On February 9, on the occasion of the thirtieth anniversary of the Chinese New Year's Eve, the official website of the China Securities Regulatory Commission disclosed a fine of 10 million yuan for an IPO enterprise with the nature of the first case. Shanghai Silxin Technology Co., Ltd. *** Formerly known as: Shanghai Guowei Silxin Technology Co., Ltd. *** hereinafter referred to as "Silxin"), the company that submitted an initial listing application for the Science and Technology Innovation Board in August 2021, failed to go public, but was found to be fraudulent issuance because of the fabrication of false content in the issuance documents, and the company and its main management personnel were fined a total of 16.5 million yuan.
The reason why the Silxin case is symbolic is that this case is the first fraudulent issuance case investigated by the CSRC without being registered after submitting the application materials since the implementation of the new ** law, and the details of the case fully demonstrate the "zero tolerance" attitude of the regulatory authorities towards fraudulent issuance.
In the process of IPO, it is not uncommon for enterprises to falsely increase their revenue or net profit in order to go public as soon as possible or obtain a higher scale of initial fundraising, and even because the resources of listed companies are too precious, a full-link packaging and counterfeiting industry chain of financial fraud and false issuance has been formed in the past few years. In the past "practice", if a counterfeiting company voluntarily withdraws materials when it is selected for on-site inspection, it does not need to be inspected, let alone punished.
In this case, it was during the on-site inspection that Silxin voluntarily withdrew the application for issuance and listing after it was found that it was suspected of inflating the income of villages and towns and other violations of laws and regulations, but it was still placed on file for investigation, and was finally determined to be a fraudulent issuance, with a total fine of up to 16.5 million yuan. The Silchip case means that the previous "practice" is no longer applicable, and the regulator's tolerance for fraudulent issuance such as financial fraud is decreasing, which is a real benefit to the capital market.
The ** Financial Work Conference held at the end of October 2023 emphasized that "finance is the blood of the national economy and an important part of the country's core competitiveness", and proposed to "accelerate the construction of a financial power, comprehensively strengthen financial supervision, improve the financial system, optimize financial services, prevent and resolve risks, unswervingly follow the path of financial development with Chinese characteristics, and promote the high-quality development of China's finance".
The comprehensive strengthening of financial supervision in the capital market is not only in the field of listing and issuance, nor only for listed companies, but also shows a strict regulatory attitude in all aspects that were considered very small or even not held accountable in the past. A very typical example is that recently, the China Securities Regulatory Commission organized the investigation of a number of practitioners to buy and sell ** and other violations of laws and regulations, relying on criminal accountability, administrative punishment, administrative supervision measures, and internal accountability for three-dimensional punishment.
However, in the past, these relatively small individual behaviors were generally not prosecuted on a large scale, which also led to some practitioners wantonly violating the law. However, in this case, the China Securities Regulatory Commission imposed administrative penalties on 63 people, with a total fine of 81.73 million yuan, and imposed a lifetime market ban on 1 person; the second is to transfer one person suspected of insider trading to the judicial authorities for handling; the third is to take administrative supervision measures against 46 people, of which 3 people are to be identified as inappropriate persons, 5 people will be supervised and talked, and 38 people will be issued warning letters; Fourth, the investment promotion company with the management responsibility of employees was ordered to increase the number of compliance inspections, issued a warning letter to the chairman of the company, supervised the conversation with two compliance directors at the time, and urged the investment promotion company to start internal accountability. It can be said that such a multi-level and meticulous accountability has achieved full coverage of different violations of laws and regulations. The all-round accountability of personal violations also shows the meticulousness of financial supervision from the side, and nothing is "too small" for supervision, as long as it is a violation of laws and regulations, it is faced with resolute treatment.
In recent years, the administrative penalties for fraudulent issuance cases of newly awarded listed companies have been significantly increased, and the amount of civil compensation judgments has also become higher, and the risk of fraudulent issuance has become greater and greater. We expect that "zero tolerance" for violations of laws and regulations and strict supervision to safeguard the healthy development of the capital market will be the principles and basic attitudes that we will continue to adhere to in the new year.