Probe of China Broker Comes After Numbers Faked in Client’s IPO

Industrial Securities Co., a mid-sized Chinese brokerage, said it was being investigated by the securities regulator for a suspected failure to perform its statutory duties.

The China Securities Regulatory Commission told the firm of the probe in a June 12 notice, the Fuzhou-based brokerage said in an exchange filing on Monday. The company will cooperate with regulators and its operations are normal, it added. A spokeswoman declined to comment further.

The investigation comes after Dandong Xintai Electric Co. said June 1 that it had been fined 8.32 million yuan ($1.3 million) by the CSRC for fabricating financial information, including in its application for an initial public offering. Industrial Securities was the underwriter for the IPO, which took place in 2014.

The brokerage said June 2 that it had set up a compensation fund to protect investors’ interests.

Xintai Electric’s shares are suspended in Shenzhen. The firm’s false numbers spanned accounts receivable, bad-debt provisioning and cash from operating activities, according to its June 1 statement.

— With assistance by Jun Luo

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