Everbright Securities Falls on IPO Investigation: Shanghai Mover

Everbright Securities Co. fell to the lowest in more than six months in Shanghai after the brokerage said it’s being investigated by China’s securities regulator for its work on a proposed initial public offering.

The stock dropped 6 percent 10.96 yuan, the lowest close since Dec. 6. The Shanghai Composite Index lost 0.5 percent.

The China Securities Regulatory Commission told Everbright Securities that it began a probe of the company in relation to Henan Tianfon Energy-Saving Panel Science & Technology Co.’s planned IPO, the brokerage said yesterday. The CSRC last month censured Ping An Securities Co., Minsheng Securities Co. and Nanjing Securities Co. amid a crackdown on brokerages for inadequate due diligence on listings.

“There will be a short-term impact from the CSRC investigation on the stock,” said Song Jian, an analyst at China Minzu Securities Co. in Beijing, who has an “add” rating on the stock. “Everbright Securities has already underperformed its peers this year so the downside to its share price may be limited.”

Everbright Securities, based in Shanghai, has dropped 22 percent this year. Citic Securities Co., the country’s largest brokerage by market value, has declined 17 percent while Haitong Securities Co., the second biggest, has gained 0.2 percent.

The CSRC, which stopped IPO approvals in October as China’s benchmark stock index fell more than 5 percent in the first three quarters of 2012, will restart listings after rules aimed at boosting investor protection go into effect, a CSRC official with knowledge of the matter said this week.

Ordered Audits

The regulator in December ordered companies planning IPOs and their advisers to audit their offering documents as the number of applications for listings swelled to more than 800.

More than 600 companies have submitted their self audits to the regulator, from which the CSRC randomly selected 40 applications for its own review. Tianfon was among those 40 companies picked, according the regulator.

The CSRC fined Ping An Securities last month for failed due diligence in the 2011 IPO of Wanfu Biotechnology Hunan Agricultural Development Co. and suspended the broker’s underwriting license for three months. Minsheng Securities was fined and warned for the same reason and Nanjing Securities was censured. Bankers at all three firms received lifetime bans from the securities industry for their roles in the cases.

— With assistance by Aipeng Soo

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