For 5 consecutive years of financial fraud, he was fined for wearing a hat for special information

Having just completed 24 years since its listing, Shenzhen Special Information (000070) Co., Ltd. (hereinafter referred to as Special Information) has been verified by the Shenzhen Securities Regulatory Bureau for financial fraud for five consecutive years. According to the latest revision of the stock listing rules of the Shenzhen Stock Exchange, the special information stock was subject to other risk warnings and suspended trading for one day today (i.e., May 13), while a number of then executives and other responsible persons, including Jiang Qinjian, were warned and punished, and Jiang Qinjian and other three people were banned from the securities market for ranging from 6 to 10 years.

Financial fraud for five consecutive years, performance commitments due to causes

Recently, with the end of the disclosure of the 2023 annual report of A-shares, regulatory authorities such as the China Securities Regulatory Bureau and the stock exchange have also successively disclosed the punishment results of relevant enterprises in response to violations of laws and regulations in information disclosure.

On the evening of May 12, the special information disclosed the announcement on the receipt of the "Prior Notice of Administrative Punishment and Market Prohibition". According to the prior notice of punishment, in order to fulfill the performance commitments, the relevant personnel of Shenzhen Tefa Dongzhi Technology Co., Ltd. (hereinafter referred to as Tefa Dongzhi), a wholly-owned subsidiary of the former acquisition, planned and implemented financial fraud, resulting in false records in the annual report of Tefa Information from 2015 to 2019.

Specifically, on April 8, 2015, Tefa Information signed the Agreement on the Purchase of Assets by Issuing Shares and Paying Cash to purchase assets by paying cash and issuing shares with Chen Chuanrong and other four shareholders of Shenzhen Dongzhi Technology Co., Ltd. (later renamed Shenzhen Tefa Dongzhi Technology Co., Ltd., hereinafter referred to as Tefa Dongzhi) to purchase 100% of the equity of Tefa Dongzhi by paying cash and issuing shares.

On the same day, Tefa Information signed the "Profit Compensation Agreement" with the three natural person shareholders of Tefa Dongzhi, and the three natural person shareholders promised that the total cumulative net profit of Tefa Dongzhi in the three years from 2015 to 2017 would not be less than 142.98 million yuan, and Chen Chuanrong separately supplemented that the net profit of Tefa Dongzhi in 2018, 2019 and 2020 would not be less than 58.6 million yuan.

On November 4, 2015, TF Dongzhi completed the equity change and became a wholly-owned subsidiary of TF Information. Since November 30, 2015, the company has included the company in its consolidated financial statements. According to Tianyan, on January 16, 2017, Shenzhen Dongzhi Technology Co., Ltd. changed its name to Shenzhen Tefa Dongzhi Technology Co., Ltd.

After investigation, in order to fulfill the performance commitment, Tefa Dongzhi inflated revenue, inflated or inflated operating costs and profits by adjusting operating costs across periods, fictitious business, etc.

Among them, from 2015 to 2019, Tefa Dongzhi reduced or inflated operating costs by undercounting or delaying the recording of customer sales and material purchases, and adjusting operating costs across periods. From 2015 to 2018, the operating costs were inflated by 10.3933 million yuan, 91.7346 million yuan, 56.2461 million yuan and 11.6292 million yuan respectively, and the inflated operating costs were 64.9477 million yuan in 2019.

In addition, in 2019, TF Dongzhi fictitiously sold business with Shenzhen Youhua Communication Technology Co., Ltd. and China Mobile Communications Group Terminal Co., Ltd. by forging purchase orders and related logistics documents, inflating operating income by 327.553 million yuan, operating costs by 283.6859 million yuan, and inflating total profits by 43.8671 million yuan.

The above-mentioned behaviors of Tefa Dongzhi led to an inflated total profit of 10.3933 million yuan, 91.7346 million yuan, 56.2461 million yuan and 11.6292 million yuan respectively from 2015 to 2018, and the total profit in 2019 decreased by 21.0806 million yuan, accounting for 8.17%, 34.74%, 16.58%, 3.29% and 5.33% of the total disclosed profit in the current period respectively. The annual reports from 2015 to 2019 disclosed by the Special Issuance Information contained false records.

The Shenzhen Securities Regulatory Bureau believes that the above-mentioned acts of the special information are suspected of violating the provisions of Article 78, Paragraph 2 of the Securities Law of the People's Republic of China (revised in 2019, hereinafter referred to as the "Securities Law"), and constitute an illegal act under Article 197, Paragraph 2 of the Securities Law. Considering the time and amount falsely recorded in the annual report of the special information, and taking into account the circumstances of its illegal acts crossing the old and new Securities Law, and taking the initiative to correct accounting errors, our bureau shall determine the range of punishment in accordance with the law.

The stock was "ST", and a number of responsible persons were fined

For the above-mentioned illegal situations, the Shenzhen Securities Regulatory Bureau has made a penalty decision on the special information and relevant personnel in accordance with the law.

At the level of listed companies, the Shenzhen Regulatory Bureau believes that the above-mentioned acts of Special Information are suspected of violating the provisions of Article 78, Paragraph 2 of the Securities Law of the People's Republic of China (revised in 2019, hereinafter referred to as the "Securities Law"), constituting an illegal act under Article 197, Paragraph 2 of the Securities Law, and issued a Prior Notice of Administrative Punishment and Market Prohibition.

According to Article 9.8.1 (8) of the Rules for the Listing of Stocks on the Shenzhen Stock Exchange, according to the facts stated in the prior notice of administrative penalty of the China Securities Regulatory Commission, there are false records in the financial indicators of the annual report disclosed by the company, but the circumstances specified in the first paragraph of Article 9.5.2 of these rules have not been touched, and the aforementioned financial indicators include operating income, total profit, net profit, assets or liabilities in the balance sheet, and the Shenzhen Stock Exchange will implement other risk warnings for the company's shares. It should be pointed out that this provision is the latest revision and new risk warning rules of the Shanghai and Shenzhen Stock Exchanges.

According to the special information announcement, the starting date for the company's shares to be subject to other risk warnings is May 14, 2024, of which trading will be suspended from the market open on May 13, 2024, and trading will resume from the market open on May 14, 2024.

In addition, the Shenzhen Securities Regulatory Bureau has also made a penalty decision on the relevant personnel involved. According to the third paragraph of Article 82 of the Securities Law, directors, supervisors and senior managers shall ensure that the information disclosed is true, accurate and complete.

Jiang Qinjian, who was the chairman or general manager of Tefa Information at the time and concurrently served as the chairman or director of Tefa Dongzhi, failed to take effective measures to manage Tefa Dongzhi, indulged in relevant financial management issues, and ensured that the annual reports of Tefa Information from 2015 to 2019 were true, accurate and complete, and was not diligent and conscientious, and was directly responsible for the supervisor.

Yang Hongyu was the director and general manager of the special information at the time, and concurrently served as the director of the special development information, and Li Zengmin was the director and chief financial officer of the special information at the time, and concurrently served as the director of the special development of the information, and the two failed to effectively perform their duties and promote the resolution of the financial management problems related to the special development information, and signed and confirmed the annual reports from 2017 to 2019 and the annual reports from 2018 to 2019 respectively to ensure that the corresponding annual reports are true, accurate and complete; Zhang Dajun was the secretary of the board of directors and deputy general manager of the company, responsible for organizing and coordinating the information disclosure affairs of listed companies, and concurrently served as the supervisor of the company, and failed to effectively play a supervisory role to ensure that the annual reports of the special information from 2015 to 2019 were true, accurate and complete. All three of them failed to exercise due diligence and were other directly responsible persons.

Chen Chuanrong was the director and general manager of Tefa Dongzhi at that time, and was the obligor of performance commitment compensation, responsible for the overall operation and management of Tefa Dongzhi, and organized and planned financial fraud; Yi Zongxiang was the director and deputy general manager of Tefa Dongzhi at the time, and organized and planned financial fraud; Wang Ling and Liu Ying were the financial managers and cost accountants of Tefa Dongzhi at the time, respectively, and participated in the implementation of financial fraud. Although the four did not hold the positions of directors, supervisors, or senior managers of the listed company, their conduct had a direct causal relationship with the illegal act of information disclosure of the listed company, and they were other directly responsible personnel.

Based on the facts, nature, circumstances and degree of social harm of the parties' illegal acts, and in accordance with the provisions of Article 197, Paragraph 2 of the Securities Law, the Shenzhen Securities Regulatory Bureau intends to decide: 1. Give a warning to Shenzhen Special Information Co., Ltd. and impose a fine of 8 million yuan; 2. Jiang Qinjian was given a warning and fined 4 million yuan; 3. Chen Chuanrong was given a warning and fined 3.5 million yuan; 4. Give Yi Zongxiang a warning and impose a fine of 2 million yuan; 5. Yang Hongyu and Li Zengmin were given warnings and fined 1.5 million yuan each; 6. Zhang Dajun, Wang Ling, and Liu Ying were given warnings and fined 1 million yuan each.

In accordance with Article 221 of the Securities Law and the provisions of Article 3, Paragraphs 1 and 7, Articles 4 and 5 of the Provisions on the Prohibition of Entry into the Securities Market (Decree No. 115 of the CSRC), our bureau also intends to decide: Jiang Qinjian shall be banned from the securities market for 10 years, Chen Chuanrong shall be banned from the securities market for 8 years, and Yi Zongxiang shall be banned from the securities market for 6 years.

The Shenzhen Securities Regulatory Bureau stated that from the date of the announcement of the decision by the Bureau, during the prohibition period, in addition to continuing to engage in securities business in the original institution or serving as a director, supervisor or senior management of the original listed company or unlisted public company, it is also prohibited to engage in securities business in any other institution or hold the position of director, supervisor or senior management of other listed companies or unlisted public companies.

According to public information, Tefa Information was established on July 29, 1997 and listed on the main board of the Shenzhen Stock Exchange on May 11, 2000, mainly engaged in the production and sales of communication materials (optical fiber preforms, optical fibers, optical cables), with a revenue of 4.937 billion yuan and a net profit of 272 million yuan in 2023.