Strict regulation continues! Seven A-share companies face investigations or penalties on the same day, including Shuangliang Energy Saving and others involved in information disclosure issues

With increased regulatory scrutiny on listed companies, overnight, three A-share companies faced investigations, and four others were penalized.

On the evening of February 27, Shuangliang Energy Saving (600481.SH), Jierong Technology (002855.SZ), and Haitai Development (600082.SH) all announced they received notices of investigation from the China Securities Regulatory Commission (CSRC), citing issues with their information disclosure. Shuangliang Energy Saving is suspected of misleading statements in disclosures; Haitai Development is suspected of illegal disclosure violations; Jierong Group and its actual controller Zhao Xiaoqun are suspected of illegal disclosure violations and have been investigated.

On the same day, four other A-share companies were penalized: Dahua Intelligent (002512.SZ), *ST Haiqin (600753.SH), *ST Mubang (603398.SH), and Yahui Long (688575.SH). The first three were found to have falsified financial reports, while Yahui Long was fined for “riding the hot topic.”

Following the penalties, a chain reaction ensued, with some companies soon facing ST (Special Treatment) designation. Dahua Intelligent announced that its stock would be subject to other risk warnings starting March 3, changing to “ST Dahua.” *ST Haiqin and *ST Mubang will also have additional risk warnings imposed next week.

Dahua Intelligent to be ST next week

Last July, Dahua Intelligent suddenly faced investigation for suspected violations of information disclosure laws. More than half a year later, the penalties were finalized.

Regulators found that the company committed three violations, including failing to disclose major contracts and their progress as required, significant omissions in annual reports from 2021 to 2023, and false statements in the 2023 annual report.

Specifically, in early December 2021, Dahua Intelligent’s subsidiary Fujian Fumi Technology Co., Ltd. (Fumi Tech) signed a equipment sales contract with Kunshan Zhiqimei Materials Trading Co., Ltd. (Zhiqimei Kunshan), purchasing equipment worth 795 million yuan. In mid-August 2023, the two parties signed a supplementary agreement to terminate the contract.

However, Dahua Intelligent had not disclosed this major contract or its progress, leading to significant omissions in its 2021-2023 annual reports.

Additionally, the 2023 annual report contained false records. The company prematurely recognized disposal gains before transferring control of two subsidiaries, inflating profits by 61.12 million yuan that year. Meanwhile, projects related to the contract were not promptly transferred to fixed assets, resulting in an additional profit inflation of 24.65 million yuan. In total, Dahua Intelligent inflated profits by 85.76 million yuan in 2023.

Ultimately, the Fujian Securities Regulatory Bureau fined Dahua Intelligent and five responsible individuals a total of 17.8 million yuan. The company also disclosed that, according to Shenzhen Stock Exchange rules, its stock will be subject to other risk warnings, with a one-day trading halt starting March 2, and resumption on March 3 with the stock name changed to “ST Dahua” and a daily limit of 5%.

Notably, as early as late December 2024, the Fujian CSRC had already issued a penalty to Dahua Intelligent, with four responsible persons also fined.

According to the company’s early January 2025 announcement, the Fujian CSRC found that Dahua Intelligent failed to disclose major contracts, related financial support, and related-party transactions, among other violations. The bureau ordered corrections and conducted supervisory interviews with four individuals, including Chen Rongsheng.

*Four consecutive limit-ups for ST Haiqin and penalties

Recently, two other ST companies, *ST Haiqin and *ST Mubang, were penalized.

*ST Haiqin was investigated as early as late December 2023 for suspected information disclosure violations. The latest disclosures show that the Fujian CSRC identified undisclosed related-party transactions and major omissions in annual reports, proposing fines exceeding 10 million yuan for the company and responsible persons.

*ST Haiqin’s predecessor was Gengxing Co., Ltd., controlled by Zhonggeng Real Estate Group (Zhonggeng Group). After a change in control, the company was renamed *ST Haiqin in June last year.

The penalties mainly concern violations during the period when the company operated under the name Gengxing Co. In 2018, its wholly owned subsidiary Ningbo Xinggeng Supply Chain Management Co., Ltd. engaged in fuel oil trading without commercial substance, inflating revenue by 993 million yuan in the first half of 2018 and 1.488 billion yuan for the full year.

Gengxing Co. also failed to disclose related-party transactions as required, with significant omissions in 2020 and 2021 annual reports. During this period, Zhonggeng Group used third-party companies to conduct sham steel trading, occupying over 10 million yuan of company funds, which was not disclosed, constituting major omissions.

In response, the Fujian CSRC ordered corrections, issued warnings, and fined the responsible persons, including a 5 million yuan fine for *ST Haiqin, 4.5 million yuan for Zhonggeng Group, and fines for other responsible individuals totaling 17.42 million yuan.

Following the penalties, *ST Haiqin announced that, due to violations of the Shanghai Stock Exchange listing rules, its stock will be subject to additional risk warnings starting March 2.

The company also disclosed a third risk warning regarding possible delisting. According to its latest performance forecast, *ST Haiqin may turn a profit in 2024, with net profits attributable to shareholders between 28 million and 42 million yuan, and net profits after non-recurring gains between 16 million and 24 million yuan, potentially reversing previous losses.

In the secondary market, *ST Haiqin’s stock performed strongly, with four consecutive limit-ups before the penalties were announced. On February 24 and 27, the stock hit the daily limit, with a total increase of 21.49% over the period, closing at 10.46 yuan per share on February 27, up 5.02%.

Another recently penalized ST company, *ST Mubang, was also found to have falsified financial data. Disclosures revealed that its periodic reports and non-public issuance documents contained false records.

Specifically, in 2023 and the first half of 2024, the company’s subsidiaries and sub-subsidiaries inflated revenue by 714 million yuan through fictitious sales of silicon materials and single-crystal furnace products, with a total profit inflation of 234 million yuan. The company’s non-public issuance documents also contained false records based on these fraudulent financial statements.

Furthermore, the company’s actual controller, Liao Zhiyuan, and other related parties engaged in non-operational fund occupation, which was not disclosed in interim reports. The company and responsible individuals were fined a total of 22.5 million yuan, and Liao Zhiyuan was banned from securities market activities for six years.

Along with the penalty disclosures, *ST Mubang stated that its stock will also be subject to additional risk warnings starting March 2, with no change to the stock abbreviation and no trading suspension.

Yahui Long “riding the wave” of brain-computer interface hype and fined

Another recently penalized company, Yahui Long, was fined for “riding the hype.” Less than a month after investigation, regulators swiftly issued a penalty.

On February 6, Yahui Long was investigated by the CSRC for suspected information disclosure violations, and by the end of the month, Shenzhen CSRC issued an administrative penalty notice.

Investigation found that on January 6, Yahui Long signed a strategic cooperation framework agreement with Shenzhen Brain-Computer Chain Technology Co., Ltd. (“Brain-Computer Chain”). That evening, the company issued a related announcement, but the disclosed information failed to accurately and fully reflect Brain-Computer Chain’s actual technology route and product details.

The same day, Yahui Long issued a supplementary announcement but did not fully disclose the development status of products such as EEG acquisition analyzers, brain-computer interface sleep aids, and sleep monitoring devices.

On the evening of January 7, Yahui Long responded to inquiries from the Shanghai Stock Exchange, but its statements did not accurately reflect the true status of Brain-Computer Chain’s non-serious medical products.

In summary, Shenzhen CSRC concluded that Yahui Long’s disclosures were inaccurate and incomplete, which could mislead investors. After the disclosures, the company’s stock price deviated significantly from market trends and experienced abnormal fluctuations.

Ultimately, the company, its chairman, and secretary were fined a total of 7.5 million yuan.