China Penalizes (Only) Two Brokerages in Crackdown on IPO Fraud

June 1, 2013 Leave a comment

China Penalizes Two Brokerages in Crackdown on IPO Fraud

China’s securities regulator punished two brokerages for violating the country’s securities rules and banned four bankers from the industry for life as it steps up a crackdown on fraud in initial public offerings.

The China Securities Regulatory Commission plans to fine Minsheng Securities Co. 2 million yuan ($326,024) for failed due diligence in Shanxi Tianneng Technology Co.’s bid to list shares in 2011 and confiscate the 1 million yuan fee it earned from the deal, the agency said on its website today. Nanjing Securities Co. will be given a warning for a similar offense committed when it advised Guangdong Xindadi Biotechnology Co. in 2012, the CSRC said. The agency said both IPOs were pulled after reports of fraud were published by unidentified media.Xiao Gang, who took over as CSRC chairman in March, has pledged to step up investor protection and enforcement of regulations as China seeks to bolster confidence in its capital markets. The central bank last month asked participants in its $3.7 trillion interbank bond market to inspect trading histories in a crackdown on illegal transactions, two people with direct knowledge of the matter said at the time.

The securities regulator said today that Tianneng and Xindadi provided falsified financial information in their offering documents. Four bankers involved in the two deals will be fined 150,000 yuan each and banned from the securities market for life, the CSRC said.

A person who answered a call to Minsheng Securities’s headquarters in Beijing today declined to comment or provide the phone number for a spokesman. Phone calls to the offices of Nanjing Securities, Tianneng Technology and Xindadi seeking comment went unanswered outside normal business hours.

Earlier in May, the securities watchdog suspended the underwriting license of Ping An Securities Co. for three months for failed due diligence in the IPO of Wanfu Biotechnology Hunan Agricultural Development Co. (300268) in 2011. The regulator also fined Ping An 76.7 million yuan and revoked the licenses of the bankers in charge of the deal.

To contact Bloomberg News staff for this story: Aipeng Soo in Beijing at asoo4@bloomberg.net

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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