HAITONG Securities Co., one of China’s biggest brokerages, could face penalties from the country’s top financial regulators, after a market watchdog found it had broken rules governing conduct in the interbank bond market.

The National Association of Financial Market Institutional Investors (NAFMII), a self-regulatory body for the interbank bond market, said late Friday that it found Haitong had helped bond issuers buy and trade their own debt, through orders it gave to asset management plans managed by its subsidiaries.

The NAFMII said it had ordered Haitong to carry out a “comprehensive and in-depth rectification” of the problems it had discovered and said it had reported Haitong’s behavior to the central bank and the securities regulator.

Debt securities in China either trade in the interbank bond market or on the smaller exchange-traded market.

The watchdog has been probing Haitong and its subsidiaries after Yongcheng Coal & Electricity Holding Group Co. roiled China’s corporate bond market by failing to repay the equivalent of US$153 million in short-term debt Nov. 10.

The default occurred just weeks after Yongcheng managed to raise the same amount from a sale of three-year debt.

Haitong Securities said Friday it had received the decision by the NAFMII and would “optimize its internal processes so as to facilitate its sustainable and healthy development of relevant businesses.” Its stock price fell 2.17 percent in Shanghai trading yesterday.

Haitong’s subsidiaries, Haitong Futures and Shanghai Haitong Securities Asset Management Co., and a separate firm, Donghai Fund Management Co., received similar warnings Friday.

(SD-Agencies)