On October 12, Financial Association News (Reporter Zhao Xinrui) reported that on the evening of October 11, the Shanghai Stock Exchange issued two fines for violations by companies listed on the Star Market, and different regulatory measures were taken against issuers, several former executives, and sponsors responsible for different scenarios. Judging from the timeline, this is another fine issued by the Shanghai Stock Exchange to issuers and relevant sponsors nearly 3 months later.

The two fines mainly revolve around the violations of Asia Vets (Shenzhen) Co., Ltd. (referred to as 'Asia Vets') listed on the Star Market. According to the Shanghai Stock Exchange's official website, Asia Vets is a project sponsored by Huaying Securities, accepted for listing application on June 9, 2022, and started trading stocks on August 9, 2023, mainly engaged in smart environmental monitoring business.

Due to the two violations of Asia Vets this time, the company and several former executives were disciplined by the Shanghai Stock Exchange. Upon investigation, the following violations were found during the IPO process and after the stock listing:

One is the failure to promptly report and disclose significant discrepancies between projected performance and actual financial data;

Two is the untimely disclosure of significant contract information.

On the same day, another penalty notice indicated that, upon investigation, it was found that Li Jixiu and Li Likun, as the designated sponsor representatives for the initial public offering application project of Huaying Securities, failed to fulfill their sponsorship duties properly.

The issuer and several former executives were criticized and reprimanded.

What violations did the issuer and its sponsors commit leading to penalties from the Shanghai Stock Exchange? First, looking at the reasons for the issuer's violations, one is that the company did not timely report and disclose significant deviations between expected performance and actual financial data.

The penalty notice indicated that on May 31, 2023, the issuer disclosed its estimated performance for the first half of 2023, expecting revenue to reach 230 million to 240 million yuan, a year-on-year increase of 1.91% to 6.34%; the estimated net income attributable to the parent company's shareholders (hereinafter referred to as net income) is expected to be 31.4404 million to 34.4733 million yuan, a year-on-year increase of 40.09% to 53.60%. On July 21 and August 4 of the same year, the company respectively disclosed the "IPO Prospectus for Initial Public Offering of Stocks and Listing on the Star Market" and the "IPO Prospectus for Initial Public Offering of Stocks and Listing on the Star Market," without modifying the above performance estimate data.

After the stocks were listed and traded, the company disclosed its semi-annual report on August 30, 2023, showing revenue of 167.6648 million yuan, a decrease of 30.14% to 27.10% from the disclosed estimated figures during the listing application period, and net income of 23.907 million yuan, a decrease of 30.65% to 23.96% from the estimated figures. It is evident that there were significant deviations between the ultimately disclosed financial data and the original estimated data.

Upon investigation, it was found that by July 21, 2023, when the company disclosed the "IPO Prospectus for Initial Public Offering of Stocks and Listing on the Star Market," the financial data for the first half of 2023 had been basically finalized. However, the company's then Chairman He Yuanping, General Manager Zhu Ying, Board Secretary Pan Haitang, and CFO Wang Jin were aware of significant deviations between the relevant financial data and the previous performance estimates, but did not promptly report to the Exchange, nor did they update the listing application documents as required.

In addition to the above situations, the issuer also failed to timely disclose significant contracts. Between October and November 2023, the company signed four contracts with Shanghai Hengwei Asia Vets Technology Co., Ltd. (referred to as "Hengwei Asia Vets"), to purchase server products, each contract totaling 177.75 million yuan and accounting for 61.5% of the audited cost of goods sold in the company's 2022 annual report. However, the company did not timely disclose these matters, only disclosing the relevant information in the annual report for the year 2023 as late as April 30, 2024.

In summary, not only did several former executives fail to promptly report and update significant financial data, but the company also failed to timely disclose major contracts. Overall, the company fell short of providing investors with the necessary information to make value judgments and investment decisions in compliance with the law.

Due to violations of relevant regulations, and at the time, He Yuanping as the then chairman, Zhu Ying as the then general manager, Pan Haitang as the then secretary of the board of directors, and Wang Jin as the then chief financial officer, bear primary responsibility for the relevant violations. The Shanghai Stock Exchange ultimately made a decision to criticize the company and several former executives.

Two sponsors of Huaying Securities have been given regulatory warnings.

Due to the above two violations of the issuer Bixing Technology, its sponsors Li Jixiu and Li Likun were found to have not fulfilled their sponsoring responsibilities properly.

The two sponsors are mainly responsible for the first violation of the issuer. In regard to the significant deviation between the financial data for the first half of 2023 of Bixing Technology and the previous performance forecast, the Shanghai Stock Exchange pointed out in the second penalty notice that the two sponsors did not thoroughly verify the situation, did not promptly report to the Exchange the significant deviation in financial data and previous performance forecast, nor did they urge the issuer to update the IPO application documents as required.

The situation reflects the inadequate performance of the sponsors in fulfilling their sponsoring responsibilities. In the end, the Shanghai Stock Exchange decided to take regulatory warning measures against Li Jixiu and Li Likun.

To further strengthen the primary responsibility of issuers and the gatekeeper responsibility of intermediary institutions, since the beginning of this year, whether for listed projects or companies still in the IPO stage, regulatory penalties issued to issuers and their related sponsoring institutions have also increased in frequency, highlighting the regulatory emphasis on strengthening the responsibility of the entire IPO process.