Another brokerage firm was investigated by the China Securities Regulatory Commission.
On the evening of April 16, Soochow Securities announced that on April 8, 2024, the China Securities Regulatory Commission decided to file a case against Soochow Securities because the company was suspected of failing to be diligent and conscientious in the sponsorship business of Gome Communications and Zixin Pharmaceutical's non-public issuance of shares. Soochow Securities said that the company will actively cooperate with the relevant work of the China Securities Regulatory Commission and fulfill its information disclosure obligations in strict accordance with regulatory requirements. At present, the company's business situation is normal.
In recent years, the sponsor representatives related to the investment banking business of Soochow Securities have been issued warning letters for failing to be diligent and conscientious. The two IPO companies it sponsored, Jianke Group and Hengxing New Materials, also had a situation of "withdrawal after investigation". Judging from the performance of the past three years, the investment banking income of Soochow Securities has fluctuated, and the sponsorship business income has declined. From 2020 to 2022, the investment banking business of Soochow Securities achieved revenue of 1.102 billion yuan, 947 million yuan and 1.108 billion yuan respectively, and the income of sponsorship business was 53.0096 million yuan, 47.434 million yuan and 41.2245 million yuan respectively.
It is suspected of failing to be diligent and conscientious in the private placement of Gome Communications and Zixin Pharmaceutical
During the implementation of the private placement project, Gome Communications and Zixin Pharmaceutical were suspected of violating laws and regulations, and as the sponsor, Soochow Securities did not find out in time.
In September 2020, GOME announced a non-public offering of shares. According to the report on the issuance of non-public shares of Gome Communications, the total amount of funds raised by Gome Communications in this non-public issuance of shares is 166 million yuan, which will be used for the intelligent project of Jingmei Electronics' intelligent terminal production line, the construction project of Gome Communication's information platform, replenishment of working capital and repayment of bank loans.
On March 19, 2021, the private placement project was approved by the China Securities Regulatory Commission. Soochow Securities stated in the "Letter of Sponsorship" of the above project that Soochow Securities, as the sponsor of the continuous supervision of this non-public offering, will continue to supervise Gome Communications for a period of continuous supervision until December 31, 2022.
The Letter of Sponsorship also mentions that the issuer has strictly complied with the regulatory agreement on the raised funds and fulfilled the relevant information disclosure obligations in a timely manner, and there is no unauthorized change of the use of the raised funds and damage to the interests of shareholders without performing the review procedures, and there is no illegal use of the raised funds.
In fact, on December 6, 2023, Gome Communications received a relevant notice from the China Securities Regulatory Commission (CSRC), which decided to file a case against Gome Communications on suspicion of illegal information disclosure. On April 15, GOME received the "Prior Notice of Administrative Punishment and Market Prohibition" (hereinafter referred to as the "Notice") issued by the China Securities Regulatory Commission.
"There are false records in the documents related to Gome Communication's non-public issuance of shares, which constitutes a fraudulent issuance. According to the "Notice", Gome Communications falsely increased its operating income of 578.2356 million yuan and operating costs of 574.5925 million yuan in 2020 through false trade business, accounting for 61.53% of the operating income and 62.18% of the operating costs of the year, respectively, and there were false records in the 2020 annual report of Gome Communication. The relevant documents of Gome Communication's non-public offering in 2020 cited the above-mentioned false trade business revenue data.
Zixin Pharmaceutical was also filed on suspicion of violating laws and regulations. According to the announcement issued on April 10, from 2013 to 2020, Zixin Pharmaceutical failed to disclose related party transactions as required, resulting in major omissions in the company's annual report, from 2014 to 2021, the company was suspected of inflating the purchase cost of ginseng to inflate inventory, and from 2017 to 2018, the company inflated operating income and profits through fraud.
Image source: Screenshot of Zixin Pharmaceutical's announcement on receiving administrative penalties and prior notices of market bans.
Zixin Pharmaceutical's private placement project occurred during this period, Zixin Pharmaceutical announced a non-public offering of shares in 2014 to raise funds to repay bank loans and supplement the company's working capital. According to the "Zixin Pharmaceutical Non-public Offering Stock Listing Sponsorship", Zixin Pharmaceutical actually issued 127 million shares in this non-public offering, and the actual net amount of funds raised was 1.567 billion yuan, and the sponsor was Soochow Securities.
Soochow Securities stated in the above-mentioned "Letter of Sponsorship" that Soochow Securities is willing to recommend the issuer's non-public offering of shares to be listed and traded, and assume relevant sponsorship responsibilities.
Zixin Pharmaceutical Co., Ltd. is a traditional Chinese medicine enterprise integrating scientific research, development, production, sales, and breeding of medicinal plants and animals, and its main business income is mainly Chinese patent medicine and ginseng products. The main business of GOME Communications is the R&D, manufacturing and sales of intelligent terminal products, and the actual controller is Huang Guangyu. Zixin Pharmaceutical was delisted from the Shenzhen Stock Exchange last year, and Gome Communications has also issued several "risk warnings that the stock may be delisted".
The two companies they sponsored were withdrawn after investigation, and the sponsors said that they "lacked confidence" in the quality of their work
In February this year, Soochow Securities received a regulatory warning from the Shanghai Stock Exchange for failing to submit relevant materials within the specified time in the process of appointing independent directors, the filing time was significantly delayed, and there were major flaws in the appointment process. As a result, Soochow Securities has become the first listed securities firm to be fined for the appointment process of independent directors since the implementation of the "Independent Director Measures" in September last year.
On January 23 this year, the Shanghai Stock Exchange terminated its issuance and listing review due to the withdrawal of the application for issuance and listing of Jiangsu Sword Agrochemical Co., Ltd. (hereinafter referred to as "Sword Agrochemical") and its sponsor. Previously, the relevant sponsor representative of Soochow Securities had been issued a warning letter for the sponsorship business of Sword Agrochemical, the specific reason being that the sponsor representative was not diligent and conscientious in his practice, and the verification of the issuer's notes receivable and other matters was insufficient.
In addition, the two IPO companies sponsored by Soochow Securities, Jianke Group and Hengxing New Materials, also had a situation of "withdrawal after investigation". In December 2020, the IPO applications of Jianke Group and Hengxing New Materials were accepted, and the sponsors were both Soochow Securities, but 10 days after being selected for on-site inspection, both companies withdrew their IPO applications in February 2021.
Subsequently, in 2023, Hengxing New Materials will hit the IPO again and change the sponsor. In the relevant "Audit Inquiry Letter", Hengxing New Materials stated that in the previous declaration, the issuer was selected for on-site inspection in January 2021, and the former sponsor institution communicated with the issuer many times to withdraw the materials because it was worried that the sponsor institution might face the risk of being punished by the regulatory authorities due to the quality of its work, considering the omission of some related party transactions and other information in the application materials, and the lack of sufficient confidence in the quality of its own work.
Hengxing New Materials said: "The issuer has confidence in its own operating conditions and internal control, and believes that there is no situation that affects the conditions for issuance and listing, but after repeated requests from the previous sponsor, the materials were finally withdrawn." ”
Soochow Securities mentioned in its 2023 semi-annual report that the company's investment banking business includes stock underwriting and sponsorship, bond underwriting, asset securitization, and listing on the New Third Board, providing financial advisory services for corporate customers in mergers and acquisitions, asset restructuring, etc.
In 2022, Soochow Securities will increase revenue but not profits. In that year, its revenue increased by 13.41% year-on-year to 10.486 billion yuan, and the net profit attributable to the parent company decreased by 27.45% year-on-year to 1.735 billion yuan.
In the first three quarters of 2023, Soochow Securities achieved revenue of 8.036 billion yuan, a year-on-year decrease of 7.82%, and net profit attributable to the parent company of 1.746 billion yuan, a year-on-year increase of 41.28%.
Beijing News Shell Financial Reporter Xu Yuting
Edited by Yue Caizhou
Proofreading by Yang Xuli
![Cinda Securities: Gives a buy rating to Zhongman Petroleum[fig]](data:image/gif;base64,R0lGODlhAQABAIAAAP///wAAACwAAAAAAQABAAACAkQBADs=)