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13 Apr CSRC Imposes RMB480m Penalties on LeTV and Jia Yueting for Financial Frauds
CSRC exposed that LeTV had conducted financial frauds for ten consecutive years from 2006 to 2017, resulting in false records in both IPO prospectus disclosed in 2010 and its non-public offering in 2016, as reported by Caixin on April 12. Based on the investigation results, CSRC decided to impose a fine of RMB240m each on LeTV and Jia Yueting Jia, the founder and the former largest shareholder of LeTV. The amount was 5% of the funds raised by LeTV through its private placements, which created the history of the highest fine in A-shares listed firms.
LeTV has suffered serious losses in the past three years and accumulated huge debts. Its 2017 annual report disclosed a loss of RMB13.88bn, erasing all profits since it was listed. In 2018 and 2019, its losses expanded to RMB4.096bn and RMB11.28bn, respectively. When it was suspended from listing in May 2019, the market value of LeTV was only RMB6.742bn, less than one-twentieth of its peaking market cap. On May 14, the Shenzhen Stock Exchange (SZSE) terminated LeTV’s stock trading according to the regulatory rule of no profit for three consecutive years. On July 21, 2020, LeTV was officially delisted by SZSE, and the company’s stock price was only RMB0.18 per share at that time.
Though the combined amount of the penalties was nearly RMB500m, CSRC made the punishments based on the old Securities Law, as LeTV’s practices were before the new Securities Law came into effect in March 2020. Compared to the old version, the new Securities Law greatly increased the amount of financial penalties. The new law stipulates that if a company conceals material facts or fabricates major false content in the issuance documents, for the company that has not yet issued stocks, the fine will be more than RMB2m and less than RMB20m; for that has finished the issuance, the fine will be more than 10% and less than one time of the amount of illegally raised funds. This means that if under the new law, the penalties imposed over LeTV and Jia Yueting would exceed RMB500m in total.