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China Bans Six Tied to $4.3 Billion Fraud From Securities Market

Bloomberg News

(Bloomberg) -- China has banned six people linked to a $4.3 billion scandal at one of the country’s biggest listed drug makers from participating in the securities industry.

The financial reporting fraud at Kangmei Pharmaceutical Co. was "premeditated, organized, long-term and systematic," the China Securities Regulatory Commission said in a statement released after the market closed Friday. Another 16 people will also be punished, the CSRC said. Kangmei Chairman Ma Xingtian is among those facing penalties.

Kangmei Pharmaceutical said in May it overstated its cash positions by 29.9 billion yuan using false documents and transaction records -- an amount one lawyer said was unprecedented in China. The firm admitted to "serious" deficiencies in its corporate governance and internal controls. The producer of traditional Chinese medicines, which had been under a regulatory probe for months, said earlier that related parties used its funds to trade its shares.

The CSRC did not name the blacklisted individuals or say how long the bans would last. The ban means the six cannot engage in securities issuance, trading or other intermediary services, or work as a senior executive at a listed firm.

Calls to Kangmei’s securities representative office just after 5 p.m. in Shanghai went unanswered.

The company’s stock has tumbled 67% since saying in a statement to Shanghai’s stock exchange that it was being investigated by the CSRC for a suspected disclosure violation.

--With assistance from Jun Luo.

To contact Bloomberg News staff for this story: Miao Han in Beijing at mhan22@bloomberg.net;Lucille Liu in Beijing at xliu621@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, Philip Glamann, Fran Wang

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