Tightening scrutiny on the country’s investment landscape, China’s market regulator fined CICC 6 million yuan for failing due diligence on its local semiconductor company S2C’s IPO.
China’s market regulator has reportedly imposed a fine of 6 million yuan (approximately US$ 841,000) on China International Capital Corporation (CICC). This penalty stems from CICC’s failure to conduct due diligence while sponsoring the 2021 initial public offering (IPO) of local chip company S2C, as stated in a filing by the investment bank with the Hong Kong Stock Exchange.
The China Securities Regulatory Commission (CSRC) also confiscated 2 million yuan from CICC’s sponsorship income. Additionally, it issued warnings and fines of 1.5 million yuan each to CICC executives Zhao Shanjun and Chen Liren, who were the IPO’s sponsor representatives.
Referred to as China’s version of Goldman Sachs by South China Morning Post, CICC acknowledged its ‘failure to exercise due diligence’ in sponsoring S2C’s IPO on the science and technology innovation board.
The firm also faced criticism for ‘misrepresentations’ in the sponsorship letter and other documentation deemed violations of the Securities Law of the People’s Republic of China.
In response to the penalties, CICC accepted the consequences and intends to learn from the incident to improve its practices. Asserting its role as a player in the capital market, it confirmed that its operations continue as usual despite the regulatory action.
Since March, the CSRC has tightened regulations on potential and existing IPOs. This shift follows new leadership under Wu Qing, who has pledged to eliminate unqualified companies and restore confidence in China’s US$ 9 trillion stock market.
S2C, which specialises in tools for integrated circuit design, applied for an IPO on Shanghai’s Nasdaq-style Star market in August 2021. However, the application was withdrawn in July 2022 after a CSRC investigation revealed potential financial misrepresentations.
Earlier this year, S2C was fined 16.5 million yuan for overstating its revenue and profits in its listing prospectus. In June, the Shanghai Stock Exchange prohibited S2C from listing its shares for five years after discovering that it had inflated its 2020 financial results by 12.5 million yuan, equating to a 118.5% increase.
