STAR market Photo:VCG

Two Chinese enterprises Amethystum Storage Techology Co and Essence Information Technology will be delisted from the STAR market on the Shanghai Stock Exchange after finding fraud in their initial public offerings, China's securities regulator said on Friday.
The China Securities Regulatory Commission (CSRC) has reaffirmed its determination in taking a "zero tolerance" approach to violations or crimes in the capital markets.

Amethystum Storage Technology stands accused of fraudulent issuance along violating regulations for disclosing other information, such as falsely inflating operational revenue and profits in the company's prospectus.

Essence Information Technology concealed material facts and fabricated false content, inflating revenue and profits while violating other rules.

The two firms both received administrative penalty decision notices from the CSRC on Friday.

The two companies are the first set of cases involving fraudulent issuance at the STAR market on the Shanghai Stock Exchange, media reports said.

As the two cases have seriously damaged the legitimate rights and interests of investors, specific solutions will be implemented to compensate investors and further protect their interests.

For instance, China Securities is taking the initiative to line up investor compensation and intends to jointly contribute one billion yuan ($145 million) with other intermediaries to establish a special fund for early compensation.

The cases serve as a strong reminder for domestic firms seeking to IPOs along with other parties including intermediaries, Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology, told the Global Times on Friday.

Dong said similar cases occurred in 2018, and had not happened again for several years, noting that strengthened regulation and compliance procedures were expected by the market.

Global Times