China punishes two brokerages in IPO fraud crackdown

BEIJING Fri May 31, 2013 11:18pm EDT

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BEIJING (Reuters) - China's securities watchdog has punished two brokerages for violating rules in helping fraudulent firms to list shares, underlining Beijing's determination to bring credibility to a stock market some have likened to a casino.

The China Securities Regulatory Commission will fine Minsheng Securities 2 million yuan ($326,000) for failed due diligence in Shanxi Tianneng Technology's attempt to launch an initial public offering in 2011, the regulator said in a statement on its website.

It also gave a warning to Nanjing Securities for a similar violation when it advised Guangdong Xindadi Biotechnology in 2012, the CSRC said. Both IPOs were halted after frauds were uncovered.

Tianneng and Xindadi provided falsified financial information in their offering documents, the CSRC said.

In May, the CSRC suspended Ping An Securities' underwriting licence for three months after it helped fraudulent firm Wanfu Biotechnology to list shares in 2011.

China's IPO market was suspended late last year as Beijing looks to clean up the opaque market and improve the quality of those companies that are allowed to list.

But IPOs in China are due to resume as early as next month.

China's stock market has suffered from rampant corporate scandals, while financial irregularities by some companies have dented the reputation of Chinese stocks traded overseas.

($1 = 6.1345 Chinese yuan)

(Reporting by Kevin Yao; Editing by Michael Perry)

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Comments (1)
fingerlakes54 wrote:
What a great and refreshing idea. A little honesty. If Wall Street doesn’t watch out–small USA investors will want to trade in China rather than on US Exchanges. Why put up with excuses from our government or brokerages that continue to hold back important information, or make up information that is “correct” but misleading. I have yet re-entered the US Markets because of these concerns. If China wants to try to run a clean show–I might start looking there instead.

Jun 02, 2013 10:39pm EDT  --  Report as abuse
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