A filing with the US Securities and Exchange Commission revealed that Founder Securities, a Chinese firm, could sell its stake in a joint venture outfit with Credit Suisse. The joint venture with the Swiss bank was a conflict of interest as Founder plans to consolidate with peer China Minzu Securities, as indicated in the regulatory filed on Friday.
Founder owns 66.7% of Credit Suisse Founder, while 33.3% is owned by the Swiss bank. Credit Suisse placed a CNY8900 million or USD131.29 million investment in the joint venture.
It was not clear, however, what the future holds for Credit Suisse Founder after the potential sale of Founder's stake in the joint venture. Reuters noted that foreign firms in China are not allowed to have a majority interest or control in domestic securities firms according to state law.
Credit Suisse's joint venture with the local securities firm was similar to the joint ventures the Swiss bank's peers have also undertaken in China. Like Credit Suisse, joint ventures of foreign banks including Citi, Deustche Bank and JPMorgan comply with the provisions of the country's law regarding foreign banks owning stakes or interest in domestic securities in China. Foreign banks are only allowed to have a minority interest in a joint venture. This structure as guided by state law also give way to foreign firms like Credit Suisse to launch share underwrting and other businesses in capital markets for Chinese clients domestically even though the controlling interests of the joint venture are with its local partners.
When asked by the news agency about the report, officials of Credit Suisse were not available for an immediate comment.
Credit Suisse Founder was formed in October 2008. As noted by Reuters, the joint venture and other similar securities ventures do not make significant, consistent profits. Already facing competition in a saturated market, opportunities of these firms to earn were also hampered by a freeze on public listings in October of this year.
Assets of Credit Suisse Founder as of June this year were at CNY884 million. It incurred CNY10 million net loss in the first six months of this year.
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