Chinese seafood company fined for misrepresentation, financial fraud

Source:Global Times Published: 2019/7/11 17:14:09

China's securities watchdog has handed punishments to a Shenzhen-listed seafood company after a 17-month investigation for suspected misrepresentations of its reports over past few years.

Zhangzidao Group Co (Zoneco), which had repeatedly attributed its substantial losses to a dramatic drop in scallop outputs caused by natural disasters, said in an announcement issued on Wednesday that it had received a punitive note from the China Securities Regulatory Commission (CSRC).

Zoneco was fined 600,000 yuan ($87,378) due to report misrepresentation, financial fraud and information disclosure delays, and Wu Hougang, chairman of Zoneco, was banned from the stock market for life, according to the punishment statement.

The story of a fall in scallop outputs has become a widespread joke among Chinese A-share investors since the once No.1 seafood company in China's stock market cited it as an explanation of substantial loss in 2014.

Zoneco hit headlines again in April with similar stories after its first-quarter financial report showed a loss of 43.14 million yuan. The CSRC said in the announcement that its probe showed several Zoneco reports, such as the yearly reports for 2016 and 2017, continued misrepresentations. The company failed to disclose the huge gap between its business performance and former expectations in a timely manner.

Wu, who was reported to have cashed out 407 million yuan worth of shares in the secondary market since 2011, said the involved personnel and the company will defend themselves, and that they are preparing the documents, according to media reports.

Zhangzidao Town in Northeast China's Liaoning Province, where the company based, said local government has established special work group for the issue.

Many individual investors appear far from satisfied after the punishment was announced. On Sina Weibo, China's Twitter-like Weibo platform, a large group of netizens said the punishment is too lenient to deter such unregulated behavior.

The official website of the CSRC showed that, in June, 17 administrative punishments were slammed on listed companies. Including Zonneco, three punishments have been delivered in July.

Li Daxiao, chief economist at Shenzhen-based Yingda Securities, told the Global Times on Thursday that regulations for listed companies need to be tightened to build a more healthy market, but individual investors should also be responsible for their own decisions.

"Investors should not keep reinvesting in companies for which they need to complain about suspected unregulated behaviors, which is quite often seen among Chinese investors," Li said.

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