Hangxiao Steel Structure Co Ltd, a Shanghai-listed building
products firm, received a 400,000 yuan fine notice from securities
regulators for illegal information disclosure.
In a statement yesterday to the Shanghai Stock Exchange,
Hangxiao said it received a penalty notice from the China
Securities Regulatory Commission (CSRC) on May 10.
The company's top management - including Chairman Shan Yinmu,
President Zhou Jinfa and another three other top officials - was
also given a warning and a fine of 300,000 yuan.
The CSRC believes the firm did not disclose information in a
timely or accurate fashion.
Shares of Hangxiao, a Zhejiang-based firm, have experienced
sharp unexplained rises between February 12 and March 13, when the
company announced it had signed a 34.4 billion yuan contract with
Hong Kong-based China International Fund Ltd for a construction
project in Angola, Africa.
The contract caused shares to skyrocket to the 10 percent daily
limit most trading days until the CSRC launched an illegal trading
investigation on April 2.
"The punishment shows the regulator's determination to reinforce
the supervision over listed companies' information release," said
an analyst with CITIC China Securities.
Hangxiao is the first case involving illegal information
disclosure since the listed company information release management
rule came into effect on January 30.
In the past, the CSRC seldom punished listed companies because
the release of information was often delayed several days.
Some investors, however, believe the penalty is too lenient.
"A fine of 700,000 yuan almost means nothing for such a big
company, and a light penalty will hardly stop such behavior from
reoccuring," said a Hangxiao investor with the surname Wang.
Hangxiao suspended trading yesterday, but its shares jumped by
9.98 percent to 14.88 yuan.
The stock market is seeing increased illegal trading based on
improper disclosure rather than financial data frauds and capital
embezzlement, analysts say.
"It is common in international capital markets and information
release has been a key area for securities regulators," said Li
Ying, partner of Heller Ehrman, one of the leading law firms in the
United States.
The CSRC said recently all listed companies should set up an
information disclosure management framework before the end of
June.
(China Daily May 15, 2007)