The sledgehammer is falling

Brokerage services, boosted by short videos, are likely entering a fast track

In late September of this year, after a period of strong performance in the A-share market, Douyin stock recommendations received attention from various parties

Several financial news anchors, including “Da Lan,” have gained popularity on Douyin, indirectly causing some volatility in the capital market

The rise of popular financial news anchors also shouldn’t overlook the power behind them – third-party wealth management firms

According to sources, many third-party investment advisory firms operate multiple accounts on short video platforms, using traffic allocation to attract users to watch investment education videos and boost their enthusiasm for purchasing related investment advisory products

Rumors also suggest that a certain third-party investment advisory firm earned 1 billion yuan in revenue this October alone, exceeding its income for the entire first half of the year

But “good times” are facing more uncertainties

Since November, various departments have issued documents requiring securities service institutions to strengthen compliance management of their social media accounts

On the evening of November 15th, Tonghua Shun (300033.SZ) announced that its subsidiary was penalized by the China Securities Regulatory Commission due to live streaming activities involving implied stock recommendations and other behaviors This could be signaling that regulators are tightening their oversight of the market The promotion of services by third-party investment advisory firms, including Nine Square Wisdom Investment (9636.HK), may also face increased pressure

Strictly monitored and watched closely

The rise of short video platforms like Douyin has amplified emotional voices and indirectly influenced trading behavior

According to data from Jiali Digital, during the period of September 27th to October 8th, when transaction volume reached a new high, Douyin’s A-share keyword search index soared from 4.2384 million to 12.7786 million, more than doubling

Under these circumstances, the actions of third-party investment advisory firms that are “adding fuel to the fire” are attracting the attention of regulatory authorities

Brokerage employees recommending individual stocks through live streams is a frequent violation

On November 8th, the Guangdong Securities Regulatory Bureau took regulatory measures to suspend the acceptance of new clients from a certain company due to instances such as “implying stock recommendations” in their live broadcasts

On the evening of November 14th, the Guangdong Securities and Futures Industry Association issued a document titled “Inadequate Live Stream Control, Institutions to be Suspended,” directly pointing out that some institutions with securities consulting qualifications had inadequate control during live stream promotional activities and engaged in recommending individual stocks during broadcasts

Live stock recommendations are prohibited. Live streaming falls under public media dissemination, and live streamers, regardless of whether they are registered as securities investment advisors, are not permitted to recommend individual stocks during broadcasts. This was stated by the Guangdong Securities Association.

This is not an isolated case

On November 7th, the Shanghai Securities Regulatory Bureau’s penalty notice also included a case involving illegal stock recommendations on social media platforms

According to regulatory investigation, Wang Yong, an investment consultant at the Shanghai branch of Haisun Securities Investment Consulting Co., Ltd., published misleading video content through WeChat Video Number, which violated professional conduct

The Shanghai Securities Regulatory Bureau took supervisory management measures of issuing a warning letter to Wang Yong regarding this matter

According to information obtained by Feng (ID: TradeWind01), some investment advisor firms that do not meet the qualifications have been recommending stocks on Douyin through brokerage affiliations and have now been suspended

“Some people in the industry are doing live streams on Douyin, but they’re actually affiliated with brokerages, which gives them investment consultant qualifications. Then they use online live streams to attract customers and sell investment consultant combination products offline.” A wealth manager from South China told Xin Feng (ID: TradeWind01), “But later, because they were recommending stocks during the live stream, it was discovered, so they were suspended. Reputable brokerages generally have educational live streams that discuss sector conditions but don’t involve individual stocks.”

Currently, regulators are paying close attention to illegal stock recommendations on social media

For example, the Shenzhen Securities Regulatory Bureau recently notified that individual institutions or individuals within the industry have been found to be engaging in illegal stock recommendations and other violations through self-media. To further regulate the operation and management of securities investment consulting agencies’ self-media within its jurisdiction, each agency should strengthen the management of their own self-media operations.

This may bring more challenges to the promotion of various third-party wealth management service providers

Traffic businesses are illegal

Whether investors lured into the market by short videos have made money remains to be seen, but as “water sellers,” third-party investment advisory firms have already seen their value rise in the secondary market

As a leading player in online investment education, Jiufang Intelligent Investment’s market capitalization has surged from 287.8 million yuan in early September to 1.2464 billion yuan at the close of trading on November 13th, representing an increase of 333.08% over 49 trading days

The semi-annual report shows that in the first half of this year, Jiufang Zhi Tou conducted brand exposure on social media platforms such as Douyin and Xiaohongshu, reaching 488 accounts and 0.46 billion followers by the end of June this year

For example, as the chief investment consultant of Jiufang Zhito, “Hong Bangzhu” has 2.26 million followers on Douyin

We are deeply engaged in MCN operations, focusing on users and collaboratively driving the comprehensive development of traffic, brands, and products. Jiufang Zhi投 (Jiufang Investment) pointed out that “By deeply integrating new media tools such as live streaming and short videos, leveraging AI technology to build fan networks, and actively exploring e-commerce models, we can effectively achieve efficient conversion of traffic.”

Jiufang Zhitou’s consultant courses cover a range of prices from several thousand yuan to over 130,000 yuan. The most expensive package, Super Investor, is priced at 139,600 yuan/six months and includes exclusive insights and private consultant services.

However, JIAF’s investment consultant products have a refund rate of over 10%

In the first half of 2024, the refund rates for Jiu Fang Zhi Tou’s flagship series and Jiu Fang Zhi Tou’s Qinlong series reached 14.7% and 18.5%, respectively

Whether Jiufang Zhitu’s business development will be affected remains to be seen amid regulatory scrutiny

Recent media reports indicate that accounts under third-party investment advisory firms such as Jiufang Zhi Tou have been affected

On November 7th, media reported that “Hong Gangzhu” had been suspended from streaming

However, on November 15th in the afternoon, Xin Feng (ID: TradeWind01) searched for the account and found that the livestream appointment for November 18th was still available on the “Hong Gangzhu” livestreaming interface

Market news also indicates that relevant authorities have inspected Jufang Intelligence Investment

But individuals close to Nine Square Intelligence have told TradeWind (ID:TradeWind01) that the inspection is a routine check and has concluded

This is not the only company rumored to be caught up in this round of regulatory storm recently

Reports indicate that Tonghua Shun is being investigated for allegedly illegally recommending stocks, and business operations may be suspended In response, Tonghuashun stated on November 15th that “there is no illegal stock recommendation situation and there has been no investigation.” However, that same evening, Tonghua Shun announced that its subsidiary, Zhejiang Tonghuashun Cloud Software Co., Ltd., was penalized by the Zhejiang Securities Regulatory Bureau with a suspension of acquiring new customers for three months and other penalties due to inadequate compliance management during the promotion of its live streaming business and instances of implying stock recommendations Behind this, it may also mean that regulatory authorities’ attention on promotional stock content on social media platforms like Douyin Live is being further upgraded

In fact, the short video market is also attracting many brokerages, but they are currently still cautious due to regulatory requirements

A person from a securities firm told Xin Feng (ID: TradeWind01) that the company is exploring short video operations and methods for attracting traffic, and has also organized personnel to visit short video platform companies for learning. However, due to compliance requirements, it is still in the exploratory phase.

In fact, the various compliance requirements of regulation stem from the evident emotional coloring of content on short video platforms, but investment requires market participants to maintain rationality; the two are inherently in conflict

If emotions influence the capital market, it can easily lead to sharp market fluctuations, which is contrary to the long-term healthy development of the capital market

How securities firms should embrace the arrival of the short video era while avoiding regulatory breaches is a difficult question for all parties involved