On April 15, Gome Communication Equipment Co., Ltd. (SH: 600898, hereinafter referred to as "Gome Communication") received the "Prior Notice of Administrative Punishment and Market Prohibition" (Penalty Zi [2024] No. 52) issued by the China Securities Regulatory Commission. The China Securities Regulatory Commission (CSRC) has completed its investigation into Gome's suspected illegal information disclosure and imposed administrative penalties on the company and six senior executives. On the day that Gome Communications issued the "Notice", the brokerage Soochow Securities also issued an announcement that it was placed on file for investigation.
Gome Communications is a company controlled by Huang Guangyu, the founder of Gome, and its main business is the research and development, manufacturing and sales of mobile terminal products. However, affected by factors such as the downturn in the consumer electronics industry, Gome Communications has continued to fall into losses since 2018.
The alleged illegal facts of GOME include false records in the 2020 annual report, fraudulent issuance of shares in the 2020 non-public offering of shares, and false records in the 2021 annual report.
In 2020, GOME participated in the trade business of Apple mobile phones, Konka color TVs, and Huawei mobile phones carried out by related parties under the control of the same actual controller, and the trade business had a closed loop of contracts and funds, which was a false purchase and sale business. Gome Communications inflated its operating income of 578 million yuan and operating cost of 575 million yuan in 2020 through false trade business, accounting for 61.53% of the operating income and 62.18% of the operating cost of that year, respectively, and there were false records in Gome Communication's 2020 annual report.
The relevant documents of Gome Communication's non-public offering in 2020 cited the above-mentioned false trade business revenue data, and the company's false trade business revenue recognized from January to September 2020 was 578 million yuan, accounting for 86.21% of the current operating income. In March 2021, the China Securities Regulatory Commission approved Gome Communications' application for a non-public offering, that is, a directional issuance of shares to the controlling shareholder Shandong Longjidao Construction Co., Ltd., raising a total of 166 million yuan, and the raised funds were mainly used for the transformation project of Jingmei Electronics' intelligent terminal production line. The CSRC determined that there were false records in the documents related to Gome Communications' non-public issuance of shares, which constituted a fraudulent issuance.
After having an experience of false records in annual reports, Gome Communications continued to make false records in annual reports in 2021. Improper accounting treatment of deferred income tax asset recognition, right-of-use assets and lease liabilities in 2021. On April 29, 2023, GOME issued the "Reminder Announcement on the Correction of Accounting Errors and Retrospective Adjustments in the Previous Period" to correct and retrospectively adjust the accounting errors in the 2021 financial statements. In 2021, the misstated net profit of Gome Communications was 19.6298 million yuan, accounting for 38.35% of the net profit recorded in the current report, and there were false records in Gome Communication's 2021 annual report.
The CSRC believes that Song Linlin, the then chairman of the board, Song Huohong, the then general manager, and Guo Chen, the then chief financial officer, were aware of the reasons for the development of the trade business in 2020, were aware of the misstatement in the 2021 annual report, and signed the 2020 and 2021 annual reports and the 2020 non-public issuance of shares commitment.
In addition to the chairman, general manager and chief financial officer, one director, one supervisor and secretary of the board of directors were also punished if they were aware of the false trading business or failed to take further measures.
Dong Xiaohong, the director at the time, was also the legal representative of the main participants in the aforesaid false trade business, such as Guangzhou Gome Trading Co., Ltd., Gome Electrical Appliance Co., Ltd., Gome Custom (Tianjin) Household Appliances Co., Ltd., Beijing Dazhong Household Appliances Chain Sales Co., Ltd., Tianjin Pengsheng Logistics Co., Ltd., etc., and should have known that the relevant trade business had no commercial substance, but Dong Xiaohong did not raise any objection to the recognition of the revenue from the relevant trade business. Fang Wei, the chairman of the board of supervisors at the time, arranged the trading business on behalf of the major shareholder of Gome Communications, and should have been aware of the false trading business carried out by related parties under the same control, but Fang Wei did not raise any objection to the recognition of trading business revenue.
Shao Jie, then secretary of the board of directors, was responsible for information disclosure, and in the 2020 trade business contract approval process, Shao Jie paid attention to the issue of revenue recognition of trade business, but failed to take further measures, and finally did not raise any objection to the recognition of trade business revenue.
In accordance with the relevant provisions of the Securities Law, the China Securities Regulatory Commission recommended that Gome Communication Equipment Co., Ltd. be ordered to make corrections, given a warning, and imposed a fine of 21.56 million yuan, Song Linlin, Song Huohong, and Guo Chen should be given a warning and fined 3 million yuan each, Dong Xiaohong and Fang Wei should be given a warning and fined 2 million yuan respectively, and Shao Jie should be given a warning and fined 1.8 million yuan.
Gome Communications Brokerage has been filedAt the same time as the fine, the CSRC also banned three executives of Gome Communications from entering the market. Song Linlin, Song Huohong, and Guo Chen, as the chairman, general manager, and chief financial officer of Gome Communications, played a major role in the illegal activities involved in the case, and the illegal acts were vile, seriously disrupting the order of the securities market, seriously harming the interests of investors, and the circumstances were relatively serious, and Song Linlin, Song Huohong, and Guo Chen were banned from entering the market for 10 years.
Gome Communications said that it is expected to have an annual loss of 105 million yuan in 2023, and there is a situation where it may be subject to delisting risk warning due to hitting the financial delisting indicators. It is estimated that the annual operating income in 2023 will be 39.05 million yuan, and the operating income after deducting the business income unrelated to the main business and the income without commercial substance will be 35.55 million yuan, which is less than 100 million yuan, and the company's net assets at the end of 2023 are expected to be -73.2 million yuan. Since the beginning of this year, GOME has issued the fourth risk warning announcement that the stock may be subject to delisting risk warning for 4 times.
Soochow Securities is the sponsor of Gome Communications, and Soochow Securities did not find the above situation in the sponsorship process and in the continuous supervision process afterwards. Soochow Securities stated in its sponsorship summary report to Gome Communications that during the period of continuous supervision, Soochow Securities reviewed and verified the company's information disclosure documents before and after to ensure that the disclosure of material information was timely, accurate, true and complete, and there were no false records, misleading statements or major omissions.
On the day of the release of Gome Communication's "Prior Notice of Administrative Punishment and Market Prohibition", Soochow Securities announced that the company was filed by the China Securities Regulatory Commission on suspicion of failing to be diligent and conscientious in the sponsorship business of Zixin Pharmaceutical's non-public issuance of shares in Gome Communication.
Proofreader: Gao Xin Editor: Zhao Xiaoxin Reporter: Du Lin