July 30, CITIC Securities Co. Ltd. (CITIC Securities, 600030.SH), China's largest brokerage firm by revenue, said Friday it has found two buyers for its 53% stake in subsidiary China Securities Co. Ltd., China Business News reported today.
In a statement to the Shanghai Stock Exchange, CITIC Securities said it will transfer a 45% stake in the subsidiary to Beijing State-owned Capital Operation and Management Center, an investment arm of the local government, for RMB 7.29 billion, and an 8% stake to property developer Century Golden Resources Group for RMB 1.3 billion, via the Beijing Financial Assets Exchange.
Upon the completion of the deal, CITIC Securities will retain a 7% stake in the smaller brokerage, while China Jianyin Investment Ltd. will keep its current 40% holding.
The firm said in March that it planned to give up its stakes in two subsidiaries, China Securities and China Asset Management Co. Ltd. (China AMC), to meet regulatory requirements.
According to China Securities Regulatory Commission (CSRC) requirements, CITIC Securities must transfer the stake in its subsidiary by December 31, the deadline set for securities firms to resolve competition issues flagged by the regulator.
The regulator has also urged CITIC Securities to reduce its stake in China AMC to comply with similar ownership rules governing stakes in fund houses.
CITIC Securities wholly owns China AMC, but the ownership structure violates a regulation published by the CRSC in 2004. The regulation disallows Chinese companies from holding a stake of more than 49% in mutual fund companies unless the fund companies are joint ventures with foreign firms in which the foreign investor must hold at least a 25% stake.
China AMC has already been punished by the CSRC for failing to comply with the ownership rules. The fund company was banned from issuing new domestic-focused trust funds and taking on new investors in private funds from January, and was told by regulators to solve the issue by July 1.
On July 20, the regulator extended the deadline to the end of September, but said CITIC Securities must comply with the relevant regulations or face further punitive measures.
Chinese media reported in late March that the securities firm was in advanced talks with U.S. investment firm T Rowe Price Group (NASDAQ:TROW) regarding the sale of a stake in China AMC.
China AMC is the country’s biggest fund management firm with RMB 300 billion in assets under management.
