① Anda Technology, sponsored by CITIC Securities, deducted a non-loss of 0.634 billion yuan in the year of listing, and the operating profit of Hengyi Petrochemical's convertible bonds fell by more than 50% compared to the year it was issued; ② In Bona Precision, which had already withdrawn its IPO, the sponsor agency did not implement the inspection procedures in place, and the abnormal situation was not carefully verified.
Financial Services Association, August 14 (Reporter Gao Yanyun) “It doesn't depend on whether tickets have been received, but how many tickets have been received”, which is a reflection of the high frequency of tickets collected by various brokerage firms this year.
As a “leading” brokerage firm, CITIC Securities has also received frequent fines recently. As of August 14, since this year, CITIC Securities has had as many as 11 fines, the most of which are investment banking fines, 7. There have been many cases of institutional and insurance penalties.
Here are a few typical examples:
First, it lost money in the year it was listed. Anda Technology, sponsored by CITIC Securities, lost money in the year it went public. The company deducted a non-loss of 0.634 billion yuan in 2023, and the operating profit of Hengyi Petrochemical's convertible bonds in the year it was issued and listed fell by more than 50% compared to the previous year;
Second, Bona Precision, which has already withdrawn its IPO and terminated, has failed to implement inspection procedures in place, and careful verification of abnormal situations is carried out;
Third, in Quanwei Technology, the continuous supervision project, there were irregularities in carrying out duties, inadequate inspection of various matters, and failure to pay attention to abnormal situations;
Fourth, in the “Titanium Dioxide Case,” the incident involved colluding to use securities loans and derivatives instruments to take a detour to reduce holdings. CITIC Securities and Sun Company were fined 71.6607 million yuan due to the “Titanium Dioxide Case.”
Case 1: Losses in the year of listing
The company's loss situation in the year it went public was criticized, and CITIC Securities “stepped on the thunderbolt” twice during the year.
On August 7, the Guizhou Securities Regulatory Bureau revealed two fines. CITIC Securities and Insurance Company Chen Jianjian and Zhao Qian were taken to issue warning letters. Liu Jianbo, chairman and general manager of Ada Technology and the company, and Shen Xiaolin, head of finance, took measures to issue warning letters.
After investigation, CITIC Securities and Anda Technology, which is sponsored by the above two guarantees, were listed on the Beijing Stock Exchange on March 23, 2023, and the selected listing criteria include the net profit standard. On April 29, 2024, Anda Technology disclosed the “2023 Annual Report”. In 2023, Anda Technology's net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was a loss of 0.634 billion yuan, which was a loss in the year of listing.
After investigation, Anda Technology adjusted the revenue recognition for lithium iron phosphate sales corresponding to the customer supply of lithium iron phosphate from the net amount method, resulting in the disclosure of the 2023 quarterly report, semi-annual report, three-quarter report, and 2023 annual performance report, respectively, cumulative confirmed operating income of 1.025 billion yuan, 1.348 billion yuan, 1.749 billion yuan, 1.923 billion yuan, and more cumulative confirmed operating costs of 1.025 billion yuan, 1.348 billion yuan, and 1.749 billion yuan, respectively billion yuan, 1.923 billion yuan, and the “2023 Annual Results Update Amendment Notice”, “2023 First Quarter Report Correction Notice”, “2023 Semi-Annual Report Correction Notice”, and “2023 Third Quarter Report Correction Notice” were disclosed for correction on April 26 and April 29, 2024, respectively, resulting in inaccurate disclosure of information and untimely correction.
On January 12, 2 fines disclosed by the Securities Regulatory Commission showed that CITIC Securities was taken to issue a warning letter, and sponsor representatives Mao Zongxuan and Zhu Wei were taken to conduct regulatory discussions. The Hengyi Petrochemical convertible bond project sponsored by CITIC Securities lost money in the year the issuer's securities were issued and listed, and operating profit fell by more than 50% compared to the previous year.
Case 2: Regulatory Notification of IPO Withdrawal Project
On August 9, the Shenzhen Stock Exchange issued two fines. The sponsor representatives Xie Bowei and Zhang Qiang of Bona Precision's IPO project, as well as certified public accountants Pan Chuanyun and Wu Yiyu, signed self-regulatory measures with written warnings. There are two main violations. One is that the Erecton inspection procedures for Bona Precision's main customer were not implemented in place, and the other was that abnormal conditions discovered during the visit were not carefully verified.
The warranty and signature will not fully verify the authenticity of Bona Precision's sales to Erecton, and the verification procedures have not been implemented. The signatory certified public accountant and sponsor representative of the project did not fully verify the major trader customers with high overseas sales revenue from Erecton's affiliate Etai Technology in strict accordance with the relevant regulations. The inspection procedures were not implemented in place, and they did not maintain professional doubts and take further measures to carefully verify the abnormal situation discovered during the field visit.
According to the Shenzhen Stock Exchange listing review information website, on January 8 of this year, the Bona Precision GEM IPO review status was changed to “terminated” because the company and sponsor withdrew their listing application, and the Shenzhen Stock Exchange decided to terminate its listing review. The sponsor of the project is CITIC Securities, and the accounting firm is Shin-Ei Zhonghe.
Case 3: Continued supervision of receipt of warning letters in violation of regulations
On May 8, the ticket disclosed by the Guangdong Securities Regulatory Bureau showed that CITIC Securities and sponsor representatives Ling Peng and Purui Airlines were taken to issue a warning letter.
As the continuing supervisory agency for Quanwei Technology's initial public offering of shares, CITIC Securities has committed the following irregularities in the process of continuing to supervise and carry out its duties:
First, there is insufficient verification of relationships between customers and suppliers in the xylene trading business;
Second, there is insufficient verification of the authenticity of the xylene trade business;
Third, in the review of xylene business documents, it was not observed that there was a clear difference between the shipping company corresponding to the transport contract and the cabin measurement report;
Fourth, the review of xylene business documents did not pay attention to obvious abnormalities in the loading port agreed in the sales contract and chartering contract.
Case 4: CITIC Securities and Sun Company were fined over $70 million due to the “Titanium Dioxide Case”
The “Titanium White Case” is a typical case of CITIC Securities being fined for violation of regulations. The amount of money forfeited is huge.
On May 15, the Securities Regulatory Commission disclosed the enforcement situation in 2023. It was mentioned that the actual controller of CNNC Titanium and CITIC China Securities, CITIC Securities, and Haitong Securities conspired to use securities loans and derivatives instruments to reduce holdings and strengthen penetrating supervision. According to the principle that substance is more important than form, it was determined according to law that relevant units and individuals jointly constituted a restricted period transaction, with a total penalty of 0.235 billion yuan.
According to the relevant announcement, the specific penalty targets and estimated forfeiture amounts were Wang Zelong (0.133 billion yuan), Hong Haowei (21.1939 million yuan), CITIC China Securities Capital (46.5 million yuan), CITIC Securities (25.1607 million yuan), Haitong Securities (7.7644 million yuan), and Han Yuchen (0.775 million yuan), respectively. CITIC China Securities Capital and CITIC Securities (the former is CITIC Securities Sun Company) were fined a total of 71.6607 million yuan.
CITIC Securities said that with regard to the issues and penalties identified in the notice, the company and CITIC China Securities Capital sincerely accepted the punishment, and will reflect deeply, earnestly implement the rectification, further raise ideological awareness, actively implement regulatory requirements, and comprehensively and systematically investigate shortcomings in various business management, carry out in-depth construction of a financial culture with Chinese characteristics, and effectively improve the level of compliance and steady management.
Case 5: Sponsored Project Violations Were Warned in Writing
On April 30, the Shenzhen Stock Exchange sent a supervisory letter to CITIC Securities. CITIC Securities adopted self-regulatory measures with written warnings. The company was required to submit a written rectification report signed by the person in charge of the sponsored business, the person in charge of quality control, and the head of the core company and stamped with the company's official seal. Additionally, sponsor representatives Zhang Weiwei and Hu Xuan were notified, criticized, and punished.
The above violations were punished. The incident occurred in the Fangda Zhiyuan IPO case, CITIC Securities's working paper on the issuer's subsidiary's capital flow inspection, and the issuer's wholly-owned subsidiary Kechuangyuan had a related transaction with Fangda Group. The relevant circumstances were not disclosed in the prospectus (declaration) or in response to the first round of inquiries. In September 2023, CITIC Securities explained the related transactions omitted above.
The Shenzhen Stock Exchange believes that during the due diligence investigation process, CITIC Securities did not fully verify the issuer's related transactions in accordance with the requirements of the Code of Practice, causing the prospectus to omit disclosure of information related to related transactions; when the draft inspection was already recorded, CITIC Securities did not fully pay attention to and implement further inspection procedures, did not carefully verify it even after being inquired by the Shenzhen Stock Exchange, and the inspection opinions issued were not accurate.
Case 6: Responding to an inquiry letter and flashing the screen, and the Shenzhen Stock Exchange initiates on-site supervision
In March, a report responding to an inquiry letter from a company to be listed on the GEM attracted widespread attention. The company to be listed is Liangang Optoelectronics. What is receiving a high level of market attention is that when responding to the “high shareholding ratio of actual controllers,” Liangang Optoelectronics revealed that the 8 listed companies all had a shareholding ratio higher than 90% before listing. The inspection opinion of the sponsor CITIC Securities is consistent with Liangang Optoelectronics's response. It is believed that Liangang Optoelectronics has established a relatively complete governance structure and internal control system, and that all internal control systems are sound and can play a necessary role. It is precisely the relevant response from the issuer and sponsor mentioned above. It is believed that CITIC Securities and Lianfang Optoelectronics are “tough” and “angry” against the exchange.
On March 22, the Shenzhen Stock Exchange published an article stating that CITIC Securities, the sponsor of Liangang Optoelectronics, initiated on-site supervision. After Liangang Optoelectronics's initial listing application was accepted, the Shenzhen Stock Exchange issued three rounds of review inquiries and regulatory letters requesting that Liangang Optoelectronics and intermediaries verify and explain matters such as the effectiveness of corporate governance, standardization of internal financial controls, and the true accuracy and completeness of information disclosure. Liangang Optoelectronics and intermediaries recently submitted a response to the inquiry, but the content of the response was not clear enough, and the issues involved were not fully explained. In order to further consolidate the sponsor's “gatekeeper” responsibilities and control the quality of the listing entrance at the source, I decided to launch on-site supervision of CITIC Securities, the sponsor of Liangang Optoelectronics.
The other two CITIC Securities fines are related to brokerage business. On August 12, CITIC Securities Zhejiang Branch was issued a warning letter by the Zhejiang Securities Regulatory Bureau, and Wan Jibo was ordered to take corrective measures. While working at CITIC Securities Zhejiang Branch, Wan Jibo repeatedly provided customers with account opening knowledge assessments or risk assessment answers, prompting customers to improve their risk tolerance level.
Increased self-regulatory supervision of industry investment banking
Investment banking business infringement fines are not only common at CITIC Securities, but are also often reflected in other brokerage firms. Recently, supervision has clearly strengthened and refined the quality of investment banking practices.
Recently, the China Securities Association revised the “Securities Company Sponsorship Business Rules” after a lapse of two years to add classification list D (suspended business category) to the original A, B, and C lists. Disciplinary sanctions such as those that have been administratively punished by the Securities Regulatory Commission within the last three years, and that administrative supervision measures such as those deemed inappropriate candidates or documents relating to administrative licensing have been taken by industry self-regulatory organizations, and that the sponsor representative will not accept the relevant business documents issued for the time being, and during the period when the sponsor representative is in charge List of people.
The China Securities Association solicited industry comments on the “Investment Banking Self-Regulatory Supervision Platform Regular Data Reporting Interface”. The China Securities Association will later officially launch the self-regulatory monitoring platform for investment banking business. At least five major functions will be launched, namely China Securities Association Investment Banking Business Electronic Draft Catalogue Management, Investment Banking Business Development Management, Investment Banking Practice Information Management, and Investment Banking Quality Evaluation. In the future, the scope of investment banking business information submission will be gradually increased in accordance with the requirements of self-regulatory supervision.
If a brokerage firm or project has negative matters, the brokerage firm shall submit a true, accurate and complete negative information to the China Securities Association. If the company or project has been penalized, fill in the “Punishment Unit”, “Punishment Date”, and “Punishment Measures”, and upload relevant letters, decisions, etc. “Project Negative Matters” only need to report the negative matters of the project within the scope of this evaluation.