China Merchants Securities closed lower on probe into M&A deal eight years ago
China Merchants Securities closed lower on probe into M&A deal eight years ago

China Merchants Securities closed lower on probe into M&A deal eight years ago

 

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Shares in China Merchants Securities slid on Monday after the broker said it’s being investigated by the securities regulator for suspected violations of the law related to a merger and acquisition for which it acted as independent financial advisor eight years ago. The shares closed 2% down at 13.56 yuan apiece.

The case stems from a takeover in February 2014 by a company called Shanghai Feile which paid 2.9 billion yuan ($340.1 million) for a 100% stake in China Security and Fire Technology. Shanghai Feile issued 396 million shares to China Security’s parent firm and another 121 million shares to raise 1 billion yuan. However, China Security and Fire was found guilty of inflating its revenue in 2013, and providing fraudulent information and misleading statements for the takeover. It was fined by the China Securities Regulatory Commission in May 2019.

Last May, as the independent financial advisor, Merchants Securities was ordered by the Shanghai High People’s Court to share responsibility with China Security and Fire and pay a quarter of the compensation to investors.

During the course of the investigation, any IPO applications for which the brokerage serves as sponsor will be suspended and no new ones will be accepted and when the reviews resume depends on how long the probe will last, said industry insiders.