Financial Associated Press (Shenzhen, reporter Huang Jingsi) news, on October 15, the CSRC issued 12 investment bank fines in one go, including 9 administrative supervision and 3 self-regulatory supervision, involving 7 securities companies and 19 insurance agents/ financial advisers. The reporter noted that the last time the CSRC issued a fine for investment banks in batches was on August 6, and a total of 7 securities companies and 14 insurance agents were fined.
Judging from the punishment, 5 insurance agents of Haitong Securities were held accountable, Pacific Securities received 2 consecutive insurance penalties, and the rest were named by CITIC Securities, Guohai Securities, Huatai United Securities, Guangfa Securities and Changjiang Securities. The main reasons for the punishment are the failure to exercise due diligence in the sponsorship process, and the punishment results are mostly the issuance of warning letters, but also the notification of criticism and regulatory warnings.
The above 12 fines undoubtedly release a strict regulatory signal to the market, and with the imminent implementation of the classification and evaluation of the quality of investment bank practice, the deterrent power of investment bank fines may be further highlighted, especially in terms of administrative supervision and self-discipline supervision related deduction matters.
The regulator issued 5 warning letters in a row, and a number of insurance agents of Haitong Securities were named
Due to the impact of the related party transactions of Beite Technology, the Shanghai Securities Regulatory Bureau issued five warning letters in a row, pointing out the performance of duties by five insurance agents of Haitong Securities.
The Shanghai Securities Regulatory Bureau said that during the on-site inspection, it was noted that Wang Ruijie, Chen Jiawei and Li Hui of Haitong Securities, as the independent financial consultant sponsors of Beite Technology's issuance of shares and payment of cash to purchase assets and raise supporting funds in 2018, did not diligently and conscientiously perform the prudent verification procedures during the period of engaging in the financial advisory business and continuous supervision of the merger and reorganization of Beite Technology, and did not find that There was a non-operating capital occupation of related parties and the failure to perform information disclosure obligations in accordance with regulations. It was not found that Beite Technology provided financial assistance to Jin Xiaotang, director and general manager of the participating companies.
The series of documents signed by the three people as a result of the above-mentioned related acts did not reflect the related party transactions of Beite Technology, and were therefore taken by the Shanghai Securities Regulatory Bureau to issue a warning letter.
The other two baodai of Haitong Securities also received warning letters. As the sponsor representatives of BEITE Technology's continuous supervision of the non-public issuance of shares in 2015, Zheng Yu and Zhao Chunkui were issued a warning letter by the Shanghai Securities Regulatory Bureau for failing to perform the prudent verification procedures diligently and conscientiously, and did not find that there were non-operating funds occupied by related parties and failed to perform their information disclosure obligations in accordance with the regulations between March 17, 2017 and November 27, 2017.
Two of the three financial advisers punished in the Pacific have left their jobs
Due to the relevant violations in the performance of diligence and continuous supervision obligations in the delisting of the sale of 100% of the main operating assets of Jagex, Pacific Securities Insurance Ji Wei was given a regulatory warning by the Shanghai Stock Exchange, and Xu Cunxin and Chen Xiao were notified and criticized. According to the information of the association, Ji Wei and Xu Cunxin left from Pacific Securities in 2019 and 2020 respectively, and Chen Xiao still performed his duties normally.
The fine shows that as the sponsor of the Pacific Securities Project, the financial adviser of the delisted Fukong Major Asset Restructuring, Ji Wei had two major violations in performing his duties of diligence and continuous supervision, one was that the special verification opinion issued by the company's restructuring was inaccurate and incomplete, and the other was that he did not promptly urge the company to disclose the restructuring progress of paying large intermediary fees. The SSE held that in the course of practicing, Ji Wei failed to strictly follow the relevant provisions of the restructuring, failed to perform the duty of diligence and due diligence, failed to urge the parties to disclose the important progress and risks in the restructuring in a timely manner, and failed to ensure the accuracy and completeness of the special verification opinions issued by Ji Wei on the company's restructuring, and gave a regulatory warning to Ji Wei.
Xu Cunxin and Chen Xiao are both the sponsors of the Pacific Securities Project, the financial adviser of the delisted Fukong Major Asset Restructuring, but there were five major violations in the performance of diligence and continuous supervision obligations, including inaccurate and incomplete special verification opinions issued to the company's restructuring; failure to promptly urge the company to disclose the progress of the restructuring of paying large intermediary fees; inconsistencies between the special opinions of the financial advisers and the company's information disclosure; and failure to promptly urge the company to disclose the equity changes of the subsidiaries that may have a significant impact on the restructuring transaction The actual delivery of the subject assets of the reorganization and sale is inconsistent with the disclosure of the reorganization draft.
It is worth noting that in response to the SSE's failure to perform their duties of diligence and due diligence, their failure to strictly comply with the relevant provisions of the restructuring due diligence and urge the company to standardize the implementation of the M&A and restructuring plan and other related liability determinations, Xu Cunxin and Chen Xiao put forward objections and defense opinions. However, the SSE found that the reasons for its objection could not be established, did not adopt it, and notified Xu Cunxin and Chen Xiao of their criticism, and notified the China Securities Regulatory Commission and recorded them in the integrity file of the listed company.
Guohai Securities and Huatai United were named
Due to the lack of diligence in the sponsorship process, Zhou Peng and Xiao Shaochun, two sponsor representatives of CITIC Securities, were taken to issue warning letters to supervise the situation. The penalty decision disclosed by the CSRC shows that the above-mentioned two insurance agents did not perform their relevant duties diligently and conscientiously in the process of sponsoring the initial public offering and listing of Weide Information, and did not find that the issuer's 2020 annual review report did not accrue the 2020 employee year-end bonus, resulting in a major error in the proportion of annual R&D investment, affecting the issuer's judgment of the attributes of science and technology.
According to relevant regulations, on July 27, the CSRC decided to take supervision and management measures against Zhou Peng and Xiao Shaochun by issuing warning letters. It is worth noting that on August 3, due to a major error in the proportion of research and development, the issuer Weide Information was also warned by the CSRC.
Also warned for their lack of diligence were Guohai Securities and two bodyguards. The CSRC pointed out that because Guohai Securities and Guo Gang and Wu Jianrui failed to perform their relevant duties diligently and conscientiously in the process of sponsoring the initial public offering of shares and listing of Chongqing Changjiang Modeling Materials (Group) Co., Ltd., they verified the capital contribution shares of Suzhou Tianyao Zhongshan Venture Capital Center (Limited Partnership) and Suzhou Tianshu Zhongshan Venture Capital Center (Limited Partnership) held by Suzhou Kunwu Jiuding Investment Center (Limited Partnership) by Jiaxing Fuhai Investment Management Co., Ltd. The representation of the transferee's source of funds is inconsistent and substantially different. According to the relevant regulations, the CSRC decided to take supervision and management measures against Guohai Securities and Guo Gang and Wu Jianrui by issuing warning letters.
Huatai United Securities and Baodai were also named for their lack of diligence. In the process of sponsoring the initial public offering and listing of Child King's shares, Huatai United Securities, Lu Meiyao and Li Dan failed to diligently and conscientiously urge the issuer to rectify the collection of payment through related parties in accordance with regulatory requirements, so that the issuer still had the above situation and the amount was large after the deadline for the first declaration and audit. Based on this, the CSRC decided to take supervision and management measures against Huatai United Securities and two insurance agents by issuing warning letters.
Three former guarantors of GF Securities were held accountable
Due to the existence of six major problems in the financial advisory related to Yitong Century's acquisition of beta health project, Lin Huanwei, Lin Huanrong and Xu Gewen, the former sponsor representatives of GF Securities, were issued warning letters by the Guangdong Securities Regulatory Bureau. It is worth noting that Lin Huanwei, Lin Huanrong, Xu Gewen and other 3 have all left GF Securities in 2020.
In February 2019, the Guangdong Securities Regulatory Bureau verified the financial advisory work of Lin Huanwei and others on the acquisition of Beta Health Project in Yitong Century. Lin Huanwei and others were issued a warning letter by the Guangdong Securities Regulatory Bureau for six major problems in their practice, namely: insufficient verification of the authenticity of Beta Health's income; insufficient verification of other receivables and other payables; insufficient verification of the gross profit margin of Beta Health's sales; inadequate implementation of the main supplier and customer visit procedures; inadequate implementation of the verification procedures for Beitax Health's accounts receivable; and failure to pay attention to the weak management of Beta Health Seal.
The financial adviser of Changjiang Securities 2 was warned by the regulator and involved 3 violations
In the process of *ST Dexin (603032) acquiring 100% of the equity of Zhihong Precision, Chen Long and Liu Guannan of Changjiang Securities, as the sponsors of the major asset restructuring financial advisory project, were warned by the Shanghai Stock Exchange for failing to be diligent and conscientious, failing to discover and report three violations in a timely manner, and Zhihongjing had inaccurate information disclosure and irregular internal governance.
According to the penalty decision, the three violations include: First, the confirmation of the sales order is inaccurate, Chen Long and others fail to fully assess the commercial substance of the order based on professional judgment, and fail to truthfully, accurately and completely disclose the accounting treatment of the relevant business, which may mislead investors. Second, the accounting of R&D expenses was inaccurate, and Zhihong Precision did not set up a special R&D department, resulting in a mixture of R&D expenditure and production expenditure, but Chen Long and other financial consultant project sponsors failed to verify and urge accurate disclosure in a timely manner. Third, the payment of employees' salaries is not standardized, and the sponsor of the financial consulting project does not pay sufficient attention to the in vitro circulation of employees' salaries and the integrity of the advance payment, and fails to report and fully prompt relevant financial abnormalities.
According to the SSE, financial advisers should conduct full due diligence on the M&A and restructuring targets of listed companies, fully assess and disclose the problems existing in the restructuring targets and the risks that may be involved, and protect investors' right to know. Chen Long and Liu Guannan, as the sponsors of the financial advisory project, did not pay sufficient attention to the risks of the underlying assets and did not fully disclose the above matters, affecting the reasonable expectations of investors. In response to the above-mentioned violations, the Shanghai Stock Exchange issued regulatory warnings to Chen Long and Liu Guannan.
Fines may affect the grading evaluation of the quality of investment banks' practice
The CSRC disclosed 12 fines in one go and then released a strict regulatory signal to the market, including more emphasis on the principle of "declaration is responsibility", resolutely eliminating "breaking through customs with illness", and intermediary institutions bearing joint and several liability for compensation, and promoting intermediary institutions to fulfill their responsibilities in multiple dimensions.
In the future, with the imminent landing of the classification evaluation of the quality of investment bank practice, the deterrent power of investment bank fines may be further highlighted. In August, the Securities Industry Association issued the Measures for the Evaluation of the Practice Quality of Investment Banking Business of Securities Companies (Trial Implementation) (Draft for Solicitation of Comments), which intends to carry out a practice quality evaluation of the investment banking business of securities companies. In principle, the evaluation cycle is carried out once a year, and the evaluation results of the practice quality of securities companies and projects within the scope of the evaluation are divided into three levels: A, B and C.
For investment banks, the deduction of corporate governance violations is particularly noteworthy:
(1) Deduct points for administrative supervision. Where a securities company is subject to administrative supervision measures below the regulatory talk by the China Securities Regulatory Commission and its dispatched agencies for violations of laws and regulations, 30 points will be deducted each time, and 40 points will be deducted each time if other administrative supervision measures are taken.
(2) Deduction of points for self-discipline supervision. Where a securities company is subject to self-discipline management measures for violating the relevant provisions of stock exchanges, associations, and other self-regulatory organizations, 20 points will be deducted for each self-discipline management measure; where disciplinary punishment is taken, 30 points will be deducted for each disciplinary punishment.
It is worth mentioning that the Association has introduced a "one-vote veto mechanism" in the Evaluation Measures, involving three major situations:
First, if a securities company is suspended or revoked from its sponsorship business qualifications due to the investment bank's internal control violations of laws and regulations, the project-related entities are criminally punished by the judicial organs, the CSRC has taken administrative punishment measures, or there are serious damages to the interests of investors or the public interest, the institutional evaluation and project evaluation classifications are directly determined to be Category C;
Second, because the relevant entities of the project are investigated by the CSRC, the institutional evaluation and project evaluation classification shall not be determined as Category A.
Third, securities companies with a project failure rate of the top 10% and greater than 15%, the evaluation results are one level lower than the results determined in Article 17, up to Category C.