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On April 21, 2023, the China Securities Regulatory Commission (CSRC) delivered the Written Decision of Administrative Penalty on Amethystum Storage Technology Co., Ltd. (*ST Amethystum) and Essence Information Technology Co., Ltd.(*ST Essence). Both were found to have committed fraudulent issuance and other major illegal acts, which has hit the delisting criteria for major violations. The Shanghai Stock Exchange (SSE) started the process of compulsory delisting for major violations on the same day, sent the two companies advance notice of its intention to terminate their stock listing, and will make the decision on the termination of listing within a specified time.
According to the facts identified in the Written Decision of Administrative Penalty, both *ST Amethystum and *ST Essence have committed fraudulent issuance, financial fraud and other acts that seriously damaged investors' interests, which greatly disturbed the capital market order and industry ecology. The CSRC has severely punished the companies and the "critical few", made decisions on administrative penalties and market entry bans, and coordinated the administrative, civil and criminal accountability. Following the "zero tolerance" requirements, the SSE has promptly implemented compulsory delisting on the two companies for major violations in accordance with the rules, and resolutely removed them from the STAR Market. Disciplinary decisions have been made simultaneously, and "principal culprit" such as controlling shareholders and chairmen have been given the toughest penalty of being publicly identified as unfitting to serve as directors, supervisors or senior management members for life.
Since its establishment, the STAR Market has clarified that it will focus on information disclosure, strengthen issuers' integrity obligations and legal responsibilities for information disclosure, crack down on fraudulent issuance, false statements and other illegal acts, strictly implement the compulsory delisting system for major violations, and thus effectively increase the cost of violations of laws. Listed companies such as *ST Amethystum and *ST Essence that have committed fraudulent issuance will be severely punished once the fraudulent issuance is found to be true. On the one hand, this demonstrates the regulator's stance and determination to regulate comprehensively and strictly in accordance with the law, crack down on securities violations and protect the legitimate rights and interests of investors. On the other hand, it embodies the original aspiration of establishing the STAR Market and piloting the registration system. The SSE will constantly guard the quality of "entrance" to the STAR Market, strengthen the supervision of information disclosure, and push all parties to fulfill their due responsibilities. It will resolutely terminate the listing of companies that commit fraudulent issuance, major violation in information disclosure or other major violations in accordance with the law, so as to ensure the long-term, healthy and orderly development of the STAR Market.
The SSE has noted that the sponsor institution of *ST Amethystum plans to lead the establishment of a pre-payment fund to compensate investors who have suffered losses due to *ST Amethystum's major violations. The Shanghai Financial Court has received an ordinary representative lawsuit against *ST Essence. China Securities Investor Services Center said in an announcement that when the conditions are met, it will apply to be involved in the case and convert it to a special representative lawsuit according to law. Both mechanisms are important measures to protect investors and deter offenders. Based on its own duties, the SSE will provide technical support and supervisory services for the above investor protection measures, make every effort to ensure the advancement of relevant work, and effectively safeguard the legitimate rights and interests of investors.
Going forward, the SSE will fully assume the responsibility as the implementer of delisting and accelerate the delisting process of *ST Amethystum and *ST Essence in accordance with the rules. The trading of the two companies' stocks will be stopped from April 24, 2023. After the delisting decision is made, the two companies' shares will undergo a delisting preparation period of 15 trading days before being delisted. Under the listing rules, the two companies will not be allowed to apply for re-listing of shares after delisting due to fraudulent issuance. Investors are advised to fully pay attention to the delisting process and trading risks related to the two companies' imminent shares delisting and make prudent decisions.
