An investor in the Jiangsu-province city of Changzhou has taken Zheshang Securities to court over losses worth 30 million yuan that were sustained under an investment advisory arrangement.
A Changzhou-based Mr. Jin claims that he executed a one-year investment advisory services agreement with the Jiangsu branch of Zheshang Securities at the end of 2015, entrusting the company with 50 million yuan in funds.
Upon expiration of the agreement Mr. Jin found that he had incurred losses of 30 million yuan, as a result of stock speculation undertaken by Zheshang Securities on his behalf.
Chinese media notes that the agreement stipulated stop loss position of 10% of the original principal, and that in the case of losses, Zheshang Seecurities would be responsible for the provision of 30% compensation.
According to Mr. Jin by August 2016 his account had already lost in excess 10 million yuan, comprising over 20% of the original principal and well ahead of the stop loss position of the agreement.
Mr. Jin claims that in spite of the losses Zheshang Securities refused to suspend trading or provide compensation, leading to the execution of a supplementary agreement on 21 August 2016.
The supplementary agreement with Zheshang Securities reportedly stated that the financial services provider would bear 100% of all losses once they appeared, and that during the term of the agreement Mr. Jin would not be permitted to interfere with or influence the “methods and mentality” of Zheshang’s operations.
By the time that both the original agreement and its supplementary part reached their expiration on 27 December 2016, however, Mr. Jin’s losses had ballooned to 30 million yuan.
According to Mr. Jin a representative from Zheshang Securities recommended extending the agreement by another six months and promised earnings of 60 million yuan, which would be divided between in a 30-70 split, at which point he opted to terminate his association with the firm.
Zheshang Securities Claims Agreement is a Sham
In response to the accusations Zheshang Securities told Chinese media that it had not signed any such agreement with Mr. Jin, and that the seal applied to the document was counterfeit.
Securities regulators have directed their attention to a Mr. Su, an employee of Zheshang Securities who is alleged to have privately accepted funds from clients for share trading during the course of 2016.