Misfortunes never come singly! The lawsuit was just received on January 17, and was filed for investigation by the CSRC on January 18
On the 18th, Shanxi Securities Co.Ltd(002500) announced that Zhongde securities, the company’s holding subsidiary, had received the notice of filing a case from the CSRC. The CSRC decided to file a case against Sino German securities because the recommendation business was suspected of violating laws and regulations in the non-public offering project of LETV information technology (Beijing) Co., Ltd. in 2016.
Earlier, on January 17, Shanxi Securities Co.Ltd(002500) announced that it had received the civil complaint served by the Beijing Financial court. Due to LETV case, 21 defendants, including Sino German securities, Zhongtai Securities Co.Ltd(600918) , Ping An Securities and Jia Yueting, were jointly sued by 2000 investors and claimed 4.571 billion yuan.
Affected by the news, Shanxi Securities Co.Ltd(002500) 18 plunged by more than 6%, and as of the close, it still fell 4.95% to close at 6.15 yuan, a new low in the past year.
It is worth mentioning that, as of press time Zhongtai Securities Co.Ltd(600918) , Ping An Securities has not announced whether it has received the notice of the CSRC to file a case for investigation.
was filed for investigation for failing to exercise due diligence
The retrospective announcement found that on August 11, 2016, Shanxi Securities Co.Ltd(002500) once announced that the subsidiary Zhongde securities failed to be diligent and responsible as the financial consultant of Ziguang Zhuoyuan in the equity transfer of Kunming Machine tool, and the CSRC decided to file a case against Zhongde Securities for investigation.
On November 9, 2015, Kunming Machine Tool announced that Shenji group, the largest shareholder of the company, planned to transfer 25.08% of its shares to Ziguang Zhuoyuan by agreement. After the equity transfer, Ziguang Zhuoyuan will become the controlling shareholder of Kunming Machine tool. As a “Tsinghua Department”, Ziguang Zhuoyuan’s entry is undoubtedly a major positive. Affected by this, the share price of Kunming Machine tool once rose continuously.
However, three months later, on February 5, 2016, Kunming Machine Tool issued the announcement on the progress of major events, suggesting that there was a “three-month automatic termination” clause in the agreement that had never been disclosed before. The equity transfer agreement will be automatically terminated on February 8, and both parties are negotiating whether to extend it.
Shortly thereafter, the announcement of Kunming Machine Tool officially disclosed that the equity agreement was automatically terminated due to the failure to complete the approval of the SASAC of the State Council within the agreed period (February 8, 2016). The share price of Kunming Machine tool also suffered a sharp decline.
Due to the failure to timely disclose the terms of “automatic cancellation within 3 months” and all effective conditions including the terms of “obtaining the support of various departments in Yunnan”, in violation of the relevant provisions of the securities law, the CSRC has successively punished Kunming Machine tool, Shenji group, Ziguang Zhuoyuan and their relevant principals. As an intermediary, Sino German securities and its relevant executives were also punished for failing to exercise due diligence.
In the end, the CSRC confiscated 3 million yuan of business income and imposed a fine of 3 million yuan.
Affected by the punishment, 24 investment banking projects of Sino German securities investment banking business at that time were suspended. Investment banking was not resumed until the punishment results were implemented.
According to incomplete statistics, as of the evening of January 18, China and Germany securities had two gem IPO projects under review, namely United chemistry and world window information. Two main board IPO projects (Zilin vinegar industry and Caofeidian wood) have been pre disclosed and updated.
Shanxi Securities Co.Ltd(002500) the largest revenue pillar
As a rare joint venture broker in China, Sino German securities was once an investment bank that could compete with the “investment bank aristocracy” China International Capital Corporation Limited(601995) .
According to previous reports, from the restart of IPO to the end of 2010, Sino German securities attracted 306 million yuan of IPO recommendation and underwriting revenue, second only to China International Capital Corporation Limited(601995) among joint venture securities companies.
In 2016, Sino German securities ushered in its highlight moment. As the lead underwriter, Sino German securities completed 58 underwriting projects throughout the year, with a total underwriting amount of more than 1097 yuan and an underwriting income of 631 million yuan.
In that year, Shanxi Securities Co.Ltd(002500) ‘s investment banking business had a total revenue of 790 million yuan, and the anti super proprietary business became the largest revenue pillar.
After the Kunming Machine Tool incident in 2016, although the investment banking revenue of Sino German securities decreased in terms of revenue, it did not prevent it from playing the role of revenue of Shanxi Securities Co.Ltd(002500) in the next few years.
This time, the CSRC filed a case for investigation. Before departure and landing, the relevant investment banking projects are bound to be suspended, and the impact on Shanxi Securities Co.Ltd(002500) still needs time to be verified.
