Industrial Securities Faces Probe by CSRC after Clients Faked IPO Numbers

The firm is being investigated by the Chinese regulator for a suspected failure to perform its statutory duties.

Industrial Securities Co., a Chinese firm engaged in brokerage, self-operation, investment banking and asset management businesses, has said that it is being investigated by the China Securities Regulatory Commission (CSRC) for a suspected failure to perform its statutory duties.

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The regulator informed the firm of the probe on 12 June 2016, according to an exchange filing today. Industrial Securities, which is listed on the Shanghai Stock Exchange, has confirmed that it will be cooperating with regulators and that its operations are continuing as normal.

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An investigation into the case was launched after Dandong Xintai Electric Co. said that it had received a fine of 8.32 million yuan ($1.3 million) by the CSRC for fabricating financial information as well as in its application for an initial public offering. The firm’s false numbers were said to have spanned accounts receivable, bad-debt provisioning and cash from operating activities.

Industrial Securities was the underwriter for the IPO, which took place in 2014 and has set up a compensation fund to protect investors’ interests.

Dandong Xintai Electric’s shares have now been suspended and it looks almost certain that it will exit the market, becoming the first company to be delisted from the ChiNext Index, China’s NASDAQ-style board of growth enterprises, and the first to be delisted from a Chinese stock index for IPO fraud.

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