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After being subject to administrative punishment for financial fraud, letter clothing violations, and fraudulent issuance, * ST Meishang (rights protection) (300495) was put on file for investigation by the China Securities Regulatory Commission.

On the evening of April 21, * ST Meishang issued an announcement that the company was recently ordered by Shenzhen Securities Regulatory Bureau to correct due to non-standard financial accounting and failure to fulfill its information disclosure obligations; at the same time, the company was filed by the China Securities Regulatory Commission on April 19, 2024 on suspicion of illegal information disclosure.

In recent years, * ST Midea has been frequently subject to regulatory attention or punishment for performance, credit, internal control and other issues, and has received more frequently since 2024.ThetackleboxNine letters of concern were received, and the company and its controlling shareholders were also subject to administrative penalties within nearly a year.

In the secondary market, the share price of * ST Beauchamp has fallen rapidly recently. As of April 19, the closing price of the stock has been less than 1 yuan for 10 consecutive trading days, or there is a risk that the listing will be terminated because the share price is below its face value.

Order correction + file a case for investigation

The announcement shows that * ST Meishang was placed on file for investigation on suspicion of illegal disclosure of information.

Combing through the past announcements, we can see that this is not the first time that * ST Beautiful has been filed. In December 2021, the company and its controlling shareholder Wang Yingyan were filed by the China Securities Regulatory Commission for illegal information disclosure. At present, the relevant parties of the company have received a written decision on administrative punishment.

At the same time when the case was filed, * ST Meishang was issued a written decision on administrative supervision measures by the Shenzhen Securities Regulatory Bureau because of two major problems: non-standard financial accounting and failure to fulfill the obligation of information disclosure in accordance with the regulations:

In terms of financial accounting, the company actually controls Changning Koka Ecological Governance Investment Development Co., Ltd., but it has not been included in the consolidated scope of financial statements and disclosed.

From April 2021 to April 2023, the company made six corrections to accounting errors in previous years, but with the exception of the financial statements for 2020, it did not assess whether the corrections had an impact on the extensive and profit-making nature of the financial statements for the remaining years, to decide whether to conduct a comprehensive audit of the corrected financial statements for the relevant years.

In the accounting of the income of the disposal subsidiary in the semi-annual report in 2022, the effects of minority shareholders' rights and interests and the impairment of subsidiary assets were not taken into account.

The impairment of fixed assets, intangible assets and productive biological assets is not prudent in 2022.

Due to the non-performance of the factoring-related contract in 2022, the debt restructuring loss is recognized, which belongs to the adjustment event after the balance sheet date of 2021, but the relevant loss is not recognized in the 2021 financial statements.

In terms of information disclosure, * ST Midea still has some problems such as the failure to disclose major litigation in time and the matters of administrative penalty decision received by Wang Yingyan, the controlling shareholder. In addition, the company did not disclose loans from senior management and other related parties from 2020 to 2021.

In addition to the above problems, * ST still has some problems such as inaccurate disclosure of 2022 performance forecast information, failure to truthfully disclose major defects in 2021 and 2022 internal control self-evaluation reports, use of personal accounts to manage company funds, non-standard operation of the three associations, incomplete registration of related parties, inadequate registration management of insider information, and untimely updating of the internal management system.

In view of the above-mentioned violations, Shenzhen Securities Regulatory Bureau decided to take regulatory measures to correct * ST.

Financial fraud and fraudulent issuance

In fact, the above-mentioned behavior is only the tip of the iceberg of * ST Beautiful.

As early as July 2023, * ST Mercer was regulated and punished for many years of financial fraud and fraudulent issuance.

According to the administrative penalty decision, the company falsely increased its net profit by recognizing accounts receivable in advance, falsely recording bank interest income, not adjusting project income according to the approved amount, and falsely increasing the income of its subsidiary company during the period from 2012 to the first half of 2020, accumulating more than 400 million yuan.

In addition, * ST Midea has not yet disclosed major litigation, related party transactions and large amount of funds occupied by controlling shareholders in accordance with the regulations. By the end of 2020, the accumulated balance of non-operating funds occupied by the relevant parties was nearly 1 billion yuan.

Due to the existence of undisclosed non-operating capital occupation and superimposed long-term financial fraud, * ST Midea still constitutes fraudulently obtaining issuance approval by fraudulent means during the 2018 non-public offering, touching fraudulent issuance.

In view of the above, the CSRC decided to order * ST Meishang to correct, give a warning and impose a fine of 13.3 million yuan; the actual controllers Wang Yingyan and Xu Jing were fined 15.1 million yuan and 530000 yuan respectively, and Wang Yingyan was banned from the securities market for life; and other responsible persons were fined 50, 000 yuan to 700000 yuan.

It is worth mentioning that Wang Yingyan, who is mainly responsible for organizing and manipulating the aforementioned violations, was also punished in February for manipulating her own stock.

Specifically, from June 12, 2018 to July 3, 2020, Wang Yingyan and Ji Yun actually controlled the use of the account group involved in the case, focused on the advantages of capital and shareholding, continuously traded "Meishang Ecology", and manipulated "Meishang Ecology". A total of 31Thetacklebox.4 billion shares, bought 39.984 billion yuan; sold 3.138 billion shares, sold 39.798 billion yuan, account trading volume of nearly 80 billion yuan. After deducting the commission and related taxes, the account group lost 238 million yuan.

For the above-mentioned acts, the CSRC decided to impose fines of 5 million yuan and 3 million yuan on Wang Yingyan and Ji Yun respectively.

The risk of delisting is high.

After various violations were exposed to the public, investors chose to vote with their feet, and the share price of * ST Beauchamp fell sharply. Since April 8, the company has closed at less than 1 yuan for 10 consecutive trading days and is facing the risk of delisting at face value.

In addition to the face value delisting risk, * ST Midea still has to face multiple pressures.

As early as May 7, 2021, the company was given a delisting risk warning because the 2020 financial report was issued with an audit report that could not express opinions; at the same time, other risk warnings were superimposed due to the occupation of non-operating funds by controlling shareholders and related parties.

Previously, although the company submitted an application to the Shenzhen Stock Exchange in May 2022 to revoke the delisting risk warning, it is still in the period of supplementary materials and there is still uncertainty about whether it can be approved. According to the regulations, if the application for cancellation of the delisting risk warning is not examined and approved by the Shenzhen Stock Exchange, the company's shares will be terminated.

In October 2022, Shenzhen High-tech Investment Group Co., Ltd. applied to Shenzhen Intermediate people's Court for the reorganization of * ST Meishang because it could not pay off its debts when it was due.

In December 2022, the court decided to initiate pre-reorganization procedures for the company and appointed Beijing City Kindu (Shenzhen) Law Firm as the manager during the company's pre-reorganization period. As of now, the company has not received the court's acceptance decision on the reorganization matters, and there is uncertainty as to whether the court will accept the reorganization of the company and whether the company will enter the reorganization process.

Since 2024, *ST Meishang has received intensive letters of concern from the exchange, and a total of 9 have been received so far. A recent letter of concern mainly targeted the inconsistent information of some customers 'testimonies. The Shenzhen Stock Exchange required the company to clarify whether the above-mentioned matters may have a situation where the audited net profit for 2023 is negative and the operating income after deduction is less than 100 million yuan; and whether the "2023 Annual Results Forecast" disclosed by the company involves the correction of accounting errors, whether the accounting treatment is appropriate, and whether it complies with the relevant provisions of the Accounting Standards for Business Enterprises.

(Article source: Securities Times·e Company)