As Chinese regulatory authorities tighten their oversight of financial gatekeepers, smaller brokerage firms are finding it challenging to sustain their initial public offering (IPO) operations.
Recent actions by the China Securities Regulatory Commission involved penalizing six securities firms for breaches in their investment banking activities. The penalties included warning letters and orders to rectify violations, with three investment banking department heads held accountable. Additionally, two firms are currently under investigation.
All six of these firms are small- or mid-sized, with violations mainly centered around inadequate on-site quality control and insufficient disclosures in sponsor reports. Many of these firms are reporting minimal or no income from IPO business in recent years. They have not only failed to bring new projects to listing but have also withdrawn some previously filed IPO applications.
For example, Guoyuan Securities has only sponsored four IPOs since 2023, with no new projects since early last year. Guorong Securities has gone nearly three years without sponsoring a single IPO. Meanwhile, three IPO applications filed by Yongxing Securities and accepted by the Beijing Stock Exchange between May 2023 and July 2025 have all been withdrawn by the applicants for various reasons.
“The trend of investment banking activities becoming concentrated among top-tier brokerages is an industry-wide shift,” said a former IPO sponsor representative. “Survival of the fittest is inevitable.”
He also emphasized that much work remains to improve the quality of information disclosure for IPOs and to enhance the independence and effectiveness of internal quality control systems.
While leading brokerages generate billions of yuan—equivalent to hundreds of millions of dollars—in investment banking revenue, many smaller firms earned less than 200 million yuan (approximately USD 29.6 million) last year. For instance, Pacific Securities saw its investment banking revenue plummet 57% to 75 million yuan (USD 11.1 million) in 2025 compared to the previous year.