Chinese MSCI constituent firm Kangmei Pharmaceutical faces 600,000 yuan fine for misstating cash position by 29.9bn yuan
- Company used fraudulent bank documents to inflate its cash deposits and falsified business certificates to inflate its income between 2016 and 2018, CSRC says
Listed Chinese company and MSCI global index constituent Kangmei Pharmaceutical is facing a 600,000 yuan (US$86,775) fine for falsifying its cash position by as much as 29.9 billion yuan, top watchdog Chinese Securities Regulatory Commission said on Friday.
According to the commission, the company used fraudulent bank documents to inflate its cash deposits and falsified business certificates to inflate its income between 2016 and 2018, leading to “major” falsifications in its financial reports.
Kangmei has also been using accounts under related parties to trade its own shares, an act of market manipulation, the commission said. The company has been under investigation since December for breach of disclosure rules.
“The CSRC’s investigation found the overstating by Kangmei was caused by deliberate fraud. But currently, the toughest punishment for a listed company for disclosure of fraud is only 600,000 yuan,” said Guo Shiliang, a Guangzhou-based writer covering the stock market, adding that the fine amounted to nothing for China’s big listed companies.
Kamgmei reported an outstanding cash position of 37.7 billion yuan at the end of September last year, but analysts challenged this as Kangmei was borrowing money heavily at the same time. According to its financial report, it owed more than 43.3 billion yuan in short-term debt and bonds at the end of September.
In April this year, the company said in a filing it had overstated its cash position by as much as 29.9 billion yuan due to an accounting error.
Yi Huiman, the commission’s chairman, last Saturday outlined his vision for corporate behaviour: no false information disclosure, no insider trading, no manipulation of stock prices and nothing that harms the interest of China’s listed companies.
