Over 20 entities have received penalties, and public offerings are quietly passing through the "Year of Compliance"

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21st Century Business Herald Reporter Yang Nana, Shanghai Report

According to statistics from 21st Century Business Herald, among the 86 fund managers with public fund management scales exceeding 50 billion yuan by the end of 2025, more than 20 fund companies disclosed details of regulatory fines in their annual reports. Among them, 12 of the top 30 largest institutions received fines, accounting for 40%, with some companies even being suspended from product registration or business applications for up to three months.

Before the current wave of systematic information disclosure drew widespread attention, most institutions had already initiated comprehensive compliance rectification, with some completing the rectification and regulatory acceptance.

In terms of reasons for penalties, compliance internal control deficiencies are the core pain points. Over 80% of the penalized companies are involved in this area, manifested as imperfect systems, inadequate implementation, missing procedures, etc., such as Bosera, China Merchants, Great Wall, and others. The second major reason is irregular investment operations and sales management misconduct, covering asset management business management, investment authority, risk control execution, and issues related to suitability management, publicity, sales compliance, etc., accounting for over half among leading companies, such as Southern, Harvest Fund, Guotai, etc. Additionally, special violations such as foreign exchange, tax, and information disclosure issues also appeared in some institutions.

These concentrated fines are not only a result of the new mechanism implemented after audit departments conducted special audits on more than ten leading public funds in 2024 but also a tangible embodiment of the CSRC’s enforcement philosophy of “long teeth with thorns” in the implementation of the “High-Quality Development Action Plan for Public Funds.” 2025 is thus called the “Year of Compliance” by industry insiders.

Regarding the distribution of fines, audit coverage and penalty results are highly correlated. Most audited institutions received administrative penalties or regulatory measures within their jurisdictions in 2025; in contrast, the proportion of small and medium-sized public funds penalized is significantly lower.

However, the fewer fines for small and medium-sized institutions do not necessarily indicate higher compliance levels. The issues exposed through daily supervision and systemic, penetrating audits are broader and deeper than those of leading firms.

The dense fines for top institutions are also related to their large management scales and complex business lines. In the fierce competition for scale, leading companies have extensive business reach, long supply chains, and many related-party transactions, objectively increasing the likelihood of compliance loopholes. In contrast, small and medium-sized firms focus on specific areas, have simpler structures, and are less frequently audited, making systemic exposure of compliance issues more difficult.

If external audit mechanisms continue to extend to small and medium-sized institutions, deeper changes are inevitable.

Top Public Funds: Multiple Weaknesses and Focused Rectification

From the disclosure situation, leading public funds with large management scales have become the focus of regulatory storms in 2025. Among the top 30 fund companies by scale at the end of 2025, 12 institutions including Southern, GF Fund, Harvest Fund, Bosera, China Merchants, Guotai, Huaxia, Great Wall, and others disclosed their regulatory measures and rectification results.

Under the “penetrating” audits, the issues exposed in top public funds are systemic and structural internal control deficiencies, not individual operational errors. Among the 12 penalized top institutions, the reasons for penalties are highly concentrated in three areas: “Compliance Internal Control,” “Investment Operations,” and “Sales Management.” The highest proportion involves trading processes, system setup flaws, and non-standard execution of trading instructions. This reflects that even with relatively sound risk control systems, top institutions still have room for improvement in the compliance execution of core investment teams.

A dual-layer accountability of “company + individual” has become the standard mode for this round of penalties. After being issued a warning letter by the Beijing CSRC in November 2025, a senior executive of China Asset Management received an additional warning letter in December for similar issues; two senior executives of GF Fund were warned for investment and sales management problems; four senior executives of Huaxia Fund received warning letters, making them the top company with the most senior management penalties. This pattern indicates that the compliance responsibilities of senior executives are now more clearly delineated.

Some institutions’ issues are multi-dimensional and dense, also more typical. For example, in November 2025, the Shanghai Regulatory Bureau of the CSRC ordered GF Fund to correct issues covering corporate governance, compliance internal control, investment operations, personnel management, sales management, and financial management. Huaxia Fund also faced problems in these areas.

Severe penalties such as suspension of business were issued. Huaxia Fund and others had their acceptance of fixed-income public fund product registrations suspended for three months. This suspension occurred during a critical window of the rapid development of fixed-income business in 2025, when many top public funds vigorously expanded their fixed-income operations. A three-month halt means missing market issuance windows and temporarily withdrawing from channel competition during the penalty period.

Additionally, Bosera and Great Wall Funds also had some business suspensions, but Bosera did not specify which businesses or the duration in its annual report, while Great Wall mentioned a three-month suspension without specifying the affected products.

Some institutions faced “double penalties,” reflecting multi-dimensional compliance pressures on top firms. Southern Fund is the only top institution to receive “double penalties.” It was first ordered to correct issues related to investment operations, personnel management, and sales management by the Shenzhen Regulatory Bureau of the CSRC, then warned and fined by the Shenzhen Branch of the State Administration of Foreign Exchange for issues like foreign exchange registration. The first points to operational internal control deficiencies, while the latter reveals past compliance gaps in cross-border business.

An industry rectification closed-loop is forming, with top institutions shifting from “passive penalties” to “proactive repair.” For example, E Fund has completed rectification through system improvements, process optimization, and system functions, with regulatory acceptance achieved; China Securities has urged its shareholder CITIC Securities to implement rectification, which has been fully completed; Huaxia Fund also reports full completion and regulatory acceptance; Huaxia’s various public fund products are now registered normally; and Jiashi Fund reported multiple products normally on March 30.

By the end of 2025, among the top 30 fund companies, 18 institutions including GF, Tianhong, Penghua, CCB Trust, ICBC Credit Suisse, Huatai-PineBridge, Invesco Great Wall, China Merchants, BOC, Ping An, Yinhua, Yongying, Wanjia, Bank of Communications Schroder, Industrial Securities, Dacheng, Huabao, Pudong Development Bank Ansheng, explicitly stated in their annual reports that there are no investigations or penalties involving their companies or personnel.

Small and Medium Public Funds: Scattered Compliance Issues

Problems in small and medium-sized fund companies are more often scattered, occasional vulnerabilities, with fewer systemic internal control flaws, and more issues related to external audits not covering them fully. Problems found during daily supervision often indicate greater compliance pressure.

Public opinion and disclosure shortcomings are prominent soft spots for small institutions. Western Gain Fund received three warning letters in 2025, notable among medium-sized firms. In March 2025, the company was warned for issues related to compliance internal control, personnel management, and integrity; the same day, senior executives were held accountable for IT issues; in December, it was again named for disclosure violations.

The 21st Century Business Herald previously reported in “Western Gain Fund Confirms Fund Manager Involved in Gambling” that in September 2025, the fund manager was detained for gambling. From the rumor emergence on September 18 to the company’s official confirmation and dismissal on September 25, a week-long “information vacuum” exposed clear shortcomings in the company’s response to emergencies, internal information transmission, and compliance disclosure mechanisms.

“Reoffending during rectification” reveals a lack of compliance resources. Nanhua Fund was ordered to correct issues in governance and internal control in November 2025, then penalized again in December for similar problems and suspended some business for three months; a senior executive was held accountable twice. This “serial punishment” pattern highlights the substantial lack of compliance resources in small firms.

Penetrating regulatory review continues to strengthen. Chuangjin Hexin Fund faced “crackdowns” in private asset management due to issues like incomplete internal control systems and poor execution, being ordered to correct and suspended for three months from new private asset management product filings. This reflects intensified regulatory scrutiny on public funds, with no longer allowing blind spots in specialized account business.

Some fines stem from detail oversights, with regulatory granularity becoming more refined. Manulife Fund was warned and fined 70k yuan by the Beijing Branch of the SAFE for missing foreign exchange registration during equity transfer in 2021. Founder Fubon Fund was fined and recovered taxes for “calculation errors” in withholding personal income tax. Everbright Prudential Fund and HSBC Jintrust Fund received warning letters for “non-compliant website content” and disclosure issues, respectively. These “atypical” fines indicate that daily supervision now covers all aspects of company operations.

“Zero penalties” do not mean “zero problems”

Against the backdrop of strengthened regulation, the scope of compliance inspections is gradually expanding.

The “full picture” of fines in the 2025 fund annual reports is a collective “health check” for the industry’s move toward high-quality development. The value of this “compliance exam” lies not in the number of fines but in the formation of a closed-loop of rectification. Leading institutions are turning regulatory pressure into internal control motivation, setting clearer red lines for future compliance.

The industry is entering a new stage of “strict regulation and accountability.” In the contest between scale growth and compliance red lines, only by truly embedding internal control genes into core business can firms remain stable and far-sighted amid fierce market competition. The dense period of fines in 2025 is not the end but another starting point for high-quality industry development.