CSRC in­ves­ti­gates six com­pa­nies for fraud

China Daily (USA) - - BUSINESS - By LI XIANG lix­i­ang@chi­nadaily.com.cn

China’s top se­cu­ri­ties reg­u­la­tor launched in­ves­ti­ga­tions into six com­pa­nies al­leged to have com­mit­ted fraud in their ini­tial pub­lic of­fer­ings, the reg­u­la­tor said on Fri­day.

It­wasthe first­batchof cases in­volv­ing IPO fraud since the reg­u­la­tor tight­ened its scru­tiny on new­share sales in June.

Ma­jor wrong­do­ings found by the reg­u­la­tor dur­ing the in­ves­ti­ga­tion included false and in­suf­fi­cient state­ments in their IPO prospec­tuses, such as cook­ing up rev­enues and prof­its, fail­ure to dis­close ma­jor debt, tax pay­ments and guar­an­tees, and in­flat­ing over­seas sub­sidiaries’ as­sets to write off huge losses of the par­ent com­pany.

Other ir­reg­u­lar­i­ties included fail­ure to dis­close in­for­ma­tion about in­ter­nal man­age­ment and cor­po­rate gov­er­nance, chang­ing cor­po­rate names and mak­ing false state­ments about busi­ness trans­for­ma­tion to mis­lead in­vestors and en­cour­age spec­u­la­tive trad­ing.

Shang­hai-listed P2P Fi­nan­cial In­for­ma­tion Ser­vice Co Ltd is among the six com­pa­nies be­ing in­ves­ti­gated for IPO fraud by the reg­u­la­tor.

“The false state­ments and the fail­ure to dis­close key in­for­ma­tion by the com­pa­nies of­ten lead to clues of se­ri­ous il­le­gal mar­ket ac­tiv­i­ties and crimes, such as il­le­gal con­nected trans­ac­tions, cash em­bez­zle­ment and tun­nel­ing of ben­e­fits,” said Zhang Xiao­jun, spokesman of the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion at a news con­fer­ence in Bei­jing.

Zhang said that the reg­u­la­tor will con­tinue the crack­down on IPO and fi­nan­cial fraud as well as vi­o­la­tions of dis­clo­sure rules to en­sure a fair, trans­par­ent and ef­fec­tive mar­ket.

In­dus­trial Se­cu­ri­tiesCoLtd, the un­der­writer of Dan­dong Xin­tai’s IPO, was or­dered to pay 550 mil­lion yuan ($82.2 mil­lion) to com­pen­sate in­vestors’ losses, in ad­di­tion to a 57.3 mil­lion yuan fine.

On Fri­day, the bench­mark Shang­hai Com­pos­ite In­dex rose 0.21 per­cent to close at 3,090.04 points. The Shen­zhen Com­po­nent In­dex fell 0.33 per­cent to close at 10,748.9.

the gain in the bench­mark Shang­hai Com­pos­ite In­dex on Fri­day

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