Yishang Display was fined 7 million yuan, and the actual controller was fined 10 million yuan for involving fabricated operating income and profits.

Blue Whale News April 7th: Recently, the Shenzhen Securities Regulatory Bureau issued an administrative penalty decision, targeting Shenzhen Yishang Display Co., Ltd. and its relevant responsible persons.

The decision shows that Shenzhen Yishang Display Co., Ltd. has the following illegal facts:

I. False records exist in Yishang Display’s related periodic reports

Yishang Display fabricated business revenue and profits by fabricating transactions. From 2018 to the first half of 2022, it overstated operating revenue by 86,042,732.71 yuan, 78,560,265.89 yuan, 325,975,495.63 yuan, 319,320,150.19 yuan, and 70,332,882.18 yuan, respectively, accounting for 7.65%, 7. 51%, 31.83%, 39.73%, and 53.91% of the amounts recorded in the respective periodic reports. The corresponding overstated operating costs were 65,300,161.38 yuan, 41,897,835.01 yuan, 235,084,576.99 yuan, 507,249,793.78 yuan, and 68,722,800.90 yuan, respectively. The overstated profits from 2018 to the first half of 2022 were 20,742,571.33 yuan, 36,662,430.88 yuan, 90,890,918.64 yuan, −187,929,643.59 yuan, and 1,610,081.28 yuan, respectively, accounting for 18.24%, 45.77%, 104. 07%, −31.12%, and 1.08% of the absolute value of the amounts recorded in the respective periodic reports. Yishang Display disclosed false records in its annual reports for 2018 to 2021 and its 2022 semi-annual report. Among them, the revenue overstated in the 2022 semi-annual report was reversed in November 2022.

II. Yishang Display failed to disclose related-party transactions in accordance with the law

From 2020 to 2021, under the arrangement of the controlling shareholder and Chairman Liu Menglong, subordinates transferred company funds by, among other things, paying suppliers through fictitious means, using them to repay his personal external debts. This constitutes related-party transactions formed by non-operating fund occupation by the controlling shareholder. The amounts of fund occupation that occurred in 2020 and 2021 were 93,156,655.82 yuan and 9,200,000.00 yuan, respectively, accounting for 5.60% and 0.53% of the audited net assets of the most recent period. As of the end of 2020 and the end of 2021, the balances of fund occupation were 84,414,398.86 yuan and 92,114,797.92 yuan, respectively, accounting for 4.84% and 7.76% of the audited net assets for the respective years. For the above related-party transaction matters, Yishang Display did not disclose them in a timely manner as required, and also did not disclose them in its 2020 and 2021 annual reports, constituting a material omission. By the end of June 2022, the funds in question had been fully repaid.

Yishang Display’s annual reports from 2018 to 2021 and its 2022 semi-annual report contain false records, and it also failed to disclose related-party transactions in accordance with the law, violating the provisions of the Securities Law.

The former Chairman and General Manager Liu Menglong, the former Director, Deputy General Manager, and Chief Financial Officer Peng Kangxin, the former person in charge of the accounting institution and Deputy Director of Finance Cheng Shiyu, the former Director and Deputy General Manager Zhao Ruiyuan, the former Director and Human Resources Director Zhong Tianhua, the former Director and Board Secretary Wang Zhenqiang, and the former Board Secretary Chen Huanhong are responsible for the above conduct.

In response, the Shenzhen Securities Regulatory Bureau decided to order Shenzhen Yishang Display Co., Ltd. to make corrections, issue a warning, and impose a fine of 7 million yuan; to warn Liu Menglong and impose a fine of 10 million yuan, taking a 7-year ban from the securities market; to warn Peng Kangxin and impose a fine of 2.5 million yuan, taking a 4-year ban from the securities market; to warn Cheng Shiyu and impose a fine of 1.5 million yuan, taking a 3-year ban from the securities market; to warn Zhao Ruiyuan and impose a fine of 750,000 yuan; and to warn Zhong Tianhua, Wang Zhenqiang, and Chen Huanhong, and each impose a fine of 500,000 yuan.