As at April 30, Steyr Motors Corp. (“Steyr”) and Northcom Group Co., Ltd. (“Northcom”) failed to disclose their 2020 annual reports and 2021 Q1 reports within prescribed time limit. SZSE immediately initiated the disciplinary procedures against the two companies and relevant persons in charge.
In recent years, SZSE has strengthened continuous regulation, targeted regulation and classified regulation of listed companies according to the plans and requirements of China Securities Regulatory Commission (“CSRC”), urging listed companies and major shareholders to hold the “Four Bottom Lines” (not disclosing false information, not engaging in insider trading, not manipulating stock prices, and not damaging the interests of listed companies) and market entities to fulfill their responsibilities, and cracking down on violations of laws and regulations to protect investors’ interests. During the annual report disclosure season, we mobilized regulatory resources and stepped up regulatory efforts, with a close eye on the disclosure progress of periodical reports from listed companies. We made good use of our regulation toolkit with a combination of regulation measures to prevent the risk that listed companies might fail to disclose periodical reports within prescribed time limit.
First, we implemented strict and responsive regulation on trading spurt at the end of year. Regarding Steyr’s plan to achieve profitability through technology licensing and product sales spurt at the end of 2020, SZSE sent a total of four letters of concern, paying great attention to and promptly inquiring into the compliance of deliberation procedures, transaction necessity and authenticity.
Second, we urged intermediaries to play their role as “gatekeepers”. Regarding Northcom’s decline of solvency, violation in related party transaction and sharp decrease in performance, SZSE sent a letter of concern to the annual report auditors for four fiscal years straight, asking them to pay attention to the authenticity and accuracy of the company’s key financial indicators. Regarding Steyr’s last-minute change of its annual auditor, we immediately sent a letter of concern, showing our concern on the reasonableness of the replacement of accountants and the competence of the new accountants, and continuously oversaw the accountants’ performance of audit duties according to law.
Third, we required companies to fully disclose risks to the market. After Steyr and Northcom were suspended from listing, we urged the companies to disclose on a monthly basis their work progress during the suspension. After the fiscal year of 2020 ended, we prudently evaluated the risk that the companies may be unable to disclose their annual reports within the statutory period and urged them to release an announcement on the risk of delisting every month, to fully reveal their delisting risk to the market as early as possible. Regarding occupation of non-operating funds by the controlling shareholder and its related parties at Steyr, we also gave a special risk warning in addition. Regarding Steyr’s financial fraud that led to a negative value in its net profit in any four fiscal years straight from 2015 to 2019, we sent an Advance Notice on Mandatory Delisting Due to Major Violation to the company on 19 April 2021, warning investors about the company’s delisting risk.
Relevant official of SZSE said that the failure to disclose periodical reports within prescribed time limit is a serious violation of laws and regulations and is addressed by SZSE with a firm hand. SZSE initiated the disciplinary procedures against Steyr and Northcom in a timely manner, demonstrating zero tolerance for listed companies’ behaviors that cross the red line. According to the arrangements during the transitional period provided for by the new regulations on delisting, the two companies’ failure to disclose their first annual reports within prescribed time limit after suspended from listing is a reason for delisting in pursuant to Article 14.4.1 of the Rules Governing the Listing of Shares on Shenzhen Stock Exchange (Revised in November 2018). SZSE will delist the two companies according to the foregoing rules and the procedures specified in relevant supporting business rules.
Next, SZSE will continue to conscientiously practice the principles of “system building, non-intervention, and zero tolerance”, follow the requirements of standing in awe of the market, rule of law, professionalism and risks and pooling the efforts of all sides to develop the capital market, and stick to the working philosophy of being open-minded, transparent, honest and impartial. We will adhere to the market-based, law-based, regular requirements, fulfill our responsibilities as the frontline regulator according laws and regulations, and resolutely perform our duty as the delisting implementer, to clear market exit and improve the market ecosystem. We will help foster a market mechanism of survival of the fittest, promote improvement in the quality of listed companies, and maintain an open, fair and impartial market.