Securities Overseas Risk Management Misstep: What Does the Fine Reveal About Its Digital Asset Prospects?”

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