Administrative Penalty Decision Document of the Guizhou Regulatory Bureau of the China Securities Regulatory Commission [2026] No. 10

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(Source: Guizhou Securities Regulatory Bureau)

Source: Guizhou Securities Regulatory Bureau

Party: Hu Jian, male, born July 1968, then serving as an independent director and member of the Audit Committee of Guizhou Bailing Pharmaceutical Co., Ltd. ( hereinafter referred to as Guizhou Bailing or the Company ), residence: Shapingba District, Chongqing.

In accordance with the relevant provisions of the “Securities Law of the People’s Republic of China” ( hereinafter referred to as the “Securities Law” ), our bureau has filed a case investigation into Guizhou Bailing and Hu Jian for information disclosure violations, and has informed the parties of the facts, reasons, basis for administrative penalties, and the rights they are entitled to under law. At Hu Jian’s request, we held a hearing to hear his and his agent’s statements and defenses. The case has now been investigated and concluded.

It has been found that Guizhou Bailing committed the following violations:

Guizhou Bailing did not implement the provisions of Article 9 of the “Basic Standards for Enterprise Accounting” and did not use the accrual basis as the accounting foundation, nor follow the revenue-cost expense matching principle to accrue sales expenses. Guizhou Bailing underreported sales expenses by 350.1249 million yuan in 2019, overreported profit by 350.1249 million yuan, accounting for 95.73% of the absolute value of the total profit recorded in the current report; underreported sales expenses by 240.8095 million yuan in 2020, overreported profit by 240.8095 million yuan, accounting for 115.35% of the total profit recorded in the current report; underreported sales expenses by 63.7916 million yuan in 2021, overreported profit by 63.7916 million yuan, accounting for 45.04% of the total profit recorded in the current report; in 2023, overreported sales expenses by 459.41M yuan, underreported profit by 459.41M yuan, accounting for 93.17% of the total profit recorded in the current report. These financial falsification behaviors led to the 2019, 2020, 2021, and 2023 annual reports of Guizhou Bailing containing false records.

The above behaviors of Guizhou Bailing violate the provisions of Article 78, Paragraph 2 of the “Securities Law,” constituting the illegal circumstances described in Article 197, Paragraph 2 of the “Securities Law.”

According to the provisions of Article 82, Paragraph 3 of the “Securities Law,” the issuer’s directors, supervisors, and senior management personnel shall ensure that the disclosed information is true, accurate, and complete. Hu Jian, then serving as an independent director and member of the Audit Committee, participated in the second and third audit committee meetings of 2024, and was aware of issues with the company’s sales expense accounting. He failed to take effective measures to prevent the company’s financial fraud, signed Guizhou Bailing’s 2023 annual report, and guaranteed its truthfulness, accuracy, and completeness, showing a lack of diligence and responsibility, making him another person directly responsible for the company’s information disclosure violations.

The above violations are supported by evidence such as company announcements, financial data, business contracts, sales documents, meeting resolutions and records, explanations, and transcripts of inquiries with relevant personnel, sufficient for confirmation.

During the statement and hearing process, Hu Jian and his agent put forward the following main opinions: First, the review time for the 2023 annual report was limited, and his participation in the second and third audit committee meetings of 2024 confirmed his awareness of issues with sales expense accounting, which is a factual error. Second, the issues with sales expense accounting had been disclosed in the annual report, and penalizing him under Article 197, Paragraph 2 of the “Securities Law” is a legal misapplication. Third, prior to signing the annual report, he received commitments and guarantees from the company’s financial responsible persons and related auditors that sales expenses would be handled according to accounting standards. Fourth, timely disclosure of the annual report is conducive to safeguarding the overall interests of the listed company and protecting the legitimate rights and interests of small and medium shareholders. Fifth, his tenure as an independent director is short, and he is not a financial professional, so there was no subjective intent or gross negligence; he has fulfilled his duties diligently, but his independent director allowance is severely mismatched with his responsibilities. Sixth, the timing of the third audit committee meeting of 2024 was incorrect. Seventh, the under- and over-reporting of sales expenses are different issues; as a non-accounting professional independent director, he could not have known that the over-reporting in 2023 was inconsistent with accounting standards and caused the annual report to be false; the audit institution is the responsible party.

In summary, Hu Jian requests exemption or mitigation of penalties.

After review, our bureau believes:

First, as an independent director and member of the Audit Committee, Hu Jian participated in the second and third audit committee meetings of 2024, and was aware of issues with sales expense accounting. He voted in favor of the 2023 annual report, guaranteeing its truthfulness, accuracy, and completeness. The evidence is insufficient to prove he fulfilled his duties diligently. Second, Guizhou Bailing’s 2023 annual report contains false records, and Hu Jian is identified as another person directly responsible for the company’s information disclosure violations. Penalizing him under Article 197, Paragraph 2 of the “Securities Law” is correct in law. Third, the commitments and guarantees from the company’s financial responsible persons and auditors are not legal grounds for exemption. Fourth, knowing about the issues with sales expense accounting but not disclosing them timely is not a reason to support voting in favor of the annual report. Fifth, given Hu Jian’s role as an external independent director with relatively minor subjective fault, and after fully considering his responsibilities and the connection to the company’s disclosure violations, the nature, circumstances, and social harm of the violations, a minimum penalty within the statutory range is appropriate. The claim that his allowance is severely mismatched with his responsibilities is not a legal reason for exemption. Sixth, the correction of the timing of the third audit committee meeting of 2024 is accepted after verification, but it does not affect the responsibility determination. Seventh, Guizhou Bailing initially underreported sales expenses and later offset the previous underreporting by overreporting, which clearly constitutes financial fraud. Lack of accounting expertise is not a legal reason for exemption. The company bears accounting responsibility, and the audit institution bears audit responsibility; the responsibility of the audit institution cannot replace that of the independent director.

In summary, regarding Hu Jian’s defense about the correction of the timing of the third audit committee meeting of 2024, our bureau has accepted and reflected it in this decision. Other opinions he raised are not adopted.

Based on the facts, nature, circumstances, and social harm of the illegal behavior, and in accordance with Articles 197, Paragraph 2 of the “Securities Law” and Article 32 of the “Administrative Penalty Law of the People’s Republic of China,” our bureau has decided:

To issue Hu Jian a warning and impose a fine of 500k yuan.

The party shall, within 15 days of receipt of this penalty decision, pay the fine directly to the national treasury. The specific payment method is detailed in the attached instructions. A copy of the payment voucher bearing the party’s name shall be sent to our bureau for record. If the party objects to this penalty decision, they may apply for administrative reconsideration within 60 days of receipt or file an administrative lawsuit within 6 months with the competent people’s court. During reconsideration and litigation, the decision shall not be suspended.

China Securities Regulatory Commission Guizhou Bureau

March 27, 2026