CHINA’S securities regulator said Friday it had barred three of the nation’s biggest brokerages from opening new margin trading accounts for clients for three months.

    CITIC Securities, Haitong Securities and Guotai Junan Securities fell foul of the regulator following investigations focused on high risk margin trading as China’s stock markets sizzled in the final quarter of 2014.

    “The three were found to be rolling over [margin trading] contracts for a large number of clients in violation of rules and had been warned,” said Deng Ge, a spokesman for the China Securities Regulatory Commission. “However, they did not correct the mistakes.”

    Outstanding margin loans totaled 1.08 trillion yuan (US$174 billion) as of Jan. 13, up from about 400 billion yuan at the end of June last year, according to China Securities Finance Corp. data. On the Shanghai Stock Exchange alone, the outstanding value of borrowings for margin trading has reached 767 billion yuan, more than double end-July’s 284 billion yuan, according to latest data.

    Leveraged funds, including margin loans offered by brokerages, are “stirring up trouble” and contributing to stock volatility, Xinhua said Dec. 11.

    Inspection teams ran checks at 45 brokerages to see whether their margin trading businesses complied with rules, Deng said. The regulator punished nine other securities companies for offenses including allowing unqualified investors to open margin finance and securities lending accounts, he added. Risks in the margin trading businesses are manageable, with no major offenses uncovered in on-site audits of the 45 brokerages last month, he said.

    The regulator plans to strengthen supervision and carry out more checks to ensure brokerages exercise appropriate caution, Deng said. (SD-Agencies)