Many companies were severely punished for financial fraud, and the shareholders were stunned.
Original Crossroads Oriental Fortune Network
It is not soft to supervise and crack down on financial fraud. Because of the fraud in the prospectus and annual reports, *ST Huichen was severely punished, and since December, many companies, including *ST Huichen, have also been severely punished for financial fraud.
01
*ST Huichen: Heavy punishment for fraud
On December 23rd, *ST Huichen announced that due to the fact that Xintang Puhua, a holding subsidiary, inflated its income and profits by fictitious business with a third party, signed a sales contract with no commercial substance, and confirmed the project income in advance, the Beijing Securities Regulatory Bureau decided to take administrative supervision measures to issue a warning letter to *ST Huichen as a senior executive in time and record it in the integrity file of the securities and futures market.
The announcement also shows that after receiving the administrative penalty decision issued by the Beijing Securities Regulatory Bureau, the company, the chairman and the financial controller were fined a total of 16 million yuan, including 5 million yuan for the company and 3 million yuan for the chairman Zhao Long.
Judging from the details of fraud, the announcement shows that the profits in 2018 and 2019 disclosed in the prospectus of *ST Huichen inflated by 5,553,100 yuan and 17,858,800 yuan respectively, accounting for 7.33% and 25.16% of the total profits disclosed in the current period. In 2020, *ST Huichen inflated its profit by 60.9616 million yuan in its first annual report, accounting for 60.69% of the total profit disclosed in the current period. In 2021 and 2022, when the company suffered losses, the profits were reduced by 17,211,900 yuan and 104,962,000 yuan respectively.
The Beijing Securities Regulatory Bureau also decided to take administrative supervision measures to issue warning letters to the other ten directors, supervisors and senior managers of *ST Huichen, and record them in the integrity files of the securities and futures markets.
According to the Beijing Securities Regulatory Bureau, the above-mentioned illegal facts are proved by evidence such as the announcement of listed companies, relevant contracts, financial materials, inquiry transcripts, WeChat chat records, bank account information, and materials provided by relevant parties, which are sufficient for identification. Considering that there are false records in the issuance documents of *ST Huichen, and the false records in individual years account for a large proportion, the scope of punishment is determined according to the above situation.
02
The Shanghai Stock Exchange also shot.
It is worth noting that the Shanghai Stock Exchange also took action. On December 22, 2023, the Shanghai Stock Exchange made a disciplinary decision and publicly condemned *ST Huichen, Zhao Long, He Kanchen, Xu Jingwu and Liang Ma. At the same time, more than ten other directors of the company were given regulatory warnings.
It is worth noting that the disciplinary decision issued by the Shanghai Stock Exchange shows that *ST Huichen and relevant responsible persons raised objections within the prescribed time limit, saying that Xintang Puhua had independent decision-making power and operational autonomy in business development and personnel management during the company’s shareholding in subsidiaries, and the company did not participate in specific implementation. After the company found that Xintang Puhua had significant business risks, it has actually carried out rectification work.
However, the Shanghai Stock Exchange said that *ST Huichen’s violation of the rules is clear and of a bad nature. The reasons that the company and the responsible person said that they had implemented management, did not participate in the operation of the joint-stock company, and trusted the intermediary agency did not affect the establishment of the violation facts, and the reasons that they said that they had been rectified failed to alleviate the adverse effects of the violation. The reasons that the relevant responsible person said that there was no subjective intention, ignorance, and performance of duties could not be established, and it did not constitute a lighter or lighter violation of responsibility.
03
Legal Person: Investors may sue for compensation.
According to public information, on July 16, 2020, *ST Huichen was listed with an issue price of 34.21 yuan, and the total amount of funds raised exceeded 600 million yuan.
*ST Huichen can be described as "the peak of listing". The stock price trend shows that on July 16, 2020, *ST Huichen’s share price once surpassed 120 yuan/share on the first day of listing (before regaining its rights), but it fluctuated and fell all the way, reaching the lowest point near 14 yuan in June 2023, and then rebounded. The latest closing price was 25.22 yuan/share, with a cumulative decline of nearly 80%.
According to China Times, Zang Xiaoli, a lawyer from Beijing Shixuan Law Firm, said that administrative fines are only one of the consequences of financial fraud of listed companies, but not all. If investors suffer losses, they can sue for compensation, and *ST Huichen and relevant responsible parties shall compensate them according to law. It is preliminarily determined that those who bought *ST Huichen shares from the listing date to April 27, 2023 and sold or continued to hold shares on or after April 28, 2023 are expected to be compensated.
04
Many companies were severely punished for fraud.
The Central Financial Work Conference proposed that we should focus on strengthening supervision in an all-round way, investigate and deal with major illegal acts such as fraudulent issuance, financial fraud, market manipulation and illegal reduction, create a good market environment, and effectively enhance market confidence.
According to the Economic Information Daily, incomplete statistics show that since November, 36 companies in Shanghai and Shenzhen stock markets have received fines from the CSRC, local securities regulatory bureaus and exchanges for falsifying financial information.
Since December, many companies including *ST Taian, Ruyi Group, *ST Huichen and *ST Botian have been fined over 10 million yuan for financial fraud or serious breach of trust, covering 107,900 shareholders.
For example, on December 3, *ST Taian announced that it had received the "Notice of Administrative Punishment in advance" issued by Guangdong Securities Regulatory Bureau. It was found that Taian Tang inflated its inventory, profits and income by reducing carry-over costs, recording expenses and inflating the sales price of drugs. From 2018 to 2021, the total inflated profit was 429 million yuan, and there were false records in relevant periodic reports.
For another example, on December 8th, *ST Botian disclosed that the company received the Notice of Administrative Punishment in advance issued by the Beijing Supervision Bureau of China Securities Regulatory Commission that day, and found that the company inflated or inflated its operating income and profits in various ways, resulting in false records in the annual report from 2017 to 2021. In 2020 and 2021, the amount of false records in the balance sheet of the company totaled 1.955 billion yuan, accounting for 138.06% of the total net assets at the end of the year disclosed in those two years.
Experts in the industry said that one after another, listed companies were punished for financial fraud, which released the signal of "zero tolerance" in supervision, which was conducive to enhancing market trust, rebuilding market confidence and maintaining a good investment environment. To completely eradicate the soil of financial fraud, it is necessary to play a "combination boxing" in a multi-pronged manner.
05
Manipulating the market was severely fined 600 million.
In addition to financial fraud, market manipulation is also the focus of regulatory attention. At the annual meeting of the 2023 Financial Street Forum held on November 8th, Yi Huiman, Chairman of China Securities Regulatory Commission said that he would focus on the next development of the capital market, strengthen cooperation with the public security and judicial organs, continuously improve the anti-counterfeiting system and mechanism in the capital market, promote the improvement of the administrative, civil and criminal three-dimensional accountability system, increase the crackdown on illegal activities such as financial fraud, fraudulent issuance and market manipulation, and severely punish intermediaries who fail to perform their duties, and will not tolerate them.
On December 9, Senyuan Electric announced that its former controlling shareholder, Senyuan Group, was confiscated by the CSRC for manipulating Senyuan Electric’s shares, and was fined 308 million yuan; At the same time, Senyuan Electric’s senior executives (actual controller, chairman and secretary-general) and traders were all fined.
On December 18th, Jintuo Co., Ltd. issued an announcement, and Wu Xian, the controlling shareholder and actual controller of the company, received the Decision on Administrative Punishment and the Decision on Market Prohibition issued by China Securities Regulatory Commission. According to the announcement, Wu Xian, Chen Lei, the chairman of Shenzhen Junru Asset Management Consulting Co., Ltd., and Lin Jianwu, the chairman of Shenzhen Huihai Hongrong Investment Development Co., Ltd., manipulated the stock price of Jintuo shares in the name of market value management and were fined by the CSRC for a total of 661 million yuan.
This move reflects the "zero tolerance" attitude of the regulatory authorities to disrupt market behavior. Wang Huaitao, the chief lawyer of Shanghai Xingu Law Firm, believes that severe punishment measures should be taken for serious violations, such as fraudulent issuance, insider trading, market manipulation, etc., including fines, capital market ban, confiscation of illegal income, and even criminal responsibility. These behaviors not only seriously damage the interests of investors, but also greatly undermine the fairness and transparency of the market, so we must take severe measures to maintain the stability and healthy development of the market.
It is for investors’ reference only and does not constitute investment advice.
Original title: "Financial fraud! 110,000 shareholders are stunned. "
Read the original text