CICC Fined by CSRC Over Mismanagement of S2C IPO and Investor Misrepresentations

Monday, 28 October 2024, 02:05

HKEX penalties issued to China International Capital Corporation (CICC) follow its failure to conduct due diligence in the S2C IPO. The China Securities Regulatory Commission (CSRC) has sanctioned the investment bank for misrepresentations linked to the initial public offering of the local chip company. This incident underscores the rising scrutiny of financial practices in China's capital market.
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CICC Fined by CSRC Over Mismanagement of S2C IPO and Investor Misrepresentations

Sanctions Imposed on CICC: A Look at the Details

China's market regulator has fined China International Capital Corporation (CICC), often referred to as China's Goldman Sachs, a total of 6 million yuan (US$841,000) for not performing adequate due diligence as the sponsor for local chip company S2C's failed new share listing in 2021. Furthermore, the China Securities Regulatory Commission (CSRC) confiscated 2 million yuan from CICC's sponsorship business income and issued individual fines of 1.5 million yuan to executives Zhao Shanjun and Chen Liren.

This case highlights CICC’s failure to exercise due diligence during S2C's initial public offering on the science and technology innovation board, along with multiple misrepresentations in essential sponsorship documents. As outlined in the Securities Law of the People's Republic of China, these actions were deemed illegal.

Commitment to Investor Approach

CICC expressed a commitment to an investor-oriented approach and aims to enhance its oversight and professional quality controls. The investment bank reassured stakeholders that it remains dedicated to fulfilling its role as a 'gatekeeper' for the capital markets and vowed to learn from these penalties.

CSRC has intensified regulatory oversight of IPOs since March when new head Wu Qing pledged to eliminate unqualified companies and restore confidence in China's expansive US$9 trillion stock market.

Background on S2C's IPO Journey

S2C, which specializes in tools used for designing integrated circuits, initially sought an IPO on Shanghai's Nasdaq-style Star market in August 2021. Unfortunately, this application was withdrawn in July 2022 after the CSRC's inquiry revealed potential falsifications in the company's financials.

Additionally, the CSRC assessed a fine of 16.5 million yuan on S2C for overstating revenues in its listing prospectus, with further measures resulting in a five-year ban from listing on the Shanghai Stock Exchange due to inflated profits.


This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.


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