Citic Reprimanded for Disclosure Failure During SooChow’s IPO

Citic Securities Co. (600030), China’s largest brokerage, was reprimanded by the nation’s securities regulator for failing to disclose a drop in profit at SooChow Securities Co. (601555) when advising on its initial offering.

Both companies received warning letters from the China Securities Regulatory Commission for not disclosing the earnings drop, which happened before SooChow Securities’s IPO prospectus was published, and for not giving additional information about the decline while marketing the shares, the regulator said on its website. The CSRC will also stop processing requests for IPOs from Citic’s representatives that work on SooChow Securities’s listing for nine months.

That penalty is the second since November for Citic Securities. Recent fraud cases have prompted regulators to toughen rules on IPO advisers, asking underwriters last month to inspect clients’ financial statements over the next three months and vowing legal action against issuers and brokers if misconduct is found.

Two phone calls to Raymond Tang, a Beijing-based press officer at Citic Securities, seeking comment on the report went unanswered. SooChow Securities posted a copy of the reprimand in a filing with the Shanghai Stock Exchange today. The person who answered the phone at SooChow Securities’ board secretary’s office referred queries about the reprimand to that statement.

Citic Securities fell 1.8 percent to 12.98 yuan at the mid- day break in Shanghai today, while SooChow dropped 2.9 percent to 7.67 yuan. The benchmark Shanghai Composite index lost 0.5 percent.

To contact Bloomberg News staff for this story: Aipeng Soo in Beijing at asoo4@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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