Core Viewpoint - The China Securities Regulatory Commission (CSRC) has issued a notice of administrative penalty against *ST Yuancheng for financial fraud, proposing fines totaling 79.45 million yuan and initiating delisting procedures due to serious violations of securities laws [1][4][6]. Financial Fraud and Penalties - *ST Yuancheng has been found to have inflated revenue and profits for three consecutive years, leading to a proposed fine of 37.45 million yuan for the company and 42 million yuan for five responsible individuals [1][5]. - The company reported a revenue of 146 million yuan for 2024, with a net profit of -32.3 million yuan, triggering delisting warnings under new regulations [3][6]. - The company’s stock price has dropped by 52.99% since July 1, following the announcement of the investigation [3]. Specific Violations - From 2020 to 2022, *ST Yuancheng inflated its operating costs by 158 million yuan and revenue by 209 million yuan, resulting in a total profit inflation of 50.46 million yuan [4][5]. - The company’s 2022 non-public stock issuance was deemed fraudulent, as it relied on fabricated financial data from the inflated revenue figures [5]. Regulatory Environment - As of October 10, 2023, 13 companies have been identified this year as having reached the threshold for mandatory delisting due to financial fraud [2][6]. - The CSRC has adopted a zero-tolerance policy towards financial fraud, emphasizing the need for strict enforcement of delisting regulations [6][7]. Improvements in Regulatory Framework - The regulatory framework for preventing financial fraud has been strengthened, with a focus on comprehensive accountability measures including administrative, civil, and criminal penalties [7][10]. - New legal provisions allow companies to reclaim excessive compensation from executives involved in financial fraud, enhancing internal governance and oversight [8][10]. - The CSRC has revised whistleblower regulations to encourage reporting of financial misconduct, increasing the potential rewards for whistleblowers [9][10].

Core Viewpoint - The China Securities Regulatory Commission (CSRC) has issued a notice of administrative penalty against *ST Yuancheng for falsifying financial data over three consecutive years, leading to a proposed fine of 37.45 million yuan for the company and 42 million yuan for five responsible individuals, along with a 10-year market ban for the actual controller [1][4][5]. Group 1: Company Violations - *ST Yuancheng has been found to have inflated revenue and profits for three consecutive years, violating securities laws [1][4]. - The company reported a revenue of 146 million yuan for 2024, with a net profit of -32.3 million yuan, triggering a warning for potential delisting due to financial indicators [3][4]. - The company’s financial reports for 2020 to 2022 included false records, with a total of 158 million yuan in inflated costs and 209 million yuan in inflated revenue [4][5]. Group 2: Regulatory Actions - The CSRC plans to impose a total fine of 79.45 million yuan on *ST Yuancheng and its responsible personnel, with the actual controller facing a 10-year ban from the securities market [1][5]. - The Shanghai Stock Exchange will initiate delisting procedures for *ST Yuancheng due to serious violations of financial reporting standards [1][5]. - This year, 13 companies have been identified as having reached the threshold for mandatory delisting due to financial fraud, reflecting the regulatory body's strict stance against such practices [2][5]. Group 3: Broader Industry Context - The regulatory framework for financial fraud has been strengthened, with over 40 cases receiving administrative penalties this year alone [7][8]. - The introduction of new legal provisions allows companies to reclaim excessive compensation from executives involved in financial fraud, enhancing internal governance [9][10]. - The CSRC is shifting towards a comprehensive regulatory approach that includes prevention, control, and post-incident accountability to combat financial fraud effectively [8][10].