Following CITIC Securities (600030. SH), Haitong Securities (600837. SH) was "targeted" by regulators, Soochow Securities (601555. SH) was also investigated by the CSRC. A few days ago, Huaxi Securities (002926. SZ) has been suspended from sponsoring business for 6 months, and the regulatory storm surrounding the brokerage has intensified.
Titanium Media APP noticed that among the above-mentioned securities firms that were investigated or fined, the refinancing business of listed companies was the hardest hit area for rectification. The reason is nothing more than that the secondary market does not pay much attention to refinancing projects, which makes the issue of relevant information disclosure easy to be ignored, and the motivation for listed companies to "collude" with securities companies is strong. With the arrival of the new "National Nine Articles", brokerages are expected to usher in the strongest supervision in history, and the refinancing business pattern of brokerages is expected to be reshaped.
Exposed to the investigation of the negative, the stock price of Soochow Securities "fell behind"
On April 17, the general rise of A-share brokerages drove the overall sector up. However, Soochow Securities dragged its feet and became the only brokerage stock that fell on the day.
The trading market shows that on April 17, Soochow Securities opened low and went low. It closed at 6.28 yuan on the same day, down 3.53%, with a total market value of 31.2 billion yuan. The biggest intraday decline fell to 7%, once hitting a new low of 6.02 yuan.
The stock price fell against the trend, and the fuse was the bad news that the investigation was filed. On April 16, 2024, Soochow Securities received the "Notice of Case Filing" from the China Securities Regulatory Commission: due to the suspicion that Gome Communications (now ST Meixun) and Zixin Pharmaceutical failed to be diligent and conscientious in sponsoring the non-public issuance of shares, in accordance with relevant laws and regulations, on April 8, 2024, the CSRC decided to file a case against Soochow Securities.
ST Meixun and Zixin Pharmaceutical used to be well-known A-share companies, and now they are not having a good time.
ST Meixun is a company controlled by Huang Guangyu, the founder of Gome, and its main business is the research and development, manufacturing and sales of intelligent terminal products. Affected by factors such as the downturn in the consumer electronics industry, ST Meixun has continued to fall into losses since 2018, and will lose money again in 2023.
Since Zixin Pharmaceutical entered the ginseng industry in 2009, it has been known as the "King of Northeast Ginseng". With the collapse of ginseng prices and the sales of ginseng products falling short of expectations, the company deducted non-net profit from 2019 to 2022 and was delisted by the Shenzhen Stock Exchange on August 4, 2023.
It is understood that Soochow Securities is the sponsor of ST Meixun's non-public issuance of shares in 2020, and the continuous supervision period will end on December 31, 2022. During the period, Soochow Securities continued to supervise ST Meixun to fulfill its obligations such as standardized operation, keeping promises, and information disclosure.
According to the "Summary Report of the Sponsorship of Soochow Securities Co., Ltd. on the Non-public Offering of Shares by Gome Communication Equipment Co., Ltd." disclosed in May 2023, Soochow Securities' concluding opinion on the review of ST Meixun's information disclosure is: "The sponsor has reviewed the information disclosure documents during the company's continuous supervision period before or after the fact, and has reviewed the content and format of the information disclosure documents. The relevant procedures performed have been verified, and the company has disclosed information in accordance with the relevant regulations of the regulatory authorities, and publicly released various announcements in accordance with the law to ensure that the disclosure of material information is timely, accurate, true and complete, and there are no false records, misleading statements or major omissions. ”
On April 15, ST also received the "Prior Notice of Administrative Punishment and Market Ban" issued by the China Securities Regulatory Commission. According to the notice, the company's 2020 and 2021 annual reports contained false records, and the non-public issuance of shares in 2020 constituted a fraudulent issuance. During this period, it was Soochow Securities that continued to supervise it.
According to previous announcements, in 2014, Zixin Pharmaceutical applied for a non-public offering, and Soochow Securities served as the sponsor for continuous supervision, and the continuous supervision period ended on December 31, 2017. At the expiration of the supervision period, Soochow Securities stated that the information disclosure work of Zixin Pharmaceutical during the continuous supervision period complied with the provisions of relevant laws and regulations such as the Administrative Measures for Information Disclosure of Listed Companies, ensuring the authenticity, accuracy, completeness and timeliness of information disclosure, and there were no false records, misleading statements or major omissions.
According to relevant reports, during the period of serving as a sponsor, Zixin Pharmaceutical's annual report had false records, among which Zixin Pharmaceutical's annual report from 2013 to 2020 did not disclose related party transactions as required, resulting in major omissions in Zixin Pharmaceutical's annual report disclosed to the public.
During the year, 3 IPO projects were withdrawn, and the investment banking business was repeatedly fined
According to the official website of Soochow Securities, its predecessor was Suzhou Securities, which was officially opened to the public in August 1993. In May 2010, the company was changed to Soochow Securities Co., Ltd. as a whole, and landed on the A-share market in December 2011, with its main businesses including wealth management business, investment banking business (investment banking), investment trading business, asset management business, etc.
Titanium Media APP noticed that Soochow Securities has continued to increase its investment banking business in recent years. According to last year's semi-annual report, the investment bank of Soochow Securities has built four professional listing service teams around the adjustment of the four advanced industrial clusters in Suzhou, and the institute has set up corresponding teams to strengthen industrial research.
Soochow Securities' investment banking business includes capital market financing activities for corporate clients, including stock underwriting and sponsorship, bond underwriting, asset securitization, NEEQ listing, and financial advisory services for corporate clients' mergers and acquisitions, asset restructuring, etc.
In 2022, the investment banking business of Soochow Securities achieved operating income of 1.108 billion yuan, a year-on-year increase of 17.02%. In the first half of 2023, the investment banking business achieved revenue of 674 million yuan, a year-on-year increase of 59.7%.
According to the official website, since its establishment, Soochow Investment Bank has undertaken more than 40 IPO projects such as Canny Elevator, Radio and Television Electric, Electric Power Research Institute, Great Wall Film and Television, Xinning Logistics, Feiliks, Changlu Co., Ltd., Zhongheng Design, Coswood, Tianfu Communication, Suzhou Test Test, Kelida, Zhangjiagang Bank, Jiangsu Beiren, etc., with a scale of nearly 30 billion yuan, nearly 20 projects in the meeting, and more than 60 reserve projects, ranking first in the Suzhou market share. In 2019, the company ranked 17th in the industry in terms of the number of sponsors and underwriters of investment bank IPO projects.
However, with the rapid development of investment banking business, the quality of its sponsorship has been questioned. According to the statistics of Oriental Wealth Choice, 3 IPO projects sponsored by Soochow Securities have been withdrawn this year, namely Sword Agrochemical, Kuaida Agrochemical, and Jieruisi.
In January this year, the IPO company sponsored by Soochow Securities, Sword Agrochemical, withdrew its listing application, and the company's dream of listing was shattered again. In the previous IPO process, a warning letter was issued due to problems such as the abnormality in the acquisition and endorsement of a large number of paper notes receivable, the refund and recovery of the same notes to the customer, and the failure of the entrusted processing materials to be accounted for separately by the processing unit.
At the end of 2021, Feng Song and Li Qiang, two sponsor representatives of Sword Agrochemical, were presented with warning letters by the CSRC for failing to be diligent and conscientious in the process of Sword Agrochemical's IPO and insufficient verification of matters such as the issuer's notes receivable.
According to public reports, when sponsoring a Novi, Soochow Securities had many inconsistent responses and insufficient verification, and was directly named by the Beijing Stock Exchange, and the two insurance agents Li Haining and Li Jun were taken by the Beijing Stock Exchange to take self-discipline punishment measures of verbal warnings. The three-dimensional shares sponsored by Soochow Securities were also orally warned by the Beijing Stock Exchange for violating the letter disclosure rules, and the two insurance agents Wang Tao and Zhou Leilei were warned.
It is worth mentioning that Longyang Electronics (301389. SZ), Jianke Co., Ltd. (301115. SZ), Rongqi Technology (301360. SZ) and other IPO projects, due to over-raising, high commissions and performance "face-changing" caused market controversy.
Brokerages frequently step on thunder refinancing projects, and supervision is intensive
Not only Soochow Securities, in the past week, a number of securities companies have been punished or filed by the Securities Regulatory Commission.
On the evening of April 12, CITIC Securities and Haitong Securities announced at the same time that they had received the "Notice of Case Filing" from the China Securities Regulatory Commission. Wang Zelong, the actual controller of CNNC titanium dioxide, was investigated together with CITIC Securities and Haitong Securities. The three were investigated for the same reason, all of which were suspected of violating restrictive provisions in the transfer of China Nuclear Titanium Dioxide (002145. SZ) in 2023.
On the same day, Huaxi Securities announced that it had received the "Prior Notice on Suspending the Regulatory Measures for the Sponsorship Business Qualification of Huaxi Securities Co., Ltd." from the Jiangsu Securities Regulatory Bureau, and planned to suspend the sponsorship business qualification for 6 months.
The Jiangsu Securities Regulatory Bureau said that Huaxi Securities was suspected of being involved in Jin Tongling (300091. SZ) in 2019, there were a number of irregularities in the practice of the non-public offering of shares sponsorship project: first, the due diligence work was suspected of not being diligent and conscientious, and there were false records in the sponsorship letter for the issuance of shares to specific targets, second, the relevant reports issued during the continuous supervision stage were suspected of being falsely recorded, and third, the continuous supervision and on-site inspection work were suspected of not being implemented properly. At the beginning of this year, Jin Tongling was exposed by the Jiangsu Securities Regulatory Bureau for financial fraud for 6 years.
In addition, the Jiangsu Securities Regulatory Bureau plans to take regulatory measures against Liu Jingfang and Zhang Ran, the sponsor representatives of the project, who are identified as unsuitable persons, and shall not hold the relevant positions or actually perform the above duties of the securities company's securities issuance and listing sponsorship business for two years from the date of the decision on the regulatory measures;
It is not difficult to see that the refinancing business of listed companies has become a "minefield" for securities firms.
An industry source said that the refinancing business has long been rolled into a red ocean, and sponsoring brokerages often need to cater to the requirements of customers for "low fees and fast speed" when undertaking projects, resulting in due diligence being a mere formality and insufficient verification of the authenticity of corporate finances. However, most of the refinancing projects rely on the historical audit report of the enterprise, and the brokerage only needs to verify the latest financial report, and the verification of the past financial authenticity of the listed company is insufficient.
In the view of Wang Jiyue, a senior investment banker, the supervision may deliberately use typical cases to "set an example", hoping to standardize the order of refinancing business by improving the attention of investment banks to the quality of private placement sponsorship. In the future, the refinancing of listed companies may be classified as a "high-risk" business, and sponsors will need to "endorse" the compliance operation and authenticity of the information, and the entry threshold for related businesses may be significantly raised.
On April 12, the China Securities Regulatory Commission (CSRC) solicited public opinions on the revision of the "Provisions on Strengthening the Supervision of Listed Securities Companies". This is another blockbuster new regulation since the issuance of the "Opinions on Strengthening the Supervision of Securities Companies and Public Funds and Accelerating the Construction of First-class Investment Banks and Investment Institutions (Trial)" on March 15. With the intensive preparation and introduction of new regulatory regulations, the refinancing business pattern of securities companies is expected to be reshaped. (This article was first published in Titanium Media APP, author|Liu Fengru)