Shareholders have been compensated 1.086 billion yuan! The latest report on the Amethystum storage case: the compensation process is nearly 99% complete, and 4 intermediaries have paid a heavy price!

Source: SFC website

In the early stage, the China Securities Regulatory Commission imposed administrative penalties on Guangdong Amethystum Information Storage Technology Co., Ltd. (hereinafter referred to as Amethystum Storage) for fraudulent issuance and information disclosure violations and violations, imposed administrative penalties and market bans on relevant responsible personnel, and transferred the suspected criminal offenders to the public security organs in a timely manner (the procuratorate has approved the arrest) in accordance with the law (the procuratorate has approved the arrest), severely punished the "first evil", and held accountable in all directions. At the same time, the China Securities Regulatory Commission (CSRC) has carried out relevant investigations on four intermediaries involved in the case, namely China Securities Co., Ltd. (hereinafter referred to as CSC), Grant Thornton Certified Public Accountants (special general partnership), Rongcheng Certified Public Accountants (special general partnership), and Guangdong Hengyi Law Firm (hereinafter collectively referred to as the four intermediaries). The four intermediaries submitted applications to the China Securities Regulatory Commission (CSRC) for the application of the party commitment system for administrative law enforcement, and the CSRC accepted the application in accordance with the law. On December 29, 2023, the China Securities Regulatory Commission (CSRC) signed commitment recognition agreements with four intermediaries. According to the Commitment Recognition Agreement, each of the four intermediaries shall fulfill the following commitments to correct the suspected illegal acts, compensate the relevant investors for losses, and eliminate damages or adverse effects:

The first is to pay the commitment money. According to Article 14 of the Measures for the Implementation of the Commitment System of Parties to Securities and Futures Administrative Law Enforcement (Decree No. 749 of the State Council), the determination of the amount of the commitment shall take into account factors such as the amount of fines and confiscation of illegal gains that may be imposed on the parties for their suspected illegal acts in accordance with the law, the losses suffered by the investors due to the parties' suspected illegal acts, and the law enforcement stage of the case at the time of signing the commitment and recognition agreement. The total amount of commitment to be paid by the four intermediaries is 1274523752 yuan (about 1.275 billion yuan), of which 1085585416 yuan (about 1.086 billion yuan) has been compensated to investors through the advance compensation procedure in the early stage. According to Article 12 of the Provisions on the Implementation of the Party Commitment System for Administrative Law Enforcement of Securities and Futures (Decree No. 194 of the CSRC), if the parties compensate investors on their own, the commitment can be deducted from the part of the self-compensation, so the four intermediaries should also pay a total of 188,937,776.31 yuan (about 189 million yuan) in commitments. These include:

According to factors such as the circumstances and consequences of the suspected illegal acts of the four intermediaries, the total amount of fines and confiscation of illegal gains that may be imposed in accordance with the law is 177,145,599.31 yuan (about 177 million yuan), which is paid by the four intermediaries respectively. Among them, China Securities Construction Investment should pay 113,998,278.51 yuan (about 114 million yuan), Grant Thornton Certified Public Accountants should pay 35,227,320.80 yuan (about 35.23 million yuan), Rongcheng Certified Public Accountants should pay 4,400,000 yuan (4.4 million yuan), and Guangdong Hengyi Law Firm should pay 23,520,000 yuan (23.52 million yuan). This part of the commitment will be handed over to the state treasury in accordance with regulations.

In addition, the four intermediaries also need to pay 11792177 yuan (about 11.79 million yuan) for the loss that was not received by qualified investors in the advance compensation. According to the calculations of China Securities Investor Protection Fund Co., Ltd. (hereinafter referred to as the insurance fund company), the total loss of investors in this case is more than 1.097 billion yuan, of which about 1.086 billion yuan has been actually compensated to qualified investors in the advance compensation, and the remaining amount of about 11.79 million yuan has not been collected by the relevant qualified investors, and this part of the amount still needs to be jointly paid by the four intermediaries. This part of the commitment will be handed over to the insurance fund company to compensate the eligible investors who have not received the compensation in the advance compensation, and if there is any surplus after the compensation, it will be handed over to the state treasury in accordance with the regulations.

The second is to carry out self-examination and rectification. The four intermediaries shall conduct self-examination and rectification in accordance with the rectification requirements put forward by the China Securities Regulatory Commission, seriously investigate the responsibility of the responsible persons and take internal disciplinary measures, strengthen the ability of compliance and risk control management, effectively improve the quality of practice, and submit a written rectification report to the China Securities Regulatory Commission, which shall conduct verification and acceptance.

The securities and futures administrative law enforcement party commitment system is a new type of law enforcement method stipulated in the Securities Law, which refers to the administrative law enforcement method in which the CSRC may terminate the case investigation if the party under investigation promises to correct the suspected illegal acts, compensate the losses of relevant investors, and eliminate damage or adverse effects during the investigation of the units or individuals suspected of securities and futures violations. The party commitment system for administrative law enforcement is of great significance in improving the efficiency of law enforcement, compensating investors for losses in a timely manner, and restoring market order as soon as possible. To this end, the State Council has specially promulgated the Measures for the Implementation of the Party Commitment System for Administrative Law Enforcement of Securities and Futures. In this case, the advantages of the commitment system of the parties to administrative law enforcement have been fully reflected:

First, the interests of investors have been protected to the greatest extent and with the highest efficiency. This case was handled by a combination of the commitment of the administrative law enforcement parties and the advance compensation. According to the calculation of the insurance fund company, a total of 17,471 investors were injured in this case, with a total loss of more than 1.097 billion yuan, and 16,986 investors received 1.086 billion yuan in compensation in just two months, accounting for 97.22% of the total number of injured people and 98.93% of the total amount of compensation. For eligible investors who have not received the compensation in the advance payment, they can continue to apply for compensation according to the announcement issued by the insurance fund company in the future.

Second, the parties suspected of violating the law have been severely punished and have paid a heavy price. In addition to the economic cost of about 1.275 billion yuan, the parties involved in the case also need to conduct self-examination and rectification in accordance with the requirements of the China Securities Regulatory Commission, seriously investigate the responsibility of the responsible persons and take internal disciplinary measures, strengthen compliance and risk control management capabilities, and effectively improve the quality of practice. Among them, the relevant responsible personnel are not only subject to heavy fines, withholding and recovering bonuses, dismissal, and not issuing reports within a certain period of time, and other internal disciplinary measures taken by their affiliated institutions, but also the CSRC will take administrative supervision measures according to the circumstances. The responsibilities of the "gatekeepers" of intermediaries have been consolidated, and violations of laws and regulations have been severely punished.

Third, it has achieved an effective combination of administrative law enforcement and civil compensation, saving social resources and improving the efficiency of law enforcement. Through the use of the comprehensive law enforcement method of administrative law enforcement party commitment, on the one hand, the relevant law enforcement cases were quickly resolved, the cases were concluded in a timely manner, and the efficiency of law enforcement was improved, on the other hand, the losses of investors were quickly compensated, the relevant civil disputes were resolved in a timely manner at the front end, and the source of litigation was well managed, so as to save follow-up judicial resources, and realize the unity of administrative law enforcement and civil compensation, and the unity of legal effect and social effect.

Fourth, the market order was restored in a timely manner and market expectations were stabilized. Through the punishment and warning of violators and the efficient compensation to investors, the market order is effectively maintained, the market environment is purified, and market expectations and confidence are stabilized.

In the next step, the China Securities Regulatory Commission will continue to intensify the crackdown on violations of laws and regulations in the capital market, use a variety of law enforcement methods, including the administrative law enforcement party commitment system, to punish counterfeiting, increase investor protection, strengthen the responsibility of intermediaries, and escort the steady and far-reaching implementation of the registration system.

Editor-in-charge: Wan Jianyi

Proofreading: Peng Qihua

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