The issue of financial fraud by listed companies in China has come under the spotlight, and LeShi, once listed on the A-share, has been accused of fraud for 10 consecutive years. The China Securities Regulatory Commission (CSRC) recently announced that 59 cases of financial fraud by listed companies have been investigated and handled since 2020, with hidden means and complex patterns of fraud in these cases.
The Chinese Communist Party’s official media Xinhua News Agency reported on the 3rd, the SFC recently released information showing that since 2020, a total of 59 cases of financial fraud and other illegal acts of listed companies have been investigated and handled, accounting for 23% of the cases handled for information disclosure, and 21 cases of related suspected crimes were transferred to the public security organs.
The relevant departments of the Securities and Futures Commission said that the financial fraud cases have four main characteristics.
First, the pattern of fraud is complex. Mainly manifested as fictitious business to implement systematic financial fraud, abuse of accounting treatment to whitewash the performance.
Secondly, the fraudulent means are concealed, both traditional and new techniques. In addition to traditional methods such as contract forgery, false invoicing, bank and logistics document forgery, new or complex financial instruments and cross-border business forgery are also used.
Third, the motives for counterfeiting are diverse, and counterfeiting in the field of M&A and restructuring is relatively prominent. The motive of counterfeiting covers such factors as avoiding delisting, covering up capital appropriation, maintaining share price, and responding to performance commitments.
Fourthly, the circumstances of counterfeiting and the harmful consequences are serious, and some cases are suspected of criminal offences. The amount of counterfeiting in individual cases is large, spanning a long period of time, and accompanied by a variety of illegal violations such as capital appropriation and illegal guarantees.
The report did not name the companies punished for counterfeiting in this wave. However, the Beijing Securities Regulatory Bureau issued an administrative penalty decision against LeTV in April, saying that it had committed financial fraud for 10 consecutive years from 2007 to 2016, and even if only after the listing, its financial fraud spanned seven years.
In July last year, the SFC also pointed out that Kangmei Pharmaceuticals had inflated its monetary funds by more than 88.6 billion yuan in aggregate from January 1, 2016 to June 30, 2018.
Some analysts believe that these cases will affect investors’ confidence in the securities market.
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