Financial fraud of listed companies is also the responsibility of intermediaries!
On April 26, Shenzhen Stock Exchange announced the supervision letter issued to Guosen Securities Co.Ltd(002736) two sponsor representatives. As the financial advisor sponsor of Ningbo Donly Co.Ltd(002164) acquisition of Nianfu supply chain major asset restructuring project, they had many problems in the process of project verification and were taken self regulatory measures of written warning by Shenzhen Stock Exchange.
In addition to the financial consultant, on the same day, the Shenzhen Stock Exchange issued a supervision letter to seven signing lawyers, certified public accountants and asset appraisers of the project, asking them to put an end to such incidents in the future. Prior to this, Ningbo Donly Co.Ltd(002164) asset restructuring project related to the signature of the intermediary responsible person has been issued a ticket Ningbo securities regulatory bureau.
As one of the 20 typical cases audited by the CSRC in 2021, the Nianfu supply chain acquired by Ningbo Donly Co.Ltd(002164) implemented financial fraud through fictitious supply chain business, accumulating false income of 3.5 billion yuan and false profit of 400 million yuan. The use of new businesses and new models to implement financial fraud and the violation of major asset restructuring rules and the information disclosure system of listed companies have always been the focus of the regulatory authorities.
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Guosen Securities Co.Ltd(002736) two insurance agents were warned in writing
According to the supervision letter of Shenzhen Stock Exchange, Guosen Securities Co.Ltd(002736) two insurance agents, as the financial advisor sponsors of Ningbo Donly Co.Ltd(002164) acquisition of Shenzhen Nianfu supply chain major asset restructuring project, failed to put in place the verification procedures for the customer contract service rate, failed to verify the differences between the obtained service agreements, visit records and confirmation letters, and failed to accurately identify individual related parties during the verification of the project.
In view of the above facts and circumstances, the Shenzhen Stock Exchange decided to take self regulatory measures of written warning. It also requires the two insurance agents to take a warning, be diligent and responsible, be honest and trustworthy, fulfill their duties, strictly abide by laws and regulations, and provide securities services in accordance with relevant business rules, industry practice norms and professional ethics.
Ningbo Securities Regulatory Bureau previously issued a warning letter to the above two insurance agents, explaining their problems in the project more specifically:
First of all, the two people's verification procedures for the customer's contract service rate are not in place. In the interview outline of the two, the customer of Nianfu supply chain filled in that the service rate with Nianfu supply chain was 0.42%, but did not mention other higher rate terms agreed in the supplementary agreement and overseas supply chain service agreement, such as the terms with export service rate of 3% and 5%. The two did not verify the difference between the visit records and the service agreement obtained.
Secondly, the two insurance agents did not further verify the differences between the confirmation letter and the visit records. They obtained the confirmation letter of current account of Nianfu supply chain affiliated company. However, during the visit, the above receivables from Expo International, Yuanyi company and Weilong International were not listed in other accounts receivable, and the interviewees confirmed that they were correct in the visit records. There was a difference between the amount of accounts receivable and payable listed in the interview record and the amount of letter of credit, and the two did not further verify the difference.
In addition, the two insurance agents failed to accurately identify the related parties of Nianfu supply chain. According to the annual declaration form of Weilong international, on May 18, 2016, Shi Yang transferred the equity of Weilong international to Xie Lili. Shi Yang was the spouse of Lin Wensheng, a senior manager of Nianfu supply chain. If Shi Yang holds the equity of Weilong international within 12 months from the benchmark date of major asset restructuring, Weilong International shall be recognized as a related party of Nianfu supply chain. They failed to effectively verify the above information, resulting in the failure to accurately identify the relationship between Weilong international and Nianfu supply chain.
lawyers, accountants and asset appraisers are subject to supervision letter
In addition to financial advisers, Ningbo Donly Co.Ltd(002164) other intermediaries of major asset restructuring projects were not spared. On April 26, the Shenzhen Stock Exchange issued a supervision letter to seven signing lawyers, certified public accountants and asset appraisers of the project.
signing lawyer: three problems in project verification
\u3000\u30001. The working paper records are incomplete, did not participate in the field visit, and did not collect the visit records of other intermediaries, so the verification of business is not prudent. The interview records of Nianfu's supply chain affiliated companies are missing in the working paper, and the interview matters are not paid attention to.
\u3000\u30002. He did not participate in the interview with the customers and suppliers of Nianfu supply chain in Hong Kong, and only obtained some interview records from Guosen Securities Co.Ltd(002736) .
\u3000\u30003. Failed to accurately identify the related parties of Nianfu supply chain.
signature accountant: audit procedures are not implemented in place
\u3000\u30001. The audit procedure for the customer's contract service rate was not implemented in place, and the difference between the visit records and the obtained service agreement was not fully paid attention to.
\u3000\u30002. There is a difference between the amount of accounts receivable and payable listed in the visit record and the amount of letter of confirmation, and no further audit procedure is implemented for the difference between the confirmation letter and the visit record.
\u3000\u30003. Failed to identify the related parties of Nianfu supply chain, the audit procedures implemented were not in place, and the audit evidence obtained was inappropriate.
signed asset appraiser: insufficient basis for appraisal assumptions
\u3000\u30001. The analysis of the historical gross profit margin of Nianfu supply chain is not sufficient, the phenomenon of high customer return of Nianfu supply chain is not paid enough attention, and the basis of the determined evaluation assumptions is insufficient.
\u3000\u30002. The evaluation procedures for other receivables were not implemented in place. Only the reply of Nianfu supply chain to the balance of accounts receivable of its affiliated companies was collected in the working paper, but the reply to the balance of accounts payable of its affiliated companies was not collected.
In this regard, the seven people required to sign by the Shenzhen Stock Exchange learned a lesson and put an end to such incidents.
regulation has been "on the road"
In 2021, the CSRC punished Ningbo Donly Co.Ltd(002164) for acquiring the major asset restructuring project of Nianfu supply chain. Nianfu supply chain and Ningbo Donly Co.Ltd(002164) were fined Shanghai Pudong Development Bank Co.Ltd(600000) yuan and 300000 yuan respectively, and the main person in charge was fined 10 Fawer Automotive Parts Limited Company(000030) 0000 yuan. At that time, several directors, executives and related parties were banned from the market.
According to the regulatory investigation, the case is a typical case of financial fraud in fictitious supply chain business. In 2017 Ningbo Donly Co.Ltd(002164) completed the acquisition of Nianfu supply chain. From July 2014 to March 2018, Nianfu supply chain falsely increased its income by 3.5 billion yuan and its profit by 400 million yuan by falsely increasing its export agency service fee and fictitious overseas agency procurement.
In January 2020, Ningbo intermediate people's Court of Zhejiang Province made a judgment, holding that the defendant Fuyu company and Nianfu supply chain, for the purpose of illegal possession, defrauded others' property in the process of signing and performing the contract, with a particularly huge amount, and their acts have constituted the crime of contract fraud. A fine of 30 million yuan was imposed for the crime of fraud in the supply chain according to the contract; The person directly responsible for the crime of contract fraud shall be sentenced to life imprisonment, deprivation of political rights for life and confiscation of all personal property.
In the previous defense, Ningbo Donly Co.Ltd(002164) said that due to the short time of consolidation, Ningbo Donly Co.Ltd(002164) did not have the ability to directly detect financial fraud, and the intermediary did not find financial fraud. In this regard, the CSRC said that reliance on intermediaries is not a legal exemption.
Some insiders pointed out that the current valuation of M & A is generally based on the income method. Therefore, the subject of M & a naturally has the motivation to carry out financial fraud and expand the performance, so as to improve the consideration of M & A. In addition, in the performance gambling stage, the subject matter of M & A also has the motivation of financial fraud to complete the performance gambling commitment.
From the distribution of counterfeiting industries, there are a large number of financial counterfeits in chemical, agricultural, machinery, commercial trade, textile and garment industries. The existence of non-standard or opaque counterparties, simple or difficult to verify business links, lack of traces of capital flow and many related party transactions makes the counterfeiting cost low or concealment good. Whether for listed companies or capital market service intermediaries such as investment banks, accountants and appraisers, it is a "technical activity" to quickly identify the financial authenticity of the subject matter of M & A.
