China suspends popular trading platform Hithink RoyalFlush to add new customers

China’s market watchdog has ordered Hithink RoyalFlush Information Network to suspend its investment advisory service for three months to add new clients because its live streaming business failed to comply with securities regulations.

The Hangzhou-based financial data and software company, which also facilitates stock trading in China, was punished in part because some influencers on its platform offered investment advice without the required licenses, the company said in a stock exchange filing, citing the China’s disciplinary note Securities Regulatory Commission (CSRC). These influencers also provided implicit recommendations for individual stocks during livestreaming.

The regulator also criticized the company’s insufficient compliance checks when working with securities firms to provide investment advisory services.

Hithink RoyalFlush promised to “think deeply and make timely corrections” to resume taking on new customers as soon as possible. It added that the investment advisory service accounted for only 199 million yuan ($37 million), or 5.6 percent, of its consolidated operating profit in fiscal 2023. It does not expect the CSRC’s disciplinary actions to impact 2024 revenues.

The company’s shares fell 14.3 percent on the Shenzhen stock exchange on Friday (Nov 15), the highest level in more than a month.

Chinese regulators have put pressure on influencers and livestreaming platforms for offering investment advice to retail investors without having the proper licenses, according to local media China Securities Journal reported earlier this week.

This isn’t the first time Hithink RoyalFlush has come under scrutiny. CSRC investigated the company in 2015 for possible violations of securities and futures laws. Founded in 2001, the company has more than 5,000 employees in China. Its clients include brokers, mutual and private funds, banks, insurance companies and private investors. The company’s net profit fell 7.5 percent year-on-year to 288 million yuan, while third-quarter revenue was 945 million yuan. BLOOMBERG