China News Service, January 19 (Xinhua) According to the China Securities Regulatory Commission website, the China Securities Regulatory Commission today reported on the inspection and enforcement of the New OTC Market. The China Securities Regulatory Commission stated that in the past two years, the China Securities Regulatory Commission has imposed administrative penalties on 9 cases, and another 21 cases have been investigated and entered into trial procedures. These cases show that firstly, there are great hidden dangers of financial fraud, secondly, there are many problems of collusion and fraud, and thirdly, the motivations for committing crimes are complicated.
According to the China Securities Regulatory Commission, the National Equities Exchange and Quotations (NEEQ) is an important part of the multi-level capital market. Since the expansion of the pilot program at the end of 2013, it has played an important role in serving innovative, entrepreneurial, and growing small, medium and micro enterprises, and has become an important channel for serving the real economy, increasing the proportion of direct financing, and expanding investment channels. As the market scale expands, some listed companies and intermediaries have exposed some problems in information disclosure and market transactions, which have seriously affected the standardized development of the New OTC Market. In recent years, the China Securities Regulatory Commission has insisted on comprehensive and strict supervision in accordance with the law, severely cracked down on various illegal activities in the New OTC Market, and effectively ensured the standardized operation of the market.
Statistics show that since 2016, the inspection department of the China Securities Regulatory Commission has accepted 51 valid clues about various violations of laws and regulations in the NEEQ market, organized 42 investigations, and the investigation initiation rate was 82%; it has filed 33 cases in accordance with the law, with a filing rate of 79%. Judging from the types of cases, illegal information disclosure and abuse of shareholding advantages alone or in collusion to manipulate the market accounted for the largest proportions. The inspection department conducted in-depth investigations into 29 cases of illegal disclosure and 8 cases of market manipulation, accounting for 88% of the number of investigations initiated in this field during the same period. From the perspective of illegal entities, major shareholders, actual controllers and market makers of listed companies are most involved.
According to reports, in the past two years, the China Securities Regulatory Commission has imposed administrative penalties on 9 cases, including 8 cases of illegal disclosure and 1 case of market manipulation. Another 21 cases have been investigated and entered into trial proceedings. A number of typical cases such as Shenxianyuan Company's financial fraud, Chenlong Sawing Machine's illegal disclosure, and Yisuozhi colluding with Zhongtai Securities to manipulate the market were seriously investigated and dealt with, forming a strong deterrent.
The China Securities Regulatory Commission said that these cases show that, first, there is a huge hidden danger of financial fraud. Some listed companies artificially created the illusion that income-related economic benefits continued to flow in by falsely issuing value-added tax invoices and forging financial documents, and inflated profits by 150 million yuan. Some undercounted costs through illegal capitalization of expenses, overcounted income through related transactions, and inflated profits by 130 million yuan. Second, there are many problems of collusion and fraud. Some listed companies conspire with market makers to issue additional shares at target prices, use their financial advantages to agree on transactions, and manipulate the pace of disclosure of good news to drive up stock prices. In order to lower performance evaluation benchmarks, some securities firm employees colluded with external investors and made continuous sales orders at prices far lower than other market makers' quotations and real-time transaction prices, manipulating the prices of many stocks to fall sharply. Third, the motives for committing crimes against the wind are complex. In order to reduce holdings at high prices, the actual controllers of some listed companies set up asset management plans through high-leverage capital allocation, and then deceived others into taking over large amounts of capital. In order to enter the innovation layer, some abuse their shareholding and information advantages and continuously buy and sell to increase trading volume.
The China Securities Regulatory Commission pointed out that in order to strengthen regulatory enforcement and protect the rights and interests of investors, the China Securities Regulatory Commission has focused on strengthening the following work in recent years: first, organizing special inspections of listed companies, strictly investigating illegal occupation of funds, and urging intermediaries to improve business quality. The second is to establish an illegal clues consultation mechanism with the National Equities Exchange and Quotations on the basis of daily supervision and inspection. More than half of the illegal clues come from the equity transfer companies. The third is to use special operations as the starting point to centrally deploy and handle multiple major typical cases, release law enforcement signals in a timely manner, and enhance law enforcement deterrence. The fourth is to hold special discussions with the public security, judicial, audit supervision, and legal affairs departments on the issues of regulatory enforcement and legal application on the New OTC Market and reach a consensus.
The China Securities Regulatory Commission emphasized that on the one hand, the China Securities Regulatory Commission will continue to actively promote the promulgation of market supervision regulations on the New Third Board and increase the supply of market systems on the New Third Board. On the other hand, the China Securities Regulatory Commission will continue to increase inspection and law enforcement efforts, focus on cracking down on illegal activities in specialized fields, and effectively safeguard market order and investor rights and interests.
