• The hammer is falling.
• Following the surge of short videos, investment advisory services are reportedly entering a fast lane.
• In late September, after a period of intense activity in the A-share market, Douyin (TikTok) recommendations for stocks garnered attention from various parties.
• Numerous financial commentators have risen to prominence on Douyin, indirectly causing some volatility in capital markets.
• Behind these rapidly rising financial commentators lies a significant force: third-party investment advisory service companies.
• It’s understood that many third-party advisory firms operate multiple accounts on short video platforms, using content distribution (投流) to attract users to watch investment teaching videos and boost enthusiasm for purchasing corresponding products.
• There are even rumors that one third-party advisory firm achieved revenue of 10 billion yuan in October alone, exceeding its first-half earnings.
• However, “good times” are facing more uncertainties.
• Since November, multiple departments have issued notices requiring securities service institutions to strengthen the compliance management of self-media accounts.
• On November 15th, Futu Securities (300033.SZ) announced that a subsidiary was penalized by the China Securities Regulatory Commission for engaging in suggestive stock recommendations through livestreaming.
• This may be signaling a stricter regulatory environment.
• The expansion of third-party investment advisory service firms like Fangyuan Intelligence Investment (9636.HK) is likely to face greater pressure.

Close Monitoring by Regulators

The rise of short video platforms like Douyin (TikTok) has amplified emotional voices and indirectly impacted trading behavior.

According to Giant Network, from September 27th to October 8th, when transaction volumes hit record highs, the Douyin A-share keyword search index soared from 4.2384 million to 12.7786 million, expanding by more than twice that amount.

Under these circumstances, the “stirring up” behavior of third-party investment advisory firms is attracting the attention of regulatory authorities.

Investment advisors recommending stocks through live broadcasts constitutes a high-frequency violation.

On November 8th, the Guangdong Securities Regulatory Bureau took measures to suspend new clients for a company’s livestreaming that presented “implicit stock recommendations.”

On November 14th evening, the Guangdong Securities and Futures Industry Association issued an announcement titled “Live Streaming Control Lacking Effectiveness, Institutions Suspended Business,” directly addressing situations where some institutions with securities consulting qualifications had inadequate controls during live streaming operations and engaged in recommending stocks.

The Guangdong Securities and Futures Industry Association stated: “Strictly prohibit livestreaming stock recommendations. Livestreaming is a public media dissemination platform, and livestreaming personnel, regardless of whether they are registered as securities investment advisors, shall not recommend stocks during live broadcasts.”

This is not an isolated case.

On November 7th, the Shanghai Securities Regulatory Bureau disclosed a penalty notice involving illegal stock recommendations on social media platforms.

Following regulatory investigation, Wang Yong, a consultant at Haishun Securities Investment Consulting Co., Ltd.’s Shanghai branch, violated professional norms by publishing misleading videos through WeChat Video No., which contradicted industry standards.

The Shanghai Securities Regulatory Bureau subsequently issued a supervisory management measure to issue a warning letter to Wang Yong.

According to Wind (ID:TradeWind01) information, some unqualified investment advisory firms have been using “rented” brokerage accounts to promote stocks on Douyin and have since been suspended from broadcasting.

“Some people are livestreaming in the industry, but they are actually renting under a brokerage firm, which gives them investment advisor qualifications, then they use live streaming to generate leads, and sell investment advisory product bundles offline,” said a consultant from South China to Wind (ID:TradeWind01). “However, because they recommended stocks during the livestreaming, they were discovered and subsequently suspended.” Regular brokerages typically discuss sector trends but do not involve individual stock recommendations.

Currently, regulators are closely monitoring illegal stock recommendations on social media platforms.

For example, the Shenzhen Securities Regulatory Bureau recently notified that some institutions or individuals were using self-media to illegally recommend stocks, in order to further regulate the self-media operations of securities investment consulting agencies in the辖区, all institutions should further strengthen company self-media operation management.

This may pose more challenges for the business development of various third-party investment advisory service firms.

“The Flow Business” is False

Whether retail investors who were attracted by short videos made a profit remains unknown, but the valuation of third-party investment advisory service companies as “water sellers” in the secondary market has soared.

As “China’s first online teaching stock,” JiuFang Intelligence’s market capitalization rose from 2.878 billion yuan at the beginning of September to 12.464 billion yuan on November 13, with an increase of 333.08% over 49 trading days.

The semi-annual report showed that in the first half of the year, JiuFang Intelligence conducted brand exposure on social media platforms such as Douyin and Xiaohongshu, and by the end of June, it had 488 accounts and 46 million followers.

For example, as JiuFang Intelligence’s Chief Investment Advisor, “Hongbangzhuxi” has 2.26 million fans on Douyin.

“We have deeply cultivated MCN operations, focusing on users, and synergistically promote the comprehensive development of traffic, brands, and products,” JiuFang Intelligence stated. “By deeply integrating live streaming, short videos, and other new media tools, leveraging AI technology to build a fan network, and actively exploring e-commerce models, we effectively achieve the efficient conversion of traffic.”

JiuFang Intelligence’s investment advisory course packages cover price ranges from tens of yuan to more than ten万元. The most expensive package, “Super Investor,” is priced at 139,600 yuan per six months, including exclusive insights and private advisor services.

However, JiuFang Intelligence’s investment advisory product refund rate is above 10%.

In the first half of 2024, the refund rates for JiuFang Intelligence’s flagship series and JiuFang Intelligence’s Qionglong Series reached 14.7% and 18.5%, respectively.

However, under regulatory scrutiny, whether JiuFang Intelligence’s business development will be affected remains to be further observed.

Recently, media reports said that accounts belonging to third-party investment advisory companies such as JiuFang Intelligence have been impacted.

On November 7th, a media report stated that “Hongbangzhuxi” was suspended from live streaming.

However, on November 15th, XinFeng (ID:TradeWind01) searched the account and found that the appointment for “Hongbangzhuxi’s” livestream on November 18th was still available in the livestream interface.

At the same time, market sources said that relevant departments have entered JiuFang Intelligence for inspection.

However, a close source to JiuFang Intelligence told XinFeng (ID:TradeWind01) that the inspection belonged to routine inspections and had already ended.

This is not the only company involved in this round of regulatory storm rumors.

There are reports that Tianhong Securities was investigated for illegal stock recommendations and may suspend business.

In response, Tianhong Securities stated on November 15th, “There were no illegal stock recommendation cases, and there was no investigation.”

However, that same evening, Tianhong Securities announced that its subsidiary Zhejiang Tianhong Cloud Software Co., Ltd. was penalized with a three-month new customer suspension due to inadequate compliance controls in the promotion of livestreaming business and the existence of scenarios suggesting recommendations of stocks, by the Zhejiang Securities Regulatory Bureau.

This may also mean that regulatory departments are further focusing on荐股 (recommendation of stocks) content on social media platforms such as Douyin.

In fact, the cake of short videos has also attracted many securities firms, but due to compliance requirements, securities firms are currently cautious about this.

A securities industry insider told XinFeng (ID:TradeWind01) that the company is exploring methods for short video operations and lead generation, and it has organized personnel to visit short video platform companies for learning, but due to compliance requirements, it is still in an exploratory stage.

In fact, behind the various regulatory compliance requirements is because the content on short video platforms has a distinct emotional color, but investment requires market participants to maintain rationality, and the two exist in a natural conflict.

If uncontrolled emotions influence the capital market, it can easily trigger violent fluctuations in the market, which goes against the long-term healthy development of the capital market.

What manner should securities holding institutions embrace the arrival of the short video era to avoid “stepping on red lines”? This is clearly a difficult question for all parties.