China's top securities regulators are probingHaitong Securitiesover allegations of misconduct in the brokerage house's investment banking business, dealing another blow to the scandal-plagued company amid tightening scrutiny of financial intermediaries.
Haitong (600837.SH) received a notice from the China Securities Regulatory Commission (CSRC) disclosing the probe, which targets the broker's role in the financial reporting fraud case ofAurora Optoelectronics Co. Ltd. (600666.SH), the company said Wednesday in a filing.
The commission said Haitong is under investigation on suspicion of negligence and violations of law and regulations when it served as financial adviser of Aurora Optoelectronics, formerly Southwest Pharmaceutical Co. Ltd. A person close to the CSRC said the regulator would already have evidence of violations when it announced the probe.
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CSRC Probes Haitong Securiites in Financial Reporting Fraud Case
Published on 10th September 2021
Haitong is suspected of negligence and violations of law and regulations when it served as financial adviser on a deal to help a client on a backdoor listing deal.
The CSRC (China Securities Regulatory Commission) is reportedly investigating Haitong Securities again in a case over alleged financial reporting fraud.
Caixin reports that the CSRC issued a notice to Haitong over allegations of misconduct in the firm's investment banking business. In a filing, Haitong said the investigation targets its role in a 2018 deal it arranged for a company called Aurora Optoelectronics Co Ltd.
Haitong is suspected of negligence and violations of law and regulations when it served as financial adviser on a deal to help Aurora Optoelectronics make a backdoor listing through an asset swap with Southwest Pharmaceutical.
Shortly after the listing, Aurora Optoelectronics' business struggled, and in 2017 it started losing money, breaching a promise to shareholders of at least three years of profitability. The company posted a net loss of CNY 1.7 billion for 2018, prompting a regulatory probe into alleged financial reporting fraud.
In July 2020, the CSRC confirmed that Aurora Optoelectronics inflated its profits by CNY 668 million between 2016 and 2018 and failed to properly disclose major operating issues and transactions between connected parties. The company was fined CNY 600,000 and 15 of its senior executives and its auditor were punished.
Haitong has been under regulatory scrutiny since late last year over its scandal-plagued investment banking business. The firm has received six punishments and five warning letters from the CSRC since November.
In March, the CSRC banned Haitong from conducting bond investment advisory business for one year for helping Yongcheng Coal and Electricity Holding Group sell bonds illegally. Yongcheng Coal defaulted on CNY 1 billion in bonds in November, causing major disruptions in the bond markets and prompting a probe into its underwriters.
