China’s Citic Tightens Grip on CLSA After Mass Departures

(Bloomberg) -- Citic Securities Co. is tightening control over its CLSA Ltd. unit, following an exodus of staff and top executives from the Hong Kong brokerage last year amid a clash over corporate culture and bonus levels.

China’s biggest broker is creating a “coordination committee” at CLSA, which will include its President Yang Minghui and Chairman Zhang Youjun, according to people familiar with the move who asked not be identified discussing internal matters. Citic’s head of research and equities and trading, Li Chunbo, will also be part of the new group along with CLSA Chief Executive Officer Rick Gould, they said.

The setup is an interim step in a re-ordering of CLSA’s decision-making structure, which is seen as being too independent, one of the people said. The four-member committee may eventually give way to new management teams being formed to oversee businesses from banking to equities and fixed income for both Citic and CLSA together, the person said. Appointments to these committees are still to be finalized.

Citic acquired CLSA seven years ago to use the Hong Kong firm, which was founded by two journalists in 1986, as a springboard for a global expansion to take on Wall Street’s powerhouses and rivals in Europe. That project has largely foundered amid a culture clash between the state-controlled Chinese brokerage and the more freewheeling Hong Kong unit.

Citic’s Zhang lambasted CLSA’s executives at a gathering in Beijing last year over their ability to earn decent returns, after which a large part of its top echelon departed, including CEO Jonathan Slone. CLSA has since lost analysts, traders and sales people to peers including Jefferies Financial Group Inc. and Credit Suisse Group AG.

CLSA’s executive committee - which hadn’t included Yang or Li - has been dissolved, the people said. Li has also been named chairman of institutional equities and research at CLSA, they said.

Media representatives at CLSA and Citic declined to comment.

Yang, a 25-year veteran at Citic, was made president in 2016 and is a deputy secretary at the Communist Party committee of the firm, while Li joined the brokerage in 2001. Both are members of Citic Securities’ executive committee.

Li’s appointment as chairman of equities and research comes nine months after resignation of research head Edmund Bradley and Xen Gladstone, the boss of sales and trading. The firm then tapped Singapore country head Andrew Hartley to head equity sales, trading and execution while Shaun Cochran replaced Bradley.

Before it was dissolved, the executive committee oversaw the firm’s global strategy, while its global management committee was responsible for the day-to-day operations, according to its November sustainability report.

The changes come as Citic faces increased competition on its home turf with China opening up its $45 trillion market to allow foreign investment banks to take full ownership of operations in the Communist Party ruled nation. Chinese regulators have said they want to create “aircraft-carrier sized” investment banks to compete globally.

In other people moves, Edward Park was named CEO of institutional equities at CLSA, one of the people said.

--With assistance from Evelyn Yu.

To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net

To contact the editors responsible for this story: Candice Zachariahs at czachariahs2@bloomberg.net, Jonas Bergman

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