China Securities Regulatory Commission Cracks Down on Fraudulent Issuances Even After Withdrawal of Application
Recently, the Xiamen Securities Regulatory Bureau made a groundbreaking determination regarding Hongxiang Shares’ issuance of shares in 2020, despite the company voluntarily withdrawing its application before registration, suspected of fraudulent issuance. This case marks the first fraudulent issuance investigated by the China Securities Regulatory Commission after the issuer voluntarily withdrew its application following the implementation of the new securities law.
The China Securities Regulatory Commission emphasized that even if issuers withdraw their application documents, they cannot escape punishment under the principle of ‘declaration means responsibility’. The Xiamen Securities Regulatory Bureau found that Hongxiang Co., Ltd.’s application for issuance of shares and payment of cash to purchase assets and raise supporting funds in 2020 contained major false content, violating securities law provisions.
Similarly, the Sierxin case was the first case officially recognized by the China Securities Regulatory Commission in which the issuer submitted application materials but withdrew before registration due to suspected fraudulent issuance. Sierxin was found to have inflated income and fabricated falsehoods in its securities issuance documents, leading to a fine of 4 million yuan imposed by the regulatory commission.
Both cases highlight the importance of reporting and taking responsibility for fraudulent issuances, regardless of whether the shares are ultimately issued. The China Securities Regulatory Commission reaffirmed its commitment to cracking down on financial fraud and protecting investors’ interests with a zero-tolerance attitude towards fraudulent activities.
As the capital market continues to evolve, IPO inspections and regulatory measures will be strengthened to ensure the highest standards of market integrity. All market participants are urged to adhere to regulatory requirements and uphold responsibility in their operations.
In light of these developments, it is crucial for all stakeholders to stay informed and comply with regulatory guidelines to maintain market order and safeguard the credibility of the securities market.
(Source: Brokerage China)