On April 3, 2026, the Zhejiang Securities Regulatory Bureau issued warning letters to Nanhua Futures Co.,Ltd. and its General Manager Jia Xiaolong, directly pointing out violations including ineffective implementation of the company's procurement internal control system and inadequate management of employee conduct. As one of the few domestic futures companies listed on both the A-share and H-share markets, Nanhua Futures has faced frequent regulatory penalties in recent years, with internal control weaknesses repeatedly emerging. Despite this, an反常 phenomenon of "violations persist, yet high salaries continue" is evident, where the growth rate of executive compensation far exceeds the company's profit growth. This exposes a deep-seated imbalance in corporate governance and incentive mechanisms and serves as a warning for compliance operations within the financial industry.

Compliance failures have become the "norm" for Nanhua Futures, and this recent regulatory warning is not an isolated incident. Over the past three years, the company, its branches, and subsidiaries have repeatedly crossed regulatory red lines: its Shenyang sales department was warned due to internal control failures in WeChat group marketing, its Guangdong branch was penalized for improper preservation of business materials, and its subsidiary, Nanhua Fund, was twice ordered to rectify and had some business operations suspended. Core compliance issues are highly concentrated, either involving internal control systems being rendered ineffective, such as procurement control failures causing actual losses, or stemming from management deficiencies, showing a lack of effective oversight over employee conduct. The pattern of repeated violations and ineffective rectification highlights loose control by the corporate headquarters over its branches and renders the risk control and compliance system virtually useless.

In stark contrast to these compliance shortcomings is the counter-trend surge in compensation for Nanhua Futures' core executives. In 2025, Chairman Luo Xufeng received compensation of 2.3373 million yuan, a year-on-year increase of 18.05%. General Manager Jia Xiaolong, who received the warning, was compensated 1.9373 million yuan, up 17.41% year-on-year. Other core executives also saw double-digit increases in their compensation. During the same period, the company's net profit attributable to shareholders increased by only 6.18% year-on-year, and operating revenue grew by a mere 2.45%. The growth rate of executive salaries was nearly three times that of profit growth, further creating an internal inversion where "executives get raises while employees face pay cuts," with the average employee salary declining by 7% year-on-year.

Even more alarming is that this severe misalignment between compensation, compliance, and performance is not due to a lack of formal rules. Nanhua Futures' recently disclosed "Measures for the Administration of Director and Executive Compensation" clearly stipulates that performance-based pay is linked to company performance and individual assessments, and compensation can be clawed back if executives face regulatory penalties. However, in reality, this clause has become a "paper rule." Even when executives are held accountable for violations, their compensation is still paid in full and significantly increased. Compliance accountability has not been genuinely transmitted to the incentive level, rendering the assessment mechanism completely ineffective.

As a licensed financial institution, compliance is a lifeline. The case of Nanhua Futures precisely exposes a common industry ailment: prioritizing performance over compliance and having weak governance. The failure of the Board of Directors and the Remuneration Committee to fulfill their supervisory duties, coupled with an imbalanced structure where executives essentially self-assess and self-award raises, not only risks client assets and damages industry reputation but also undermines investor confidence and impacts the company's long-term valuation.

Currently, regulators are continuously strengthening the orientation of "compliance having veto power" and "linking compensation to risk control." Following this dual warning, the effectiveness of Nanhua Futures' rectification efforts will become a key focus for regulators. If the company fails to improve its governance mechanisms, rationalize its incentive system, and genuinely integrate compliance and risk control into compensation assessments, it may face even stricter regulatory penalties. This case serves as a warning to all financial institutions: high executive compensation must be matched with responsibility and compliance. "Counter-trend salary increases" detached from compliance and performance will ultimately incur dual costs from both regulators and the market.