China Bond Regulator Punishes Accounting Firm Amid Probe

  • NAFMII says local accounting firm failed to provide documents
  • The documents are related to a probe into Greenland, Yunfeng

A bond regulator in China punished a local accounting firm for failing to assist in a probe, highlighting how authorities are tightening controls over the market as debt defaults escalate.

The National Association of Financial Market Institutional Investors said Ruihua Certified Public Accountants failed to provide necessary documents in time concerning an investigation into the disclosures of Greenland Holdings Corp. and Shanghai Yunfeng Group Co., according to a statement on its website Tuesday. The Beijing-based regulator said it would suspend the accounting firm’s related business for one year, without giving details.

Chinese regulators have strengthened controls on the world’s third-biggest bond market after an unprecedented 11 companies defaulted in the onshore debt market this year, already exceeding the tally for 2015. China Securities Regulatory Commission said in an April 28 statement that on-site investigations of brokerages found a number of problems in their underwriting, including a lack of thorough due diligence on issuers.

“The impact on the investigation so far has only fallen on the accountant and Yunfeng itself,” said Christopher Yip, an analyst at S&P Global Ratings in Hong Kong. “If further findings lead to any noncompliance on the part of Greenland, this could impact its refinancing speed.”

In response to the regulator statement, Ruihua said Tuesday it has fulfilled its duties as much as it can and said the NAFMII ruling is “very imprudent and irresponsible,” according to a statement on its website. The accounting firm said it will seek legal ways to protect its rights.

Yunfeng is an affiliate of Chinese developer Greenland and is engaged in logistics, property development and automobile services. Caixin magazine reported on March 1 that Yunfeng was in default on 2 billion yuan ($309 million) of privately placed notes in January after early repayment clauses were triggered.

A NAFMII press officer wouldn’t comment on the condemnation and referred to related statements on its website. Two calls to Ruihua’s main line went unanswered. One call to a spokeswoman for Greenland went unanswered. She didn’t immediately respond to a WeChat message seeking comment.

— With assistance by Judy Chen

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