As a trader, his son-in-law closed his position without authorization, resulting in a loss of 55.1 million yuan. Then he followed his father-in-law, who was a shareholder of the company, to compensate for the loss in full with his own and self raised funds, Jinzi Ham Co.Ltd(002515) ‘s bizarre incident made new progress – receiving a regulatory ticket.
On March 10, Zhejiang Securities Regulatory Bureau disclosed the decision on Issuing warning letters to Jinzi Ham Co.Ltd(002515) and relevant personnel.
Zhejiang securities regulatory bureau said that the company’s futures trading incurred 55.1 million major losses, which were not disclosed in time, the receipt of large employee compensation was not disclosed in time, the accounting treatment was not standardized, and the excess margin did not fulfill the review and disclosure procedures.
According to relevant regulations, Zhejiang securities regulatory bureau decided to take the supervision and management measures of issuing warning letters to the company, Shi Yanjun, Wu Yuexiao and Wang Qihui respectively, and record them in the integrity archives of the securities and futures market Jinzi Ham Co.Ltd(002515) announced that after receiving the above administrative supervision measures, the company and relevant responsible persons attach great importance to them and will rectify them in strict accordance with the requirements. The above administrative supervision measures have no significant impact on the production and operation of the company. Please invest rationally and pay attention to investment risks.
As early as January this year, Jinzi Ham Co.Ltd(002515) disclosed the announcement on the progress of hedging business, and a futures trading loss of more than 50 million yuan surfaced. Immediately, the Shenzhen Stock Exchange issued a letter of concern to it, asking to explain the internal control, risk management and other systems of commodity futures hedging business, as well as the detailed rules for traders’ losses and replenishment. In the follow-up reply, the specific position operation of the company and the identity of the trader as the then actual controller and the nephew and son-in-law of the chairman surfaced.
one crime: the hedging business of the company is invalid for hedging
Zhejiang securities regulatory bureau said that in the daily supervision and on-site inspection, it was found that Jinzi Ham Co.Ltd(002515) had a number of problems. The first was that major losses in futures trading were not disclosed in time.
As early as January last year, after deliberation and approval by the board of directors, Jinzi Ham Co.Ltd(002515) plans to carry out pig futures hedging business. Zhejiang securities regulatory bureau said that in practice, the company’s hedging business belongs to the situation of ineffective hedging because the futures position does not match the actual demand of spot.
Specifically, Jinzi Ham Co.Ltd(002515) opened a futures account on March 16 last year and gradually bought the bullish contract of pig futures in August of the same year, with a margin of less than 50 million yuan.
At the end of August 2021, futures traders operated the company’s account to buy bullish contracts for pigs 2111, 2201, 2203 and 2205 successively. The account began to build positions from about 17000 yuan / ton to about 15000 yuan / ton. During this period, the lowest price of pig futures fell to about 13000 yuan / ton.
As the spot and futures prices of pigs continued to show a unilateral downward trend, the company’s account suffered a large amount of floating losses and the margin shrank sharply.
At the beginning of September 2021, the company decided to make physical delivery of all pig futures contracts it held in the later stage, and supplemented part of the margin (the maximum margin is 70 million yuan).
However, from the middle of September 2021, the price of pig futures continued to fall sharply, and the futures traders of the company closed their positions without authorization, resulting in a total loss of 551053 million yuan in the company’s account.
After the Shenzhen Stock Exchange issued a letter of concern, Jinzi Ham Co.Ltd(002515) in its reply, further stated that the net long position or net short position established by the company in the futures market at any time point should not exceed 2 / 3 of the consumption in the next year in principle.
In terms of positions under construction, as of August 31, 2021, the company’s position was 16300 tons (101700 hands), which was lower than 2 / 3 of the company’s purchase volume in 2020 and the planned purchase volume in 2021. However, due to the continuous decline of pig spot price in 2021, the development of the company’s brand meat business did not meet expectations, so it did not fully match the actual purchase volume in the spot market in 2021.
For the futures trading process, Zhejiang securities regulatory bureau pointed out that as of August 24, 2021, Jinzi Ham Co.Ltd(002515) futures account had accumulated floating losses of 113101 million yuan, accounting for 19.07% of the audited net profit attributable to shareholders of Listed Companies in 2020, and exceeded 10 million yuan for the first time, meeting the disclosure requirements.
In addition, as of September 30, 2021, the accumulated actual loss of the futures account was 551053 million yuan, accounting for 92.92% of the net profit attributable to the company in 2020. The company did not disclose the major losses of the above futures trading until January 27, 2022, and the disclosure of major losses was not timely.
two crimes: large amount of compensation not disclosed in time
In this incident, Yang Kai, a trader, sold out futures contracts without authorization, resulting in heavy losses to the company, which shall be fully compensated according to the assessment regulations. On September 29 and September 30, 2021, the company received a total of 551053 million yuan of compensation from Yang Kai, accounting for 92.92% of the net profit attributable to the company in 2020, but the above compensation was not disclosed until January 27, 2022.
Zhejiang securities regulatory bureau said that Yang Kai’s large compensation constituted the company’s additional income, but the company did not disclose the above compensation in time as required
In fact, due to the large amount of compensation, the identity of the trader once triggered a heated debate in the market. In the reply to the previous letter of concern, Jinzi Ham Co.Ltd(002515) said that the compensation came from the self owned and self raised funds of Yang Kai and his father-in-law Shi xiongbiao. Shi xiongbiao is a natural person shareholder holding Jinzi Ham Co.Ltd(002515) 345% of the shares. He is also the brother of Shi Yanjun, the former actual controller and current general manager of the company.
this also means that trader Yang Kai was the niece and son-in-law of Shi Yanjun, the then actual controller. The company believes that Shi xiongbiao used his own and self raised funds to help his son-in-law pay compensation based on his father-in-law rather than his shareholder status. This transaction does not constitute an equity transaction
three crimes: defects in risk control business of futures business
In addition to the above two issues, Zhejiang securities regulatory bureau also said that at the same time, in September 2021, the company’s futures account invested a total of 70 million yuan, exceeding the amount of 50 million yuan considered and approved by the board of directors, and the margin over invested in the futures account did not fulfill the review and disclosure procedures.
From the perspective of the company’s futures business risk control system, Zhejiang Securities Regulatory Bureau believes that Jinzi Ham Co.Ltd(002515) has some defects, such as lack of effective supervision on the account and inadequate operation authorization management.
Generally speaking, the above acts violate the provisions of Articles 3, 22 and 25 of the measures for the administration of information disclosure of listed companies (Order No. 182 of the CSRC) and Article 3 of the standards for the governance of listed companies Jinzi Ham Co.Ltd(002515) then chairman Shi Yanjun, then president and chief financial officer Wu Yuexiao, and then Secretary of the board of directors Wang Qihui were mainly responsible for the above violations, in violation of Article 4 of the measures for the administration of information disclosure of listed companies (Order No. 182 of the CSRC).
According to relevant regulations, Zhejiang securities regulatory bureau decided to take the supervision and management measures of issuing warning letters to the company and the above-mentioned main responsible persons, and record them in the integrity archives of the securities and futures market. At the same time, the company is required to seriously learn lessons, strengthen the study of securities laws and regulations, improve the standardized operation level and information disclosure quality of the company, and submit a written rectification report within 10 working days from the date of receiving the decision, so as to prevent such violations from happening again in the future.
four crimes: inaccurate disclosure of the third quarterly report due to non-standard accounting treatment
Zhejiang securities regulatory bureau also mentioned that the company did not conduct accurate accounting for the fair value of hedging instruments and did not conduct accurate accounting treatment when receiving Yang Kai’s large compensation, resulting in inaccurate disclosure of the company’s third quarterly report in 2021. The company disclosed the announcement on the correction of accounting errors in the third quarter of 2021 on January 27, 2022 to correct the accounting errors in the third quarter report of 2021.
