At least fifty Chinese listed companies were placed under investigation or punished for fraud last month as the country’s financial regulators intensified a crackdown on irregularities in the local capital market.
The sweep comes in the wake of China Securities Regulatory Commission’s (CSRC) decision to give its branch units authority to impose administrative penalties on local listed companies in a bid to regulate the chaotic stock market.
Sichuan Shuijingfang Co., Henan Dayou Energy Co., Jinshan Development & Construction Co. and Shanghai Xinmei Real Estate Co. were placed under investigation and criticized for failure to disclose information.
Executives at Gifore Agricultural Machinery Chain Co. and Hunan Boyun New Materials Co. were accused of illegally trading stocks.
Guangdong Xindadi Biotechnology Co., Wanfu Biotechnology (Hunan) Agricultural Development Co., and Shanxi Tianneng Technology Co. were given administrative punishments including fines and warnings for falsifying profits.
Legal, accounting and securities firms that provided services for the fraudulent companies, such as Ping An Securities, ZhongLei (HK) CPA Company and Hunan Bo’ao Law firm, were handed fines.
Bond market irregularities are also a concern for public security authorities. They have arrested the head of the fixed income unit in Guosen Securities, Sun Mingxia, and the head of Hong Yuan Securities’ bond sales unit, Chen Zhijun, for failing to follow market regulations.
According to a report published by Shenyin Wanguo Securities, 827 Chinese companies have been delisted from stock markets worldwide since 1990 for fraudulent activity. Cai Junyi, chief investment consultant at Shanghai Securities, said the punishments should deter listed companies and their intermediaries; however, “the degree of punishment still lags behind that in developed overseas capital markets,” he said.
Sources: National Business Daily (每日经济新闻), Beijing Business Today (北京商报), Caijing, Wall Street Journal
A version of this post first appeared in the China Compliance Digest.