China’s securities regulator said it will delist two firms after finding fraud in their initial public offerings, pledging “zero tolerance” for violations or crimes in its capital markets.
(Bloomberg) — China’s securities regulator said it will delist two firms after finding fraud in their initial public offerings, pledging “zero tolerance” for violations or crimes in its capital markets.
Essence Information Technology Co. and Amethystum Storage Technology Co. will be delisted from the Star board on Shanghai Stock Exchange, the China Securities Regulatory Commission said in a statement late Friday. Some executives deemed accountable for the IPO fraud will be banned from the securities market. The regulator will also refer suspects in this case to the police.
“Frauds in stock offerings and financial reports are like ‘tumors’ in capital markets which will cause serious damage to lawful rights of investors and hamper market order as well as financial security,” the CSRC said.
The watchdog will crack down on such activities to heed the State Council’s call to show “zero tolerance” toward capital market violations and crimes. It is the first time firms have been ordered to delist from the Star board.
The CSRC is investigating CSC Financial Co., Dongxing Securities Co. and other entities involved in the IPOs, it said, warning all intermediary agencies including accounting companies and law firms to abide by laws and regulations.
CSC Financial, also known as China Securities, will set up a 1 billion yuan ($145 million) special fund to compensate investors of Amethystum Storage, according to the statement. CSC Financial served as the sponsor and lead underwriter of the firm’s IPO.
Trading in shares of Amethystum Storage and Essence Information Technology will be suspended from Monday, the companies have said in separate filings. The two acknowledged they received the notice of penalties from the CSRC, which cited information disclosure violations, including inflating revenue and profits, in their IPO documents.
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