The annual return can reach more than 9% at the highest and more than 6% at the lowest. The financier is controlled by the local finance, and several state-owned asset platforms with high credit rating provide guarantee at the same time… If you are an investor, do you buy such attractive investment products?
These investment products, which look like both bonds and trusts, have complete procedures and attractive returns. In fact, they are all kinds of private placement non-standard “fixed financing”, that is, directional debt financing instruments and plans. The issuing place is all kinds of local financial exchanges, and the nominal issuing subject is local County-level urban investment companies.
However, these so-called fixed financing products may have touched the regulatory red line. On December 17, the inter ministerial joint meeting to clean up and rectify various trading places (hereinafter referred to as the “joint meeting”) issued a document requiring the general office of the provincial government with financial asset trading places within its jurisdiction (hereinafter referred to as the “Gold Exchange”) to immediately organize and carry out on-site inspection of the gold exchange within its jurisdiction. As early as October 2020, the supervision banned the gold exchange from financing real estate enterprises (projects) and urban investment companies, and was not allowed to expand industries across provinces.
The first financial survey found that after the issuance of the regulatory on-site inspection requirements, many products targeting urban investment and financing projects were still “quietly” sold through wechat circle of friends and other channels, and the platform for issuing and endorsing some of them changed from the gold exchange approved by the local government to a variety of “pseudo gold exchanges” such as registration and settlement companies, property rights trading centers and even consulting companies.
In addition to the promise of high yield, in order to facilitate the raising, these fixed financing products usually divide the same financing into multiple raising, with a minimum purchase threshold of only 50000 yuan. In terms of issuance methods, most fixed finance products are not much different from on-site products. Underwriters and managers are also introduced, and complete information such as due diligence report, cashing commitment letter, guarantor and rating report are provided.
However, this may only be a superficial phenomenon. Insiders told first finance that the “Gold Exchange”, as an issuance platform, does not audit the authenticity of projects. Some projects are not only difficult to distinguish between true and false, but also the funds are called one-to-one by investors to the financing Party’s account. There is no need to go through the underwriter, issuance platform, or account custody, so it is difficult to effectively supervise the true whereabouts of funds.
In this context, some fixed financing projects of fake urban investment companies appear. On December 10, a county-level urban investment company in Shandong announced that a product promoted by social intermediaries guaranteed by the company had nothing to do with the company. The financial products suspected of fraud once again sounded the alarm of “pseudo Gold Exchange”.
repeated “fake gold exchange”
In late December, an introduction to investment products sold through online channels described the financier as follows: the financing amount was 120 million yuan, the asset scale of the financier had exceeded 10 billion yuan, the shareholders included local finance bureaus and central enterprises, and two powerful local state-owned platforms rated above AA by well-known rating agencies, while providing guarantee for the project.
The words “the same fund of central enterprise trust” in the sales materials can easily connect the issuer of this product with local government financing platforms and trust companies. Around 2012, such products once became one of the mainstream businesses of trust companies. But in fact, the above products have nothing to do with trust companies, nor are they products issued by formal asset management institutions.
“This is a fixed financing product, not a trust plan. It can only be bought from us.” Its salesperson said, “in fact, this is a government platform project issued by the gold exchange. The financier is a transportation investment company in a city in Central China. As a channel, we are responsible for product sales and fund-raising.” Statistics show that the above transportation investment company is a government financing platform, mainly responsible for the construction of local transportation projects.
The initial business of the gold exchange was financial asset transaction matching, and then gradually extended to bank financial management, insurance, trust and other products, as well as the issuance of equity, private debt and other financing instruments. After 2018, the gold exchange has carried out a large number of directional debt financing tools / plans with the nature of private debt and the financing party is mainly local urban investment. In addition to the gold exchange approved by the local government, the “pseudo Gold Exchange” without business qualification also participated in it.
The issuing place of the fixed financing products of the above transportation investment company is likely to be a “pseudo Gold Exchange”. According to the investigation of the first financial reporter, the company is a “registration and settlement company” registered in a provincial capital city in the West. It was established in June 2020 with a registered capital of 50 million yuan, and the registration authority is a local branch of the Administration for Industry and commerce. Due to the concealment of the real situation and fraud of the public information, the company was listed as an abnormal operation by the market supervision department in July 2021.
At least since 2019, the fixed financing products with the above transportation investment companies as the financiers have been sold on various online financial product platforms. In May this year, it was shown that the above transportation investment company was the financing party and raised a fixed financing product with a scale of 30 million yuan, which appeared on several online sales platforms. In the second half of the year, the pace of its issuance was further accelerated, and more than ten issues of products have been issued since July.
Statistics show that since February this year, the sales personnel of the above-mentioned trading and investment platform products have also sold the fixed financing products of urban investment companies in Chongqing, Shandong, Sichuan and other provinces and cities, with a large amount, and the minimum single phase scale is more than 100 million yuan. Among them, a western urban investment platform has issued several issues this year, most of which are more than 300 million yuan.
Even some rural property rights trading centers are involved in the name of creditor’s rights transfer. According to the information obtained by the first financial reporter, on November 3, a rural property right trading center in a prefecture level city in South China issued a notice agreeing to list the creditor’s right transfer project of an investment company with an amount of 25 million yuan in the Institute. Among the 11 shareholders of the center, more than half have local urban investment background.
grey financing method
“The filing fee of the gold exchange is too expensive. We should also consider the cost of designing the project.” The fixed finance salesperson of the above trading company said that the reason for choosing the “registration and settlement company” rather than the issuance of the gold exchange was due to the consideration of the issuance cost.
Insiders told reporters that at the beginning of 2018, the supervision cut off the channel for private placement products to issue entrusted loans. It was difficult for the funds of banks and other financial institutions to connect with non-standard businesses through entrusted loans. The county-level urban investment platform with low credit and narrow financing channels turned to cooperate with the local financial exchange and finance through fixed financing products, which was the main reason for the popularity of fixed financing by the financial exchange. Linking products directly to the government and focusing on “believing in the government” is also a common way of product sales.
However, this financing method has been subject to strong regulatory rectification for many times in recent years. In October 2020, the regulation prohibits the exchange from financing real estate enterprises (projects) and urban investment companies, and does not allow cross provincial and non local business development. The stock risk resolution and rectification of the exchange should be completed by the end of June 2021. On December 18, the joint meeting again requested the general offices of 29 provincial governments to immediately conduct on-site inspection of the gold exchanges under their jurisdiction.
Under the background of strict supervision and rectification, although the gold exchange approved by the local government has converged, its operation methods have been inherited by various “fake gold exchanges”, and most of the products sold are county-level urban investment as the main financing body. If the above claims that the financing party is the product sales data of the Central City Trading and investment company, it claims that the company is directly controlled by the local finance and the city is one of the top 100 counties in China.
The role of the gold exchange is mainly as an issuance platform to endorse the legitimacy of products. With the regulatory clean-up and rectification, the fake gold exchange in the gray area shows a more unique “advantage”.
The endorsement method of the gold exchange is mainly to provide filing. Statistics show that in early November this year, the above-mentioned Western registration and clearing company successively issued two filing notices for the central trading company, with the filing amount of 30 million yuan, the filing contents are the latter’s accounts receivable rights and interests, and the filing periods are one year and two years respectively. In late December after the issuance of the regulatory on-site spread notice, the fixed financing products of the above Central Trading Company are still sold online.
The “packaging” of some fixed financing products is not much different from the formal floor bonds. There are not only underwriters and managers, who are responsible for the production of due diligence report and fund-raising of the issuer, but also the issuer’s cashing commitment letter, guarantor and its rating report, guarantee letter and other materials, such as the above-mentioned central trading platform. Statistics show that its underwriters and managers are from another province in Central China.
In terms of issuance mode, Dingrong has obvious private placement nature. In order to facilitate fund-raising and avoid legal risks, the financiers often divide the same financing into multiple fundraising, the amount of each fundraising is as low as RMB 10 or 20 million, and reduce the starting purchase threshold to RMB 100000 or even RMB 50000, so as to reduce the difficulty of fundraising. For example, the financing of RMB 100 million of the central trading and investment company is divided into seven issues.
Although it has obtained financing channels, the cost paid by the urban investment company is very high. According to the above insiders, in addition to the capital cost of 8% ~ 9%, the total cost of fixed financing issuance is as high as 13% ~ 16% of the filing expenses, sales expenses and other miscellaneous expenses of the gold exchange.
“The cost of more than a dozen points is normal.” The above-mentioned person said that urban investment companies with high credit level can raise funds through issuing bonds and bank loans, and will not borrow such high interest funds at all.
the authenticity of the project is difficult to distinguish
The Interim Measures for the administration of financial product sales of financial management companies issued in May this year stipulates that without the permission of the financial supervision and administration department, no non-financial institution or individual shall sell financial products as an agent, and financial product sales institutions shall not carry out other financial product sales business activities in the name of financial management or use the word “financial management”. In addition, the regulation also requires that the gold exchange shall not directly or indirectly sell products to individuals or conduct cross provincial and non local exhibitions.
This makes the distribution process of fixed financing products extremely hidden. The first financial survey found that in the publicity materials, the name of the financier of the fixed financing products is usually replaced by the capital Pinyin initials, and only the complete name is displayed in the collection account. The information of the issuing place, underwriter, manager and other participants is not mentioned at all. As the industry, business and other materials released by various trading places on the issuing platform, the fixed financing information is even more difficult to find.
This is the case with the above-mentioned South China rural property rights trading center. According to the website information, although its listed projects include rural intellectual property rights, collective property rights, trees, state-owned assets and equity transfer, the actual listed projects are mainly shops, orchards for rent, and the sale of trees and steel. A small number of creditor’s rights and equity transfer projects were last updated in May this year, and financing related projects basically did not appear.
For the fixed financing products issued in the name of the above Central Trading Company, the main content of the sales materials is the strength of the company and the city where it is located, but the full name of the company is not disclosed, nor is any information of third parties such as the issuing place and underwriters published. After repeatedly questioning the salesperson, the reporter learned that the products were issued in a “Gold Exchange” in the west, but he refused to disclose the specific information of the gold exchange.
There is no public listing of any products on the website of the above-mentioned Western registration and Clearing Company. In addition to a few columns such as company profile, shareholders, company dynamics, policies and regulations, the website has almost no business and product content. The latest update of company dynamics was in December 2020, while the release of policies and regulations was far away in 2016.
Moreover, the phone calls of relevant parties published on the website could not be connected. The reporter asked the central trading and investment company for confirmation. The office staff said that the investment department of the company was responsible for this matter. The reporter repeatedly called the company’s investment department and the Western registration and settlement company, but no one answered. After the latter’s shareholder’s phone was connected, the other party said that the phone was his private number.
This leaves great doubt on whether CCCC will issue fixed finance in the form of filing in the Western registration and Clearing Company, and whether the latter has actually provided filing.
It seems that the authenticity of the distribution documents with complete information is difficult to confirm. According to the information provided by the salesperson, although the rating reports provided by the two state-owned companies guaranteed by the company were issued by formal rating agencies, the report was signed in August and September 2020. In April and August 2021, one of the guarantors also publicly issued two issues of bonds, and the bond issuance application of the other guarantors was also registered with the regulatory authorities.
On some fixed financing product sales and evaluation websites, the products under the banner of “government credit” as credit enhancement measures provide the credit rating, finance, assets and other information of financiers and guarantors, and even stay in 2018 and 2019. But in fact, the corresponding financiers also have the experience of issuing bonds publicly this year.
“This is a gray area in itself. There are many fake gold exchanges that are secretly working in the dark. Projects can be packaged. Only issuers and underwriters know whether they are true or false.” The person familiar with the matter said.
funds are not regulated
Unlike regular floor securities and asset management products, the issuance shall go through the procedures of trading place review, registration, listing and transaction settlement. When the gold exchange and Shanzhai gold exchange are fixed financing products for filing, they do not supervise the project issuance, registration and settlement and funds. This brings great risks to the real flow and use of funds.
In terms of sales procedures, the fixed financing products generally pay first and then sign the contract. The payment method is that the investor transfers directly to the financing Party’s account. After making the payment, the underwriter notifies the financing party to check the account and verify the capital. The whole process is not witnessed by a third party, and the distribution platform is not subject to any supervision. “The financing parties are government platforms, and the money is directly transferred to the government account.” A certain financial product salesperson told the first financial reporter.
The transaction is conducted one-on-one. The two sides have not met in advance, nor has there been any third party or issuance place supervision. How to confirm the transaction after payment?
Insiders told reporters that, in general, when issuing fixed financing products, if investors have purchase intention, the information provided by the channel and sales personnel generally includes a subscription contract. After confirming the purchase, the seller will mail three formal contracts sealed by the financing party, two of which will be sent back after being signed by the investor, and the other one will be kept on file.
The transaction process is opaque, and the use and whereabouts of funds after issuance are also not regulated. The reporter learned from several salespeople that the accounts of investors are generally specially opened by the financing party to raise funds for the project, and the use of funds is controlled by the financing party without going through the issuing place and underwriter.
“The difference between fixed financing and trust is that trust has a trust account, and the money is called to the trust company, and then to the financier. We save one (link) in the middle, and the money is directly called to the financier.” A salesperson said, “because it is a government platform, we have no way to supervise the account. They have their own supervision.”
The salesperson also said that trusteeship is mainly that individual projects need special funds for special purposes, and monitor whether the funds are used in the project. The reason why the fixed financing products they sell are not supervised is that “there is no way to misappropriate the funds for the projects on the government platform”. If it is a non-governmental project such as real estate development, fund custody will generally be carried out.
“This kind of project can’t find the whereabouts of funds at all. Only the issuer itself knows.” The above industry insiders said, “the underwriter only cares about the project packaging and sales. The channel does not know where the funds really go, and is not responsible for capital supervision. As a seller, the underwriter earns sales commission. Because it is in a gray area, it will not be responsible for compliance review.”
According to the first financial reporter, among the participants of Dingrong, if investors are not considered, the underwriter is the most profitable. Generally, the sales fees charged by the Underwriters account for 3% ~ 5% of the total raised funds, which is more than 10 times the filing fees of the issuing place.
risks grow secretly
Financial products that are difficult to distinguish between true and false and lack effective supervision have begun to trigger some risk events, and have even been used for investment fraud.
On December 10, Shandong Zoucheng Limin Construction Development Group Co., Ltd. (hereinafter referred to as “Zoucheng Jianfa”) stated that the industrial and commercial inquiry showed that it had added a 100% holding “Shandong Jizou Construction Investment Co., Ltd.” but the company group had never invested in the establishment of the company, nor had it contacted or authorized the company and any personnel of the company. At present, Some social intermediaries promoted the name as “Shandong Jizou construction Urban Investment receivable creditor’s rights assets project”, but the company has never entrusted or financed through Shandong Jizou Construction Investment Co., Ltd., and there is no guarantee for its business. The company has reported the case and verified it with Yantai Zhifu district market administration bureau.
On November 8, Qingdao Changyang Investment Development Co., Ltd. and Shuifa Investment Group Co., Ltd. reported to the police that Qingdao Zhenhua Urban Construction Co., Ltd. forged false contracts to commit investment fraud. On November 22nd, the Laixi police in Qingdao announced that in November 3rd, the suspect forged registration materials, registered Zhenzhen City Construction Co., Ltd. in Laixi, and opened a business account to Bank Of Qingdao Co.Ltd(002948) Laixi Culture East Road branch, etc., and implemented fraudulent contract investment fraud.
In August this year, Zhumadian urban and rural construction investment group of Henan Province announced in the local media that criminals released financing information in Tianjin financial assets exchange with “Henan Zhongjian No. 1 directional financing plan”, and falsely claimed that the company had provided guarantee. Subsequently, the Tianjin gold exchange stated that it had never received the application for listing information of relevant products, and the product was not a listed project of the Tianjin gold exchange.
From the public information, the fraud in the name of Zoucheng Jianfa and Shuifa group is quite similar to the fixed financing products sold online. The official account of Zoucheng construction and development shows that the amount of financing in the name of the project is 50 million yuan, which is divided into two phases. The corresponding period is 12 months and 24 months. The underlying assets are the 60 million yuan claims of Zoucheng Highway Engineering Co., Ltd., which are registered by the pledge. The fraud of Shuifa group forged several false contracts such as accounts receivable pledge contract, letter of guarantee, loan agreement and creditor’s right transfer, and stamped with the official seals of Qingdao Changyang Investment Development Co., Ltd. and Shuifa Investment Group Co., Ltd.
The emergence of this situation is related to the role played by the financial issuer of the financial exchange. According to media reports, in a creditor’s right product called “Guangxi Baise development and Investment Group Co., Ltd. No. 5” that claims to be filed in Tianjin gold exchange, the exchange has said to guide and urge the issuer to conduct information report, but it does not conduct substantive audit on the content of the information report and will not be responsible for the content of the issuer’s information report.
“The gold exchange acts as a channel, but the channel fee is only 0.3%. As long as you give money, you can put it on record. As for the project packaging and distribution, you don’t care much, so the project can be packaged whether true or false.” The above insiders said that it is not ruled out that some projects forge project information, official seal and record of the gold exchange. Even if the record is really provided, it is difficult to find evidence after the accident because there is no public listing.
It is this loose listing standard that brings no small risk to the issuance of fixed financing products. As early as December last year, Shandong local financial regulatory bureau announced that seven local property rights exchanges and the gold exchange, including the Tianjin gold exchange, carried out the registration, filing and issuance of non-standard debt instruments in the province without approval, and some businesses were open to the public, which had great potential risks.
This approach has also been adopted by registration and settlement companies, property rights trading centers, consulting and information management companies and other “pseudo gold exchanges”. In a notice of registration and filing, the above-mentioned western “registration and Clearing Company” claims that the notice of filing is only a confirmation of the registration and filing of rights and interests, and the issuer shall not publicize in the name of the company without authorization. In case of breach of contract during the filing period, the company has the right to revoke the notice of filing.
The above-mentioned South China property rights trading institution also said in the filing notice that the red head documents are strictly prohibited from being transmitted in any form, and once found, the product listing qualification will be cancelled. According to the available information, up to now, the shareholders of the company have been involved in 346 lawsuits.
(First Finance)
