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China punishes IPO sponsor
IFR 1983 11 May to 17 May 2013 | By Ken Wang, Fiona Lau
Equities
Ping An Securities faces three-month ban over flawed IPO
China’s securities watchdog on Friday handed out its toughest punishment to date for an IPO underwriter with a
decision to bar Ping An Securities from sponsoring any new listings for three months.
The ruling follows an investigation into a 2011 IPO and comes as regulators are trying to restore investors’ confidence
in the domestic IPO market. The China Securities Regulatory Commission stepped up its scrutiny of new listings
since freezing the IPO market late last year. It is poised to reopen the market in the coming weeks.
The CSRC said on Friday that Ping An’s IPO sponsorship licence would be suspended for three months, and Ping An
would be fined Rmb75.75m (US$12.3m), three times the underwriting fee it earned as sponsor of the Rmb425m
ChiNext IPO of Wanfu Biotechnology (Hunan) Agricultural Development.
Ping An’s due diligence failed to spot that Wanfu had inflated its revenues by a total of Rmb740m and net profits by
Rmb160m from 2008 to 2011. It was listed in September 2011 and the CSRC started investigations into the company
a year later.
“A three-month ban is harsh, but business will be back to normal after that anyway”
The individual sponsor representatives who worked on the deal have also been fined Rmb300,000 each, had their
sponsor and securities qualifications cancelled, and been barred from re-entering the industry for life.
“The punishment result is in line with our expectations. A three-month ban is harsh, but business will be back to
normal after that anyway. The company is very selective on new deals now, because we cannot afford another
scandal,” said a banker at Ping An Securities.
Compensation
Ping An announced on its website that it had set up a fund of Rmb300m to compensate investors who suffered
losses from investing in Wanfu’s IPO. This is the first time in China’s history that a sponsor has offered to
compensate investors for failing to fulfil its duties.
The move of setting up the fund raised some eyebrows in the market.
“Ping An is setting a precedent for the market. It provides a key reference for those IPO scandals that are still waiting
for punishment results,” said a banker.
Wanfu’s IPO was priced at Rmb25. Its stock last changed hands at Rmb5.65 before trading was suspended on April

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This was a shot across the bow of the underwriters in China.   Keeping this in mind, I wonder what underwriter would gleefully try to unload a bunch of shares in a company that was taken from it's first investors without compensation......Not a nickels worth and worse than that, those investors have been totally ignored as have their attempts to legally reclaim at least some of their