GF Securities Launches Internal Shakeup in Wake of Client’s $12.6 Billion Fraud

What’s new: GF Securities Co. Ltd. unveiled a plan to reorganize its investment banking operations, four months after the brokerage house was punished by regulators for its role in a client’s financial reporting fraud.

GF Securities said its board of directors approved a plan to install a new investment banking business committee while scrapping two existing departments facilitating the business. The revamp streamlines the organization structure and will improve the company’s oversight of business operations, sources from the brokerage said.

The background: GF Securities has been under the spotlight since one of its major clients, Kangmei Pharmaceutical Co. Ltd., was investigated for financial reporting fraud. In July, GF Securities was banned from the securities-sponsorship business for six months and from bond underwriting for a year.

Kangmei, one of the country’s biggest listed drugmakers, was accused of financial reporting fraud involving 88.6 billion yuan ($12.6 billion) of overstatements between 2016 and 2018. It was fined 600,000 yuan ($84,600) in May by top securities regulators for inflating revenues and fabricating bank deposits.

GF Securities was the sponsor of Kangmei’s initial public offering in 2001. Since then, the brokerage has helped with at least a dozen of the drugmaker’s financing deals.

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Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimison@caixin.com).

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