Financial Association News, October 26 (Reporter Gaoyanyun) is another typical case of rapid regulatory punishment, from the registration of China International Capital Corporation to the issuance of the administrative penalty notice, only took 1 month.

On October 26, China International Capital Corporation issued an announcement stating that the company has received the administrative penalty advance notice from the China Securities Regulatory Commission, which intends to order the company to correct its actions, issue a warning, confiscate underwriting business income of 2 million yuan, and impose a fine of 6 million yuan; Zhao Shanjun and Chen Liren will be warned and fined 1.5 million yuan each.

In total, China International Capital Corporation faced a combined penalty of 11 million yuan, with the company and related individuals fined and penalized.

The CSRC believes that China International Capital Corporation did not fulfill its due diligence in providing underwriting services for Sierxin's Star IPO, and issued false records in the underwriting documents and other files.

A total penalty of 11 million yuan for the "one confiscation, three penalties" measure.

The administrative penalty notice shows that the CSRC has completed the investigation of the case and intends to make an administrative penalty according to the law. China International Capital Corporation provided underwriting services for Sierxin's IPO, with Zhao Shanjun and Chen Liren acting as signed underwriting representatives.

It was found that China International Capital Corporation provided underwriting services for the Star Board IPO of Si'erxin, but did not fulfill its duties diligently during the practice, issuing false records in the "Underwriting Prospectus" and other documents, including failure to carefully verify the production situation of hardware equipment, failure to carefully verify the software sales situation, inadequate execution of customer visit procedures, inadequate execution of fund flow verification procedures, and failure to carefully verify the recording of affiliated party loan interest expenses.

In addition, the announcement mentioned that during the regulatory investigation process, China International Capital Corporation and related personnel actively provided information and cooperated with the investigation.

China International Capital Corporation stated that it sincerely accepts the issues and penalties identified in the pre-notice of administrative penalties, earnestly takes the case as a lesson, strengthens comprehensive rectification, adheres to putting investors first, continuously strengthens practice quality control, safeguards the "gateway" of the capital markets, consolidates the "gatekeeper" responsibility, and better serves the high-quality development of the capital markets. Currently, the company's operation is normal.

Even after the IPO was withdrawn, it will still be investigated.

From the filing against China International Capital Corporation on September 25 to the company's announcement of receiving a pre-notice of administrative penalties on October 26, the timeframe spans exactly one month.

On October 11, China International Capital Corporation announced that the company received a notice of filing from the CSRC because the company was suspected of being negligent in its underwriting responsibilities for Si'erxin's initial public offering, with the CSRC deciding to file the case against the company on September 25.

The CSRC and the exchange have successively conducted investigations and hearings into Si'erxin's suspected fraudulent issuance behavior and imposed administrative penalties.

On June 11, the Shanghai Stock Exchange imposed disciplinary action against Si'erxin, not accepting its application for issuing and listing documents within five years. It was found that Si'erxin fabricated significant false information in the securities issuance documents in the announcement, with the prospectus involving false financial data, falsely inflating the revenue total by 15.3672 million yuan, accounting for 11.55% of the annual revenue, and falsely inflating the total profit amount by 12.4617 million yuan, representing 118.48% of the annual profit total.

On February 9, the China Securities Regulatory Commission (CSRC) issued penalties, imposing administrative sanctions on Seor Xin for fraudulent issuance in the process of applying for initial public offering (IPO) on the Star Market. CSRC imposed a fine of 4 million yuan on Seor Xin; Huang Xueliang, the former director of Seor Xin, and Toshio Nakama, the former CEO of Seor Xin, were fined 3 million yuan each.

On August 24, 2021, the Shanghai Stock Exchange accepted Seor Xin's application for the first public offering of shares and listing on the Star Market, with China International Capital Corporation (CICC) as the sponsor and Ernst & Young as the accounting firm; On July 27, 2022, the Shanghai Stock Exchange decided to terminate the review process as Seor Xin withdrew its IPO application.

The Seor Xin case is typical and reflects the high attention of regulatory authorities to whether projects are withdrawn improperly. Brokerage investment banking quality assessments include the withdrawal rate as an important evaluation indicator.

Some brokerages still have issues with lax internal controls in investment banking.

Recently, CSRC disclosed the results of a special inspection on internal controls and ethical practices in securities companies' investment banking business.

On October 18, CSRC announced that this year it has conducted on-site inspections on the internal controls and ethical practices of some securities companies' investment banking operations. Despite most securities companies paying more attention to the establishment of basic internal control systems in investment banking operations, the overall effectiveness of the three-line internal control system consisting of business departments, quality control, and internal compliance is positive. There has been some improvement in the quality of project practices. However, there are still some securities companies with lax internal controls in investment banking, especially in due diligence work for certain projects, such as bond underwriting, where diligent and responsible requirements are not fully implemented.

CSRC pointed out that in response to the issues identified in inspections, it adheres to the principles of 'penetrating supervision and full-chain accountability' and 'dual punishment' for institutions and individuals, targeting 'key minority' such as company executives, and categorizing measures based on the severity of the issues.

For securities firms like Kaiyuan Securities and Central China Securities with multiple violations and serious circumstances, CSRC has imposed administrative regulatory measures, suspending their corporate bond underwriting business for 6 months, and requiring the companies to comprehensively improve and learn from the lessons.

The China Securities Regulatory Commission has taken administrative regulatory measures such as regulatory interviews, ordering corrections, and issuing warning letters to address due diligence and internal control weaknesses based on the severity of violations by 11 companies.

At the same time, the China Securities Regulatory Commission has taken administrative regulatory measures such as regulatory interviews, ordering corrections, and issuing warning letters to 43 individuals directly responsible or with management responsibilities. These individuals include the company's major executives, heads of investment banking, heads of internal audit, heads of quality control departments, heads of business departments, project team members, and the companies are required to hold these responsible individuals internally accountable.

The China Securities Regulatory Commission stated that in the next step, it will resolutely implement the spirit of the third plenary session of the 20th Central Committee, conscientiously implement new capital market regulations such as the new 'Nine Articles' and other '1+N' regulatory documents, urge all institutional institutions to learn from the cases, promote improvement through cases, continuously strengthen the supervision of investment banking business, timely evaluate the regulatory effects, continuously improve regulatory work, promote sponsoring institutions to further enhance the quality of practice, adhere to the bottom line of integrity in employment, and better play the functional role of securities companies in serving the real economy and national strategic objectives.