Recently, the China Securities Regulatory Commission disclosed the first fine in the Year of the Tiger: Kimenta’s inflated income of about 23.1 billion in three and a half years. Kingenta has inflated its income and profits, concealed related-party transactions, and falsely recorded assets and liabilities, and many other illegal facts.
According to the penalty, Kim Zhengda and 8 executives were fined 7.55 million yuan in total, and 3 of the main responsible persons were banned from the market for 3 to 10 years.
Financial fraud is a chronic disease of the A-share market, and it is also a major cancer in the A-share market. It will not only damage the interests of investors and affect the reputation of listed companies, but also seriously endanger the development of the capital market and shake the foundation of China's stock market.
The most famous financial fraud case in history, the Enron fraud case, sounded the alarm for people. Enron is a well-known energy company established in the northern United States. During the 10 years from 1990 to 2000, Enron's sales revenue rose from $5.9 billion to $100.8 billion, creating one after another in a short period of time. myth. However, the arrogance and conceit of the company's top management led the company to embark on a path of no return to financial fraud. Shares fell from $90 to $0.26 after the fraud was revealed.
It is embarrassing that company executives have either served prison terms or committed suicide. And Arthur Andersen, one of the top five accounting firms in the world responsible for auditing Enron, also disintegrated and went bankrupt. It was also after this incident that the US Congress passed the "SOX Act", which strengthened corporate governance, accounting agency supervision and securities market supervision.
Financial fraud is frequent, why is it repeated?
First of all, this is because the illegal cost of financial fraud in my country is too low. my country's securities market is a market that has transitioned from emerging to mature, and many systems and regulations are far behind that of developed countries, especially the United States' securities market. Taking Kingenta as an example, when the inflated income was 23.07 billion yuan, the total fine by the securities regulatory department was only 7.55 million yuan, which was almost 0.03% of the inflated income. Although the newly promulgated "Securities Law" in 2020 increased the maximum penalty for financial fraud from 600,000 yuan to 10 million yuan, such a penalty can be said to be a huge profit compared to billions or even tens of billions of income. Businesses are still willing to take risks.
On the other hand, the audit institution lacks independence. The financial audit should be supervised by a third-party administrative institution, but it is performed by an intermediary institution that has an interest in the enterprise—an accounting firm. In many cases, the firm is controlled by others. Making false accounts creates a living space. Therefore, in order to prevent financial fraud in the securities market and effectively protect the interests of the majority of small and medium investors, it is necessary not only to further increase regulatory penalties, but also to optimize and reform the audit system to strengthen the independence and authority of third-party institutions.
For regulators, system construction is a long way to go. Transparent information disclosure is the soul of the securities market. Only by regulating and restraining enterprises from the moral and legal level can we curb financial fraud and guide the healthy development of the market. For investors, it is also necessary to identify abnormalities, prevent risks, and invest prudently.