What happened?, Rare! Within one day, 9 A-share listed companies were registered in the same period last year | Listed companies | A-shares

On the evening of July 12th, the news of 9 listed companies being registered exploded in the capital market, and regulatory authorities are continuously upgrading their supervision of listed companies.

Specifically, China Heavy Industry, Shoukai Group, Taihe Water, Dongfang Garden, Shanghai Phoenix, and Xingyuan Environment have all announced that they have received a "Notice of Filing" from the China Securities Regulatory Commission. Three other ST companies, * ST Rihai, ST Huatie, and * ST Jinglan, also issued relevant announcements at the same time. These 9 companies that have been filed are all suspected of violating information disclosure laws and regulations. It is worth noting that ST Huatie and its actual controller, Xuan Ruiguo, have both been registered by the China Securities Regulatory Commission.

On July 13th, all nine companies mentioned above recorded varying degrees of decline, significantly underperforming the overall market* ST Rihai, ST Huatie, * ST Jinglan fell below the limit; Taihe Water and Shanghai Phoenix fell below the limit at one point, ultimately closing down 9.85% and 6.48% respectively; Xingyuan Environment closed down 4.05%. According to public information, as of the end of the first quarter of this year, the number of shareholders in these 9 companies has exceeded 900000.

It is not common for 9 companies to be registered at the same time, but it is not uncommon for listed companies to be registered this year. According to incomplete statistics from Wind, within this year, 60 A-share listed companies on the Shanghai and Shenzhen Stock Exchanges received filing notices from the China Securities Regulatory Commission (CSRC), almost twice as many as the same period last year. At the same time, 24 actual controllers, controlling shareholders, or shareholders holding more than 5% of the shares, as well as directors, supervisors, and senior executives, received filing notices from the CSRC, an increase of over 30% compared to the same period last year.

"With the strengthening and guidance of regulation, the A-share market will further focus on strengthening the rule of law, improving market transparency, improving the governance structure of listed companies, standardizing the operations of actual controllers, and continuously promoting the healthy development of the capital market." Zhang Xiaohong, Dean of the China Institute of Finance at Zhejiang University of Finance and Economics and Senior Partner of Jintiancheng Law Firm, told First Financial. Tian Lihui, Vice President of Guangxi University and Dean of the Financial Development Research Institute of Nankai University, also stated that with the implementation of the comprehensive registration system, the China Securities Regulatory Commission has continuously strengthened its supervision of the capital market, increased its crackdown on improper behavior, and promoted the high-quality development of the capital market.

Nine companies were filed overnight

All of them are suspected of violating regulations in the field of information and clothing

It is extremely rare for 9 companies to be filed at the same time, and the reasons for being filed all point to suspected violations of information disclosure laws and regulations. Moreover, shortly before the announcement was filed, several companies had also received warning letters or regulatory letters related to information disclosure.

Taking China Heavy Industry, one of the leading shipbuilding companies with the highest market value among the 9 companies, as an example, about a month ago, China Heavy Industry received a regulatory work letter on the disclosure of information in the 2022 annual report from the Shanghai Stock Exchange.

According to the requirements of the Shanghai Stock Exchange, China Heavy Industry has incurred asset impairment losses of 1.923 billion yuan in 2022, a significant increase of 178.33% year-on-year, which is the highest value since 2018; The ending book balance of other receivables was 1.481 billion yuan, a decrease from 1.759 billion yuan at the end of 2021; Management expenses increased by 19.31% year-on-year, while research and development expenses increased by 26% year-on-year; Provide an explanation and supplementary disclosure on the issue of an increase of 8.312 billion yuan in operating receivables, which differs from the changes in the ending balance of operating receivables. If it is deemed unsuitable or inconvenient to disclose due to special reasons, the Shanghai Stock Exchange also requires it to explain the reasons for the inability to disclose.

However, China Heavy Industry has been delayed in responding to regulatory issues and has issued multiple announcements regarding delayed responses. On the same day as the announcement of being filed, China Heavy Industry issued its third extension reply, with the first two extension notices issued on June 29th and July 6th, respectively.

Similar to China National Heavy Industry Corporation, * ST Rihai also made multiple delays in responding to regulatory actions before being filed. On April 12th, the Shenzhen Stock Exchange issued an inquiry letter regarding the company's 2022 annual report, inquiring about the reasons for the decline in the main business revenue of the company's three major sectors, the reasons for the year-on-year decline in the gross profit margin of wireless communication modules and basic equipment, and the specific measures taken by the company to control debt risk, improve capital structure, and reduce financial expenses. * ST Rihai was required to submit relevant explanatory materials to the Shenzhen Stock Exchange and disclose them to the public before May 5th, while copying the dispatched agency.

On May 6th, * ST Rihai issued a notice for the first time regarding the extension of the inquiry letter. On May 13th, the company was extended for the second time, and on May 27th, it was extended again. Finally, a formal response was received on the evening of June 9th. On June 12th, the regulatory authorities issued another inquiry letter, raising new questions regarding the previous response. The Shenzhen Stock Exchange observed that * ST Rihai stated that the recovery momentum of the communication market in 2023 is strong, and the company will actively seize market opportunities. However, in the first quarter, its operating revenue decreased by 26.3% year-on-year, and its net profit loss increased by 48.84% year-on-year; At the same time, the company's accounts receivable in 2022 increased by 130.47% compared to the retrospectively adjusted impairment loss of 310 million yuan in 2021.

The Shenzhen Stock Exchange requires companies to explain the reasons for the failure to improve their operating performance, verify whether there is uncertainty in their ability to continue operating, and verify whether relevant asset impairment provisions have been fully provisioned during the retrospective adjustment process of the financial statements for the years 2019-2021. As of July 11th, * ST Rihai has delayed responding to inquiry letters for two consecutive times.

Dongfang Garden was recently issued a regulatory letter. Due to partial debt default when the company released the prospectus for the issuance of corporate bond "20 Donglin G1" on December 18, 2020, in February 2023, Dongfang Garden and related personnel received a warning letter from the Beijing Securities Regulatory Bureau; Due to non-standard internal management and transaction accounting, He Qiaonu and Tang Kai occupied non operating funds of the company, with a total amount of 125 million yuan in 2019. As a result, the Shenzhen Stock Exchange issued a regulatory letter in June.

In addition, as of the end of June 2023, Dongfang Garden and its controlling subsidiaries have accumulated a huge amount of litigation cases for twelve consecutive months, totaling approximately RMB 2.225 billion, accounting for approximately 45.36% of the company's latest audited net assets.

Just the day before receiving the "Notice of Case Filing", Taihe Water issued an announcement and received the "Decision on Ordering Shanghai Taihe Water Technology Development Co., Ltd. to Take Corrective Measures" issued by the Shanghai Securities Regulatory Bureau, which mentioned that the company had falsely increased its revenue and profits.

The announcement shows that from 2017 to 2018, Taihe Water undertook the Fuzhou project and confirmed all revenue from the Fuzhou project in 2017 and 2018. After investigation, it was found that some water areas of the Fuzhou project have not been finally treated, and the company has falsely increased its operating revenue and total profit for 2018, resulting in untrue and inaccurate information disclosure in the company's prospectus, which violates the Management Measures for Information Disclosure of Listed Companies.

For this reason, the Shanghai Securities Regulatory Bureau has decided to take supervisory and management measures against Taihe Water, ordering correction. At the same time, supervisory and management measures such as issuing warning letters will be taken against Chairman He Wenhui, then General Manager Xu Xiaona, and CFO Jiang Wei.

60 companies under investigation within the year

Twice the same period last year

According to judicial interpretation, filing refers to the formal acceptance of a case by relevant law enforcement agencies and the start of an investigation, and filing is usually a legal procedure aimed at suspected illegal and criminal acts.

According to incomplete statistics from Wind, as of now this year, 60 A-share listed companies on the Shanghai and Shenzhen Stock Exchanges have received registration notices from the China Securities Regulatory Commission, compared to only 33 companies in the same period last year.

Among these 60 listed companies, risk warning companies accounted for about 40%, reaching 24. Among the companies investigated last year, risk warning companies also accounted for about one-third.

Companies with delisting risk warnings include * ST Changfang, * ST Yunsheng, * ST Future, * ST Soute, * ST Rihai, * ST Pangda, * ST Jinglan, * ST Jiai, * ST Huayi, * ST Hongxiang, * ST Furen, * ST Datong, * ST Botian, * ST Bikang, * ST Zixin, * ST Tianwo, * ST Jiaoang, * ST Huichen, etc. Among them, 7 have been delisted.

Other risk warning companies include ST Shida, ST Sansheng, ST Modern, ST Longjing, ST Huatie, and ST Honggao.

Some risk warning companies have even received multiple filing and investigation notices, such as * ST Zixin, which has locked its face value for delisting and suspended trading, receiving two filing notices within the year.

On January 6th of this year, Zixin Pharmaceutical and its former actual controller Guo Chunsheng received a notice of filing issued by the China Securities Regulatory Commission. Due to suspected illegal and irregular information disclosure, the China Securities Regulatory Commission has decided to file a case against the company and Guo Chunsheng.

On May 9th, the controlling shareholder of Zixin Pharmaceutical, Guoyao Zhaoxiang Pharmaceutical Co., Ltd., also received a filing notice from the China Securities Regulatory Commission. Due to suspected restricted trading of Zixin Pharmaceutical's stocks, the China Securities Regulatory Commission decided to file a case against Guoyao Zhaoxiang Pharmaceutical Co., Ltd.

The main reason for these risk warning companies being investigated is suspected of violating information disclosure laws and regulations. In recent years, the China Securities Regulatory Commission (CSRC) has continued to increase its efforts in investigating and punishing malignant illegal cases such as financial fraud and market manipulation, effectively increasing the cost of illegal activities in the capital market, and strengthening regulatory and law enforcement deterrence.

At the 14th Lujiazui Forum, Chairman of the China Securities Regulatory Commission, Yi Huiman, emphasized in his keynote speech that he will continue to adopt a "zero tolerance" attitude, strictly crack down on various illegal and irregular behaviors and market chaos, and focus on strengthening the maintenance of market order and ecological shaping after the comprehensive implementation of the registration system.

Duan Haiyu, a lawyer at Beijing Yingke Law Firm, said in an interview with First Financial that the national legislative body has also increased its crackdown and significantly increased the punishment. For example, the punishment for the crime of illegally disclosing or not disclosing important information has been changed from "fixed-term imprisonment of not more than three years or detention, and a fine of not less than 20000 yuan but not more than 200000 yuan" to two levels of punishment. The first level of punishment stipulates fixed-term imprisonment of not more than five years or detention, and a fine of not more than 20000 yuan but not more than 200000 yuan; The second sentence stipulates imprisonment of not less than five years but not more than ten years and a fine.

Apart from risk warning companies, the remaining 36 listed companies are distributed across 17 industries. Among them, the environmental protection industry has the highest number of companies under investigation, reaching 5, followed by basic chemical industry, reaching 4.

It is worth noting that three securities firms were investigated this year, namely Guangfa Securities, Dongxing Securities, and Northeast Securities.

Guangfa Securities was filed for failing to fulfill its duties diligently in the underwriting business of Meishang Ecological Landscape Co., Ltd.'s non-public offering of stocks in 2018, and was suspected of violating the law; Northeast Securities has been filed for suspected failure to fulfill its duties in sponsoring, continuous supervision, and other related businesses during the non-public offering of shares by Yu Diamond in 2016, resulting in false records, misleading statements, or significant omissions in the documents issued; Dongxing Securities has been filed for allegedly failing to fulfill its duties in sponsoring, underwriting, and continuous supervision during the initial public offering of Zeda Yisheng Technology Co., Ltd. and its listing on the Science and Technology Innovation Board.

"Listed companies need to pay more attention to their governance level and information disclosure quality, abide by relevant laws and regulations, and avoid improper behavior," said Tian Lihui.