On January 29, Haitong**, the relevant person in charge and the sponsor representative were respectively subject to regulatory measures and disciplinary actions by the Shanghai Stock Exchange due to deficiencies such as the obvious failure to perform due diligence in the initial offering sponsor business, the failure of the investment bank's quality control kernel department to identify major risks of the project, and the imprudent control of due diligence.
In fact, since June 2023, Haitong** has been subject to regulatory measures several times due to the failure of sponsors to perform their duties.
Previously, in June 2023, Haitong** was given a regulatory warning by the Shanghai Stock Exchange for failing to fulfill its responsibilities in the sponsorship of IPO projects on the Science and Technology Innovation Board; In November of the same year, the China Securities Regulatory Commission issued a warning letter to Haitong** and the sponsor representative for failing to perform relevant duties diligently and conscientiously in the process of sponsoring the IPO of World Agriculture; In January 2024, the Shenzhen Stock Exchange decided to take a written warning against Haitong**.
The responsibility of sponsoring secondary listing projects is not in place
On January 29, the Shanghai Stock Exchange stated in its decision on taking regulatory measures against Haitong** and relevant responsible persons that after on-site supervision, it was found that Haitong** had deficiencies such as obvious failure to perform its due diligence in the initial sponsorship business, failure to identify major risks of the project by the quality control kernel department of the investment bank, and imprudent due diligence checks. The responsible person was responsible for the company's aforesaid conduct and failed to practise prudently and diligently. Therefore, the Shanghai Stock Exchange decided to conduct a regulatory conversation with Haitong**, and issued regulatory warnings to Jiang Chengjun (then the person in charge of the sponsor business), Zhang Weidong (the then head of the kernel), and Xu Can (the then head of quality control).
At the same time, the Shanghai Stock Exchange emphasized that Haitong** and relevant responsible persons should take this as a warning, carefully find and rectify problems, establish and improve and strictly implement the internal control system, work process and operation norms of investment banking business, be honest and trustworthy, be diligent and responsible, effectively improve the quality of investment banking business, and carry out internal accountability in strict accordance with the company's system.
In the "Decision on Circulating Criticism of Sponsor Representatives Yan Ying and Xie Dan" made on the same day, the Shanghai Stock Exchange determined that Yan Ying and Xie Dan, as the sponsor representatives of a secondary listing project designated by Haitong**, failed to perform their sponsor duties and violated the rules.
It is worth noting that during the acceptance stage of the project, the Shanghai Stock Exchange carried out on-site supervision of the sponsor, and the project has now withdrawn the declaration.
The SSE found that the sponsor failed to exercise due diligence, failed to pay sufficient attention to the relevant related parties and suspected related party entities, and failed to effectively verify whether the issuer had not completed the liquidation of extracorporeal capital circulation; Insufficient attention is paid to whether the issuer has the risk of adjusting income across years and conducting effective verification; Failed to pay attention to the mismatch between the consumption of relevant materials and the production volume, and failed to fully verify the reasons for the abnormal gross profit margin of the issuer and the accuracy of cost accounting.
Since 2023, there have been many sponsorship problems
In fact, since June 2023, Haitong** has received regulatory measures on several occasions due to sponsorship issues.
On June 15, 2023, the Shanghai Stock Exchange announced its decision to issue a regulatory warning to Haitong**. The decision is 6 pages long, and it has been counted that Haitong** has failed to perform various responsibilities in the sponsorship of IPO projects on the Science and Technology Innovation Board.
For example, the Shanghai Stock Exchange found that Haitong**, as the sponsor of the initial listing projects of Huiqiang New Materials, Mingfeng Medical and Zhizhen Shares, had selectively omitted answers to important audit questions and failed to verify the issuer's revenue recognition, inventory, procurement costs, capital flow and R&D expenses.
In the on-site supervision of practice quality, the SSE also found that in terms of internal quality control of the sponsorship business, Haitong** had weaknesses such as insufficient quality control of investment banks, insufficient identification of project risks in the kernel department, insufficient implementation of opinion tracking, inadequate management of project manuscript acceptance and archiving, and insufficient effectiveness of on-site verification by the quality control department.
During the review of the issuance and listing of the firm, the on-site implementation will be carried out after the issuance of the "Notice of On-site Supervision of Sponsor Business" for the above three projects.
Prior to the supervision, Haitong** had withdrawn the project sponsorship, which to a certain extent reflected that the due diligence work related to the issuer's operating conditions and the risks and problems it faced was insufficient, and the preparation for the project declaration was not solid enough. The Shanghai Stock Exchange said.
The SSE emphasized that Haitong should take this as a warning, take practical measures to rectify the situation, conduct internal accountability against relevant issues, and submit a written rectification report signed by the person in charge of the sponsor business, the person in charge of quality control, and the person in charge of the kernel and stamped with the company's official seal to the SSE within 20 trading days from the date of receipt of the decision.
On November 7, 2023, the China Securities Regulatory Commission (CSRC) made a decision to issue warning letters to Haitong**, Chen Cheng and Jingyang. After investigation, the CSRC found that Haitong ** and two sponsor representatives failed to perform their relevant duties diligently and conscientiously in the process of sponsoring the IPO of World Agriculture, failed to report and disclose the freezing of the shares of the actual controller of the issuer to the Shenzhen ** Exchange in a timely manner, did not find that the issuer's accounting foundation was weak, the internal control was not perfect, and the disclosure of capital lending information was incomplete, and the prospectus was changed without the consent of the China Securities Regulatory Commission or the Shenzhen ** Stock Exchange.
Two months later, on January 5, 2024, the Shenzhen Stock Exchange adopted a written warning against Haitong** in accordance with the decision of the CSRC on the above-mentioned regulatory measures and the facts ascertained by the on-site inspection.
The Shenzhen Stock Exchange also emphasized in the written warning decision that Haitong should take this as a warning, take practical measures to rectify it, conduct internal accountability against relevant issues, and submit a written rectification report; They should be honest and trustworthy, diligent and conscientious, conscientiously perform their sponsor duties, earnestly improve the quality of practice, and ensure the authenticity, accuracy and completeness of the prospectus and documents issued. (CCTV Capital Eye).