On March 15, 2022, the Shanghai financial court accepted the dispute case of liability for Securities Misrepresentation between investors and Amethystum Storage Technology Co.Ltd(688086) , a listed company on the science and innovation board. The case is the first case of securities fraud liability dispute involving a company listed on the science and innovation board. In February 2020, Amethystum Storage Technology Co.Ltd(688086) was underwritten by China Securities Co.Ltd(601066) .
China Securities Co.Ltd(601066) is a large-scale securities firm with a long history, occupying a high share in the field of IPO underwriting. From the beginning of 2022 to the closing on March 15, China Securities Co.Ltd(601066) as the lead underwriter, the number of A-share IPO projects reached 8, ranking in the forefront of the industry.
The ultimate liability of the issuer and the lead underwriter remains to be determined by the court. However, with the deepening of the registration system, the responsibilities of investment banks, underwriters, sponsors, accountants, lawyers and other intermediaries as important “gatekeepers” of the securities market in the issuance of new shares have attracted more and more attention.
Amethystum Storage Technology Co.Ltd(688086) the final judgment of this case has considerable reference significance for all kinds of market participants.
Shanghai financial court accepted the first case of securities fraud liability dispute on the science and innovation board
According to the official wechat of Shanghai financial court, on March 15, 2022, the court accepted Amethystum Storage Technology Co.Ltd(688086) the dispute over the liability for Securities Misrepresentation Amethystum Storage Technology Co.Ltd(688086) was listed on the science and innovation board in February 2020, and the lead underwriter is China Securities Co.Ltd(601066) P align = “center” Figure 1: Shanghai financial court accepts Amethystum Storage Technology Co.Ltd(688086) Securities Misrepresentation liability dispute case (excerpt)
The study found that Amethystum Storage Technology Co.Ltd(688086) since its listing, it has received inquiries from the exchange for many times and received the notice of filing a case from the CSRC in February 2022. One month later, the dispute over the liability for Securities Misrepresentation of the company was accepted by the Shanghai financial courtP align = “center” Figure 2: some regulatory documents received since Amethystum Storage Technology Co.Ltd(688086) listing
At present, according to the notice of filing the case disclosed by Amethystum Storage Technology Co.Ltd(688086) disclosure, it does not specify which letter phi is suspected of “violation of laws and regulations” Amethystum Storage Technology Co.Ltd(688086) was listed in February 2020, and Lixin Certified Public Accountants issued a qualified opinion audit report on the company’s financial statements in 2020, mainly involving “prepayment of technology development fees and prepayment of equipment” and “recoverability of accounts receivable”.
In December 2021, Amethystum Storage Technology Co.Ltd(688086) announced the change of accounting firm from Lixin Accounting firm to Zhongxi accounting firmP align = “center” Figure 3: annual audit report of Amethystum Storage Technology Co.Ltd(688086) 2020 issued by Lixin Certified Public Accountants (excerpt)
In the subsequent reply to the inquiry letter of Shanghai Stock Exchange, China Securities Co.Ltd(601066) as a sponsor, gave a reply to the above two questions China Securities Co.Ltd(601066) said in the relevant reply that Amethystum Storage Technology Co.Ltd(688086) has disclosed in the “major event tips” section of the prospectus that “investors should be reminded of the characteristics of the company’s relatively loose credit policy for accounts receivable and the risk of recovery of accounts receivable at the initial stage of the development period”P align = “center” Figure 4: China Securities Co.Ltd(601066) special verification opinions on relevant inquiry letters (excerpt)
However, the reply of China Securities Co.Ltd(601066) does not mean that the issuer and underwriter can be exempted from liability.
In the past few years, the regulatory authorities have continuously strengthened the compliance supervision of securities companies in investment banking businesses such as underwriting and recommendation. Since 2020, China Securities Co.Ltd(601066) has been subject to regulatory penalties for compliance problems in related businesses for many times.
In 2020, China Securities Co.Ltd(601066) was ordered by the CSRC to make corrections due to the imperfect internal control of investment banking business. The punishment decision document mentioned the IPO projects of Xi’An Bright Laser Technologies Co.Ltd(688333) , Western Superconducting Technologies Co.Ltd(688122) , Heng’an Jiaxin and other companies. In 2021, the securities firm was also interviewed by regulators for its irregularities when acting as the sponsor of the IPO of 21st century space technology application Co., Ltd.
China Securities Co.Ltd(601066) ipo lead underwriting business ranks at the forefront of the industry
From the beginning of 2022 to the closing on March 15, a total of 63 new shares were listed in the A-share market.
Among them, China Securities Co.Ltd(601066) served as the lead underwriter of 8 A-share IPO projects. In the whole year of 2021, in terms of the number of IPO lead underwriters and the amount of funds raised, China Securities Co.Ltd(601066) completed 46 IPO projects and raised more than 50 billion yuan. Its IPO underwriting business ranked among the top three in the securities industryP align = “center” Figure 5: ranking of IPO underwriting securities companies in 2021 (after hours data on March 15, 2022)
However, the share price trend of some projects underwritten by China Securities Co.Ltd(601066) was not ideal after listing, and many projects broke.
Since 2022, Guoxin technology and softcom power, with China Securities Co.Ltd(601066) as the co lead underwriter, once fell below the issue price on the first day of listing.
Compared with its issuing price, among the IPO new shares underwritten by China Securities Co.Ltd(601066) in 2021, the closing price of Bank Of Chongqing Co.Ltd(601963) , Shenzhen Hongfuhan Technology Co.Ltd(301086) and Sichuan Huiyu Pharmaceutical Co.Ltd(688553) -w after the end of the year decreased by more than 10%.
how can large securities companies be good gatekeepers
Similar to China Securities Co.Ltd(601066) since 2022, Citic Securities Company Limited(600030) and Haitong Securities Company Limited(600837) have been the main underwriters of 12 and 9 respectively. Among them, three of them fell below the issue price on the first day of listing. It can be seen that while several large securities companies are the leaders in the main underwriters of IPO, they are also “big breaking investors”P align = “center” Figure 6: new shares whose intraday or closing price falls below the issue price from the beginning of 2022 to March 15
According to the classification results of securities companies in 2021 disclosed by the China Securities Regulatory Commission, the rating of Haitong Securities Company Limited(600837) was downgraded from AA to BBB in the previous year, which is rare, mainly due to loopholes in its compliance risk controlP align = “center” Figure 7: some regulatory penalties Haitong Securities Company Limited(600837) received since 2021
In terms of IPO and related lead underwriting business, Haitong Securities Company Limited(600837) as the recommended listing sponsor of Shandong new green food, failed to be diligent and responsible; In the process of performing the continuous supervision responsibility of restructuring and listing of Shanghai Zhongji pile Industry Co., Ltd., the procedures of regular return visit and on-site inspection were not performed as required.
In addition, since 2020, “industry leader” Citic Securities Company Limited(600030) has also been subject to regulatory penalties from the CSRC and its branches and the inter-bank market dealers association for many timesP align = “center” figure 8: some regulatory penalties Citic Securities Company Limited(600030) received since 2020
At the end of 2020, the CSRC frequently issued documents mentioning the imperfect internal control of Citic Securities Company Limited(600030) in multiple IPO underwriting projects Citic Securities Company Limited(600030) in the process of sponsoring the IPO of Shenzhen Yhlo Biotech Co.Ltd(688575) science and innovation board, there were some problems in the submitted application materials, such as inconsistency in financial data and obvious differences in disclosure caliber. In the Starpower Semiconductor Ltd(603290) IPO project, Citic Securities Company Limited(600030) did not strictly accept the working paper. In the IPO project of Anhui MAANSHAN Rural Commercial Bank Co., Ltd., no conflict of interest review was conducted for all project personnel.
From this point of view, although the first securities fraud dispute on the science and innovation board mainly involves China Securities Co.Ltd(601066) one, the practice quality and compliance problems reflected behind it are quite universal.
It is thought-provoking that how should large securities companies perform the function of “gatekeeper” of the securities market?
