St Xinyi (rights protection) will become the first delisting stock in the year of the tiger!

St Xinyi announced on the evening of March 3 that the company had received the notice and supervision letter issued by the Shanghai Stock Exchange. According to the notice, the Shanghai Stock Exchange will make a decision to terminate the listing of the company’s shares in accordance with relevant regulations St Xinyi shares have been suspended since the opening on March 3. The Shanghai Stock Exchange will make a decision to terminate the listing of the shares within 15 trading days after the suspension of the company’s shares.

In the view of regulators, ST Xinyi’s major illegal compulsory delisting reflects the determination of the regulatory authorities to resolutely implement the new delisting regulations and “zero tolerance” for financial fraud. It will become another landmark event to unblock the “export customs” after the reform of the delisting system.

Poor means of financial fraud

According to the decision on administrative punishment issued by the CSRC, ST Xinyi’s annual reports of 2018 and 2019 have false records, including falsely increasing the operating revenue of 2018 by 13.3854 million yuan, accounting for 100% of the operating revenue of the current year; Falsely increased the operating revenue of 2019 by 5.7236 million yuan, accounting for 55.13% of the operating revenue of the current year.

It can be seen that ST Xinyi’s means of counterfeiting are extremely bad. In 2018, ST Xinyi signed an iron concentrate sales contract with Axin commerce and trade and an iron concentrate purchase contract with Sibei investment, based on which an operating revenue of 13.3854 million yuan was recognized. Both the actual controller of Axin commerce and the shareholder of Sibei investment are he, a good friend of Huang Wei, the actual controller of ST Xinyi.

According to the verification of the regulatory authorities, ST Xinyi did not obtain the control of relevant commodities in the process of trade business, and the relevant funds circulated among the company, suppliers and customers to form a closed loop. The relevant sales contracts did not have commercial substance and did not meet the conditions for revenue recognition in the accounting standards.

In 2019, ST Xinyi again signed a sales contract with he’s Axin commerce and trade and Sibei investment, falsely increasing the operating revenue by 2.2166 million yuan. In addition, ST Xinyi added a new way of counterfeiting in 2019. Through sun dingshengyuan, the property management income was recognized as 2.297 million yuan under the condition that it did not actually provide property management services, did not confirm the cost of property services, and did not actually obtain cash inflow.

During the 2020 audit, ST Xinyi also signed a rent credit agreement with relevant parties. ST Xinyi falsely increased its operating income by 1.3 million yuan when the relevant parties did not actually lease the property, manage the sublease or receive the Sublease Rent, and the relevant debts were not offset.

According to the decision on administrative punishment, ST Xinyi’s operating income was less than 10 million yuan for two consecutive years in 2018 and 2019 after deducting the falsely increased operating income. Combined with the company’s operating income of 3.4587 million yuan in 2020, the company’s actual operating income for three consecutive years from 2018 to 2020 was less than 10 million yuan, which has touched on major illegal delisting.

Malicious financial fraud has long been a harbinger

In retrospect, ST Xinyi’s main business has weak sustainable operation ability and poor standardized operation. The audit opinions in the annual reports over the years are non-standard opinions such as qualified opinions. The accountants questioned the authenticity of the company’s income, the occupation of funds by related parties, the ability of sustainable operation and other matters.

Since 2015, ST Xinyi and relevant responsible persons have been administratively punished by the CSRC for three times and disciplined by the Shanghai stock exchange for five times. Violations include failure to disclose regular reports such as 2018 and 2019 annual reports within the statutory time limit, and non disclosure of major issues such as major debts, related party transactions and related party guarantees.

At present, Huang Wei, the actual controller of ST Xinyi, has been banned from the market. Tacheng Public Security Bureau has filed a case for investigation on the crime of ST Xinyi and Huang Wei suspected of illegal disclosure and non disclosure of important information.

Reading the previous announcement of ST Xinyi, it can be seen that there have long been doubts about the authenticity of the company’s revenue. In 2018 and 2019, ST Xinyi disclosed an operating revenue of slightly more than 10 million yuan, which just met the shell preservation demand.

From the audit opinion of the annual financial report, ST Xinyi’s 2018 annual report was issued with an audit report that could not express an opinion, involving many accounting subjects of the company. Subsequently, the company hired Shenzhen Tangtang Certified Public Accountants (hereinafter referred to as “Shenzhen Tangtang”) as the annual audit institution, and the annual reports of 2019 and 2020 were issued with qualified audit reports.

Shenzhen Tangtang was subsequently inspected by the CSRC and found many practice problems. In January 2022, the CSRC announced that it planned to impose an administrative penalty of “six penalties for no one” on Shenzhen Tangtang. The suspected crime of relevant subjects will be transferred to the public security organ. The reason is related to the previous annual report audit of ST Xinyi.

The CSRC found out that Shenzhen Tangtang, knowing that the audit business of ST Xinyi’s annual report has been “rejected” by other accounting firms, signed an agreement with ST Xinyi, promised not to issue “unable to express opinions” or “negative opinions” in the audit report, and required that ST Xinyi should be compensated in case of punishment by the regulatory department.

At present, ST Xinyi has not hired an auditor in 2021 after being urged by the regulatory authorities for many times.

The regulator has previously sent letters to remind of risks

The Shanghai Stock Exchange has paid close attention to ST Xinyi for a long time, and has sent frequent letters to inquire before. Since 2018, the Shanghai Stock Exchange has sent about 50 inquiry letters to ST Xinyi, including about 10 inquiry letters on the post audit of periodic reports, repeatedly reminding the market of the company’s business authenticity and significant risks in capital transactions.

According to the analysis of insiders, the regulatory authorities have sent letters many times, which is not only to fulfill the obligation of supervising the problem company, but also to continuously remind investors of the risks of the problem company, so that all parties in the market have a psychological preparation for the explosion of the problem company.

As of February 26, 2022, ST Xinyi has sounded the delisting alarm 18 times. On October 23, 2021, ST Xinyi announced that it had received the prior notice of administrative punishment, which showed that the company might touch a major illegal delisting with an operating income of less than 10 million yuan in three years. Since then, ST Xinyi has disclosed a risk warning announcement that may involve major illegal compulsory delisting and be terminated every five trading days in accordance with the relevant provisions of the stock listing rules.

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Wang Qun said that China has always supported the IAEA to play an active role in promoting nuclear safety and security, and to perform its safeguards duties in strict accordance with its mandate. At the same time, all parties should fully respect the independence and authority of the institution and avoid politicizing the relevant affairs of the institution.

Wang Qun said that the responsibility for nuclear safety and security is borne by sovereign states, and relevant issues should be handled through existing procedures. China is concerned about the safety, security and guarantee of nuclear facilities in Ukraine. On this issue, the countries concerned should earnestly perform their duties, and the institutional Secretariat should provide necessary assistance in strict accordance with its mandate. It is hoped that relevant parties will act with caution to avoid nuclear safety and security accidents. Institutions should also give full consideration to the security situation in Ukraine and properly handle the issue of safeguards and supervision over Ukraine in accordance with their mandates.

Wang Qun appreciated and supported the decision made by the president of the meeting on the agenda review and resolution of the special Council. This decision is professional and full of wisdom. He hoped that all parties would make full use of the window of opportunity brought by this decision, intensify consultations around the draft resolution, reflect the consensus of all parties to the greatest extent, and make the content of the resolution ensure that the organ fully performs its responsibilities in accordance with its mandate, It will also help to solve the security problems of nuclear facilities in Ukraine. China will continue to make constructive efforts and play a constructive role in the consultation process on the resolution.

Wang Qun finally stressed that China will continue to pay close attention to the changes in the situation in Ukraine and support all efforts conducive to easing the situation and political settlement.