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SFC Document Disclosures Vicki Zhao and his wife's inquiries transcript: never thought to purchase with their own funds

April 17th, 2018 09:36
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On April 16, the Securities and Futures Commission official website issued the "Administrative Punishment Decision" and the "Market Ban Decision". It ordered Wanjia Culture and Longwei Media to make corrections, gave warnings, and imposed a fine of 600,000 yuan respectively. Conde Yong, Huang Youlong, Zhao Wei, and Zhao Zheng were given warnings and imposed fines of 300,000 yuan respectively. Huang Youlong, Zhao Wei, and Kong Deyong took measures to ban the securities market for five years respectively.

Kong Deyong is the former 10,000 family cultureXiangyuan CultureChairman of the Board of Directors, 600576), at the end of 2016, Long Wei Media, a subsidiary of Zhao Wei and Huang Youlong, announced that they planned to acquire 29% of Wanjia Culture, and the purchase price will reach 3.06 billion yuan. The reason why this transaction became the focus of the market is because Zhao Wei’s proposed acquisition of RMB 3.06 billion will have 3 billion yuan from borrowing, with a leverage ratio as high as 51 times. This approach is almost “empty gloves, white wolf”. Coupled with the identity of Zhao Wei's celebrity, caused concern. However, the acquisition plan was changed within a short period of time, changed from a controlling stake to only 5% of the equity, and finally terminated completely. The two parties did not pursue any liability for breach of contract, which directly led to the cultural price of Wanjia culture riding a roller coaster. .

The CSRC issued the official “Decision of Administrative Punishment” and it was past November 2017 that the Wanjia Culture (has been renamed Cheung Yuen Culture) received the “Supervision of Administrative Penalties and Market Bans” issued by the China Securities Regulatory Commission. During the five-month period, Zhao Wei and Huang Youlong spoke to the SFC.

In the "Administrative Punishment Decision" announced this time, Huang Youlong submitted his defense:

First, the original intention and purpose of participating in the acquisition is to promote the long-term and coordinated development of arts and cultural industries, rather than seeking short-term benefits.

Second, the behavior of participating in transactions is good faith, honesty, and legality. The ultimate failure is the result of many factors.

Third, the "notice" confuses different subjects, behaviors and their legal responsibilities, and applies legal errors.

Fourth, the duty of prudence has been fulfilled, there is no fault, and there is no motive, purpose, and necessity for misrepresentation.

Fifth, the disclosure of information by Longwei Media does not constitute a "serious situation" and should not be banned from the market.

Regarding the eight defense arguments of Zhao Wei, Huang Youlong, and Wanjia Culture, the Securities and Futures Regulatory Commission listed all the illegal facts and explained them in detail. “After review, I will think that the facts in this case are clear and the evidence is sufficient. The parties’ reasons for the above defense It could not be established.” The China Securities Regulatory Commission has found that the aforementioned acquisitions have caused a large fluctuation in the share price of 10,000 cultures, which has caused great concern in the market and media, seriously affected the market order, damaged the confidence of small and medium investors, and affected the fairness, fairness, and openness of the market.

The defenses of Huang Youlong and Zhao Wei focused on several key issues:

First, during the acquisition, Longwei Media made false records, misleading statements and major omissions in information disclosure, including false records, major omissions in information disclosure regarding financing plans and arrangements, failure to disclose timely, and failure to disclose financial institutions. There are major omissions in the disclosure of financing cooperation and the failure to complete the financing plan on schedule.

For example, the China Securities Regulatory Commission is of the opinion that Long Wei Media has insufficiently prepared its own domestic funds and the financing of the relevant financial institutions has yet to be approved. With extremely uncertain circumstances, the company has acquired shell companies for the acquisition of listed companies, and has rashly announced its plans. Markets and investors are seriously misleading. Its behavior was superimposed by factors such as its celebrity effect, which seriously misled the market and investors and caused great concern from the market and the media. As a result, the share price of Wanjia Culture fluctuated dramatically and disrupted the normal market order.

In response, Longwei Media argued that the allegations of the rashly announcement could not be established, and the announcement of the acquisition of information was an act of performing announcement duties in accordance with law. Longwei Media stated that the company’s establishment time, whether to carry out business activities, preparation of funds, and the leverage ratio of share transfer transactions are all factors of the transaction subject’s own business considerations and do not affect the legality, authenticity and reasonableness of the acquisition. Sexuality should not be taken into consideration in determining the violation of information disclosure by Longwei Media.

Longwei Media also stated that the stock price volatility of listed companies after the announcement is a normal market reaction. Therefore, the “Notice” believes that Longwei Media has rashly announced the acquisition of information and superimposed on factors such as celebrity effects, which seriously misleads the market and investors and seriously disrupts the market. The normal market order is inconsistent with the facts.

In fact, at the time of the announcement of the acquisition, Long Wei Media was only established for one month, its registered capital was not yet fully paid, and its actual business activities were not carried out. The total assets, net assets, operating income, and net profit were all zero. In the actual acquisition, self-owned funds only invested 60 million, most of the funds from the borrowing, and not yet ready.

The China Securities Regulatory Commission is of the view that the establishment of the Longwei Media, the implementation of business activities, the preparation of funds, and the leverage of the share transfer transaction are objective facts that comprehensively and objectively reflect the nature and seriousness of the illegal activities of the entire case. The case discloses information on the illegal circumstances and the important factors affecting it.

The China Securities Regulatory Commission also believes that Longwei Media’s description of its financial strength is misleading. The China Securities Regulatory Commission explained that in the Wanjia Culture Announcement, Longwei Media disclosed the actual financial status of its controlling shareholder several times and stated that Zhao Wei and Huang Youlong hold shares in several listed companies such as Gold Baby Holdings, as of December 2016. On the 31st, the market value of the above-mentioned stocks was approximately RMB 4.522 billion, and the total value of related assets was approximately RMB 5.663 billion. In addition, during the hearing, Long Wei Media defended that Longwei Media's shareholders had strong asset strength. Domestic and foreign family assets exceeded RMB 5 billion and they had sufficient repayment ability. However, in the actual acquisition process, Longwei Media is a company that has just been established for more than a month. The registered capital has not yet been fully paid. The acquisition program has only 60 million yuan of its own funds. Most of the acquisition funds are borrowed from financial institutions, and some It uses the shares of the listed company to be acquired for pledge financing to financial institutions.

Therefore, the China Securities Regulatory Commission found that Long Wei Media did not use its “repayment capability” to continue the acquisition when the financial institution’s financing was not approved. Instead, Longwei Media stated that most of its assets were overseas and stopped the acquisition, while the assets were overseas. This objective situation is clearly predictable in advance. Therefore, Longwei Media’s emphasis on “family assets” and “repayment ability” coupled with its celebrity effect has actually caused serious misdirection of the market and investors.

During the acquisition process, there was also an omission in the preparation of Longwei Media's funds and the progress of the acquisition.

On the one hand, Longwei Media announced that 1.5 billion of the acquisition funds came from the loan of Tibet Yinbi Asset Management Co., Ltd., and nearly 1.5 billion came from financial institutions.

However, after investigation by the Securities Regulatory Commission, it was found that the above financial institutions specifically referred toCITIC BankZhao Zheng, representative of Longwei Media, said that if the loans of financial institutions are approved before the second payment deadline, Longwei Media will give priority to using low-cost funds (funds of financial institutions). During the negotiation process,CITIC BankThe Hangzhou branch plans to submit the approval according to a financing plan of RMB 3 billion. This means that if CITICbankWhen the pledge financing program is approved, borrowing money from financial institutions will cover 3 billion yuan in equity transfer, eliminating the need to use the bank's funds. However, Longwei Media did not publicize the situation. There were false records, major omissions, and there was no clear uncertainty in the financing of financial institutions. There were major omissions.

Long Wei media stated in its defense that Longwei Media did not know that the amount of RMB 3 billion in “requesting” was reported internally by CITIC Bank, and the financing plan of CITIC Bank had great uncertainty and adjustability. Wei Wei Media made clear risk warnings in the relevant announcements regarding the uncertainty in the financing of financial institutions. The Securities Regulatory Commission refutes this claim that the parties’ inquiry about mutual verification of the transcripts proves that Longwei Media is aware that China CITIC Bank does not exceed 3 billion yuan in financing amount. Huang Youlong also stated in the query transcript, “Zhao Zheng hopes that 3 billion yuan will be provided by the bank, so the cost can be reduced... If the bank agrees to provide 3 billion yuan, Zhao Zheng will repay Silver Beats 1.5 billion yuan.”

The China Securities Regulatory Commission also found that Longwei Media had false records and misleading statements about information disclosure that actively promoted the successful completion of the transfer of the controlling share rights.

In the January 2017 announcement, Longwei Media stated that if Longwei Media fails to obtain full-time financing of financial institution stock pledges, Longwei Media will actively communicate with Wanjia Group in order to complete the transaction smoothly. Continue to seek financing from stocks pledged by other financial institutions. However, after the failure of the approval of China CITIC Bank, Long Wei Media did not actively communicate with Wanjia Group and no longer contacted other financial institutions to seek financing. There were false records and misleading statements in information disclosure.

Long Wei media argued that after the failure of the approval of the financing plan of China CITIC Bank, Long Wei Media has communicated with other financial institutions several times to continue to seek financing. Whether or not Longwei Media has communicated with other financial institutions will not affect investors. Judgment, even if information disclosure is flawed, does not constitute an illegal disclosure of information.

However, the reality is that even CITIC Bank, which provides financing solutions, does not contact Longwei Media on its own, but instead contacts Wanjia Group, the controlling shareholder of Wanjia Culture.

The Securities Regulatory Commission stated in its response that the person responsible for the contact of the acquisition with the financial institution was Wang Jiazhong of the Wanjia Group. Huang Youlong also stated in the query transcript that CITIC Bank was the chairman of Wan Culture and was found by Kong Deyong. “From the beginning to the end, the bank was connected with Kong Deyong. I did not contact the bank with Zhao Zheng... In Zhao Zheng’s time went to Hangzhou and Kong Deyong. Before I went to the plane (before the share transfer was changed to 5%), Zhao Zheng and I said not to do it... As for the later cancellation of the acquisition, I feel that there is no way to do this, and we will not do it... Kong Deyong asked us to leave 5% of the stock I really do not want to, but out of credit, I finally agreed... We never thought of buying with our own funds.” In addition, Huang Youlong and Zhao Zheng clearly stated in their inquiry transcript that after the failure of CITIC Bank's financing, they did not contact any financial institution again.

It is worth mentioning that during the defense, Zhao Wei also tried to "clear" the connection with the acquisition.

Zhao Wei said that he did not participate in the Long Wei media to ask questions on the Shanghai Stock Exchange. He was not directly responsible for the reply of the Shanghai Stock Exchange to the SSE, and he was not a “supervisor” of a listed company, although he was a shareholder of Long Wei Media. , Executive Directors, Managers and Legal Representatives, but do not bear statutory guarantee responsibility for the information disclosed by Long Wei Media, and the supervisory authority shall bear the burden of proof. The "Celebrity Effect" of accusations against the "Notice" has "gravely misdirected the market and investors, caused the stock price of Wanjia culture to fluctuate greatly, and seriously disrupted the normal market order." There is no basis for the factors.

The Securities Regulatory Commission refuted that Zhao Wei, as the controlling shareholder, actual controller, and legal representative of Long Wei Media, signed the "Share Transfer Agreement" and "Loan Agreement" to provide personal assets and personal credit information for the announcement and bank financing plans. Zhao Zheng also asked in the transcript, "She (Zhao Wei) knows the progress of the acquisition... twice. We sent it to Huang Youlong before the announcement. He agreed that Zhao Wei also knows." Therefore, the China Securities Regulatory Commission has found that Zhao Wei is directly responsible for the violations of the laws and regulations of Long Wei Media.

The following are the illegal facts of Long Wei Media, Zhao Wei Huang Youlong's husband and wife, Wanjia Culture, etc. presented by the China Securities Regulatory Commission, and the defense statements of Long Wei Media, Zhao Wei and Huang Weilong, and the response of the Securities Regulatory Commission.

  Illegal facts (1) Longwei Media has insufficient preparation for its own domestic funds, and financing of relevant financial institutions is yet to be examined and approved. With extremely uncertain circumstances, shell companies will be required to acquire listed companies and rashly announce the market and investment. It is seriously misleading.

A total of RMB 3,509.90 million was required for the acquisition. In the acquisition plan, Long Wei Media has its own funds of RMB 60 million. The remaining funds are borrowed and the leverage ratio is as high as 51 times. After the signing of the "Share Transfer Agreement," Long Wei Media discussed financing with the relevant bank. The bank's financing funds are subject to the approval process of the head office. Whether or not the final approval can be adopted remains uncertain.

Long Wei media defense reasons: For the first illegal facts, Longwei media believes that: First, the company's establishment time, whether to carry out business activities, capital preparations, the leverage ratio of the transfer of shares transactions, etc., are the subject of the transaction itself The considerations do not affect the legitimacy, authenticity, and reasonableness of the acquisition, and should not be taken into consideration in determining the disclosure of Longwei's media information. The second is that the accusation of “precautionary notice of administrative penalty” about Long Wei’s “rapid announcement” cannot be established. According to the provisions of Article 94 of the Securities Act, when a listed company is acquired by agreement, after the agreement is reached, the purchaser must submit a written report within three days and make an announcement. Therefore, the announcement of acquisition information is an act of performing announcement duties in accordance with law. Third, the stock price volatility of listed companies after the announcement is a normal market reaction. The "information" held that Longwei Media has rashly announced the acquisition of information and superimposed on factors such as the celebrity effect, seriously misleading the market and investors, seriously disrupting the normal market order and the facts.

The Securities Regulatory Commission responded: (a) Regarding the first illegal fact. I will think that the establishment of the Longwei Media, the implementation of business activities, the preparation of funds, the leverage of the share transfer transaction, and other objective facts are an important part of a comprehensive and objective reflection of the nature and seriousness of the illegal activities of the entire case. The case discloses information on the illegal circumstances and the important factors affecting it.

First, the acquisition of a listed company is a transaction activity that must be regulated by law in the capital market, rather than a mere commercial consideration or commercial judgment between the acquirer and the acquiree. The conduct involves the scope of public interest and market order, involving capital. The market information disclosure supervision system of listed companies is directly related to the effective allocation of market resources and investor rights and interests, and related to the effective implementation of laws and regulations such as the “Company Law” and “Securities Law”, and relates to the smooth and orderly operation of the securities market. While strictly complying with relevant laws and regulations, the purchaser should consciously perform the “Company Law” as specified in Article 5 of the “Company's business activities, must abide by laws and administrative regulations, comply with social ethics, business ethics, be honest and trustworthy, and accept the government and society. The public supervision, and the obligation to assume social responsibility, must also abide by Article 3 of the Securities Act concerning the principle of "openness, fairness, and fairness must be applied", Article 4 on the observance of the principle of good faith, and Article 5 on the prohibition of fraud. It stipulates that no one is allowed to mislead investors and undermine the order of the securities market by using "meaning autonomy" or "freedom of contract" in any way.

Second, Longwei Media's description of its financial strength is misleading. On December 26, 2016, the “Detailed Rights Report of Zhejiang Wanhao Wanjia Culture Co., Ltd.” disclosed Longhui Media’s disclosure of its controlling shareholder, the core company controlled by the actual controller, and its core affiliates; In the January 12, 2017 Wanjia Culture Respond Announcement, Longwei Media disclosed the ownership of several listed companies, such as Golden Baby Holdings, the actual controller of Longwei Media and its spouse, Mr. Huang Youlong, as of December 2016. On the 31st, the market value of the aforesaid shares was approximately RMB 4.522 billion; the total value of the above-mentioned related assets was approximately RMB 5.663 billion, and the cash flow recovered from the investment in 2016 was approximately HK$ 1.256 billion. In addition, during the hearing, Long Wei Media defended that Longwei Media's shareholders had strong asset strength. Domestic and foreign family assets exceeded RMB 5 billion and they had sufficient repayment ability. However, in the actual acquisition process, Longwei Media is a company that has just been established for more than a month. The registered capital has not yet been fully paid. The acquisition program has only 60 million yuan of its own funds. Most of the acquisition funds are borrowed from financial institutions, and some It uses the shares of the listed company to be acquired for pledge financing to financial institutions. When the financing of financial institutions was not approved, Longwei Media did not use its emphasis on "repayment ability" to continue to promote the acquisition, but said that most of its assets were overseas and stopped the acquisition, and the objective situation of assets outside the country was obvious. Can predict in advance. Therefore, Longwei Media’s emphasis on “family assets” and “repayment ability” coupled with its celebrity effect has actually caused serious misdirection of the market and investors.

Third, the acquisition of Longwei Media is unreasonable. In less than four months from December 23, 2016 to April 1, 2017, the assignments were twisted and twisted, from the transfer of controlling rights to the transfer of 5.0396% equity, and later changed to a complete termination of the equity transfer. Both sides did not pursue any Liability for breach of contract, this kind of commercial behavior is obviously counter-intuitive and objectively causes the large fluctuation of the stock price of Wanjia Culture.

In conclusion, Long Wei Media purchased shell-and-shell companies for its listed companies, and its domestic funds were not fully prepared. Financing of relevant financial institutions had yet to be approved. Under circumstances where there was great uncertainty, they were rashly announced and were seriously misleading to the market and investors. Severely disturbed the normal market order.

  Illegal facts (2) There are false records and major omissions in the information disclosure of Longwei media about fundraising plans and arrangements.

Long Wei media defended the reasons: For the second illegal fact, Longwei Media believes that: First, the description of “financing financing of financial institutions amounting to 149,990,000 yuan” is based on a relatively certain factual situation that can be replied at that time. The source of part of the funds required for the acquisition will be truthfully described. When Longwei Media made a reply, it did not know that China CITIC Bank internally reported the amount of 3 billion yuan in the “recruitment”, and the financing plan of CITIC Bank had great uncertainty and adjustability. Second, the payment method for the transfer of shares involved in the case is determined, and there is no factual basis for the "dynamic adjustment" plan and arrangement. Third, Longwei Media made clear risk warnings regarding the uncertainty of the financing of financial institutions in related announcements. CITIC Bank's internal financing plan cannot be used as the basis for Long Wei's media information disclosure.

The Securities Regulatory Commission responded: Regarding the second illegal fact. I would think that, first, the fact that the parties asked the transcripts to verify each other is enough to prove that Longwei Media is aware that China CITIC Bank does not exceed 3 billion yuan in financing amount. Zhao Zheng stated in the query transcript that “we hope that the total amount will be as high as possible, because they have low costs, but the final amount they can borrow depends on the stock price. Before the meeting on December 29, CITIC Bank made a I have given me a plan to guarantee that 2.2 billion yuan can be borrowed from the bottom. If the share price rises up to 27 yuan, the maximum amount will be 3 billion yuan.” Wang Weifei, who is in connection with the bank’s financing, has written in Longwei media. China stated that "When CITIC Bank came, it brought a plan.... We said that 1.5 billion yuan is our bottom line. We can get the best point for multi-loans. The banks say how much they need to look at stock prices, ... but $1.5 billion can certainly If they are approved, they will report a financing plan of 3 billion yuan.” Conde Yong’s inquiry stated in the record, “Wang told me that China CITIC Bank wants to do this business, and the amount of the arrangement is 3 billion. Just sent WeChat to Zhao Zheng to say this...". Huang Youlong also asked in the transcript that "China CITIC Bank borrowed 3 billion yuan this amount I later learned." In addition, the statement made by Yang Moiwei of China CITIC Bank on the amount of financing of CITIC Bank is consistent with the above situation. To sum up, Long Wei Media's proposal that it does not know that the amount of bank financing does not exceed RMB 3 billion is obviously inconsistent with the facts. At the same time, relevant personnel of Longwei Media contacted the proposed financing bank and discussed the financing plan in an in-depth manner. However, they did not know the amount of the bank’s proposed financing, which was obviously unreasonable.

Secondly, Zhao Zheng admitted in the transcript that Longwei Media would give priority to using the bank's funds. “Yinbixin’s funds are credits, which are used according to our needs and do not have to be used or used at all. We must use low costs. "At the same time, Huang Youlong also stated in the query transcript:" Zhao Zheng hopes that all of the 3 billion will be provided by banks, so the cost can come down... If the banks agree to provide 3 billion yuan, Zhao Zheng will give them 1.5 billion yuan Also off." In addition, the agreement signed between Longwei Media and YinBixin is a loan quota authorization agreement, which is a kind of framework agreement of credit granting nature. For example, the loan agreement of the “Loaning Agreement” 1.1 stipulates that “the total amount of funds borrowed by Party A from Party B is not higher than The renminbi picked up 500 million yuan, that is, Longwei Media's borrowing from Silverbilt has not been actually borrowed, but it is a kind of loan quota agreement, and Longwei Media may not use Silverbilt's funds. In conclusion, Long Wei Media has not fully disclosed the possible existence of variable payment methods, with major omissions.

  Illegal facts (3) Longwei Media did not disclose in a timely manner the failure to reach financial cooperation with financial institutions

Long Wei media defense reasons: For the third violation of the truth, Longwei media believes that: First, the January 31, 2017, dated in the reply announcement, is only the date that Longwei Media’s “anticipated” financial institution's financing approval is completed. Certain matters do not constitute promises. Longwei Media made full risk warnings about the feasibility of financial institution approval. Investors will not have excessive trust in the “estimated” date, and Longwei Media has no obligation to further disclose this. Second, the “notice” presupposed that Longwei Media’s inability to obtain financing from financial institutions on January 31, 2017 had a significant impact on the acquisition. However, in fact, Longwei Media was still actively liaising with other financial institutions for financing, and it still has sufficient time limit. Funding. Thirdly, Longwei Media and financial institutions have not reached financing cooperation and will not have a significant impact on the progress of this acquisition. They do not have the major requirements for disclosure of information, and Longwei Media has not disclosed its obligation to disclose such information. Fourth, Wanjia Culture, as the subject of information disclosure obligations, had previously known with Longwei Media that financial institutions had not reached financial cooperation with relevant financial institutions. Failure to timely disclose major information had nothing to do with Longwei Media.

The Securities Regulatory Commission responded: Regarding the third illegal fact. I would think that, first, the failure of the financial institution's financial approval will have a significant impact on the smooth progress of this case's acquisition, and it falls under Article 32 of the “Measures for the Administration of Information Disclosure of Listed Companies”, which will have a major impact on major events. Should be promptly disclosed. The “expected” time recorded by Longwei Media in its reply announcement on January 12, 2017, has been expected to be expected by the market and investors since January 31, 2017. Once it is not able to be achieved on schedule, it should be disclosed in a timely manner to further suggest risks. In the announcement of the Ten Thousand Cultures, it has been made clear that the failure of financing by financial institutions made the acquisition unable to be completed. The failure of Longwei Media to obtain financing from financial institutions on January 31, 2017 was crucial to the success of the acquisition. Therefore, related entities should keep track of this issue, and one-time risk warnings cannot exempt phased information disclosure obligations.

Second, Longwei Media and Wanjia Group are two different entities. There is no evidence to prove that the two parties have signed any commission agreement. The Wanjia Group's contact with financial institutions cannot be understood as "Long Wei Media actively contacts financial institutions." At the hearing, the fact that Longwei Media provided evidence that Wang Zhongzhong and Kong Deyong of the Wanjia Group continued to contact financial institutions after January 31, 2017 cannot be equated with Long Wei Media's continued search for financing from financial institutions. Moreover, continuing to seek funds does not constitute a reason for not disclosing the “reasoning of financial institutions without approval”.

Third, Longwei Media cannot exempt its information disclosure responsibilities because Wanjia Culture is aware of financial institution financing failures. Wanjia Culture is a statutory information disclosure obligor. Longwei Media is an information disclosure obligor involved in the share acquisition. There is no evidence to prove that Longwei Media has issued any information disclosure notice or issued relevant letter to Wanjia Culture regarding financial institution failure. . The information of Wanjia Group or Wanjia Culture that Longwei Media and relevant financial institutions did not reach financing cooperation does not constitute the reason why Longwei Media can not fulfill its obligation of information disclosure.

  Illegal facts (IV) Long Wei’s disclosure of major reasons for the failure to complete the financing plan on schedule

In February 20, 2017, Longwei Media announced that it was unable to complete the financing plan on time due to the disclosure of Wanjia Culture, which was attributed to the failure of the financial institution's approval of the financing and did not disclose that it was necessary to pay the second equity transfer fee. There are major omissions in the fact that enough funds are being prepared.

Long Wei media defense reasons: Long Wei media that: First, financial institutions financing program is not approved is the main reason for failing to complete the financing plan on schedule, is subject to Long Wei media subjective judgment. As long as Longwei Media truthfully discloses its own business judgments, it does not constitute an illegal disclosure of information. Second, Longwei Media did not have sufficient evidence to determine that Silver Bound could not provide loans before February 7, 2017 and could not announce this. Third, under the condition that Longwei Media has signed the "Supplemental Agreement on Share Transfer Agreement" with Wanjia Group, adjusted the share purchase ratio to 5.0396%, and does not require follow-up borrowings from SilverBird, the bank's funding situation is Does not affect the investor's investment judgment, even if not announced, does not constitute a major omission.

The Securities Regulatory Commission responded: Regarding the fourth illegal fact. I would think that, first, Wanjia Culture announced on January 12, 2017 that “the remaining amount of funds borrowed from Yinbixin will be expected to be released no later than February 7, 2017,” but as of February 7, 2017 Silver Bissau did not provide financing as contracted to prove that it did not actually have sufficient funds. Long Wei Media did not pay enough attention to this important issue and disclosed it in a timely manner. In the announcement on February 16, 2017, under which “Tibet Bank BIS is willing to perform its loan commitments in accordance with the agreements already signed”, it still has not disclosed that BIS has not prepared sufficient funds and has not provided financing for the contract, constituting an information disclosure. Illegal. The “financing institutions with prior financing wishes” in the inquiry letter of the Shanghai Stock Exchange did not refer to CITIC Bank alone, and Yinbixin was also a financing institution with previous financing intentions. Therefore, Yinbixin did not need to provide information on financing. In view of this, the reasons why Longwei Media “cannot complete the financing plan on schedule” include the full disclosure of the details of the bank’s failure to provide loans in addition to the failure of the financial institution’s financing.

Second, the proportion of the share purchases mentioned in the defense opinion was adjusted to 5.0396%, and there was no need for follow-up borrowings from SilverBinson, which was not related to the facts described in the “notice” and did not constitute a reason for disclaiming the obligation to perform information disclosure obligations in accordance with the law.

  Illegal facts (5) There are false records and misleading statements in the information disclosure of Longwei Media actively promoting the successful completion of this controlling share transfer transaction.

Long Wei media defense reasons: For the fifth violation of the law, Longwei media believes that: First, Long Wei media has also actively communicated with Wanjia Group after the failure of the approval of the financing plan of CITIC Bank. The second is that the “will actively communicate with the Wanjia Group so as to complete the transaction” mentioned in the reply announcement refers to how the transaction continues to be promoted according to the objective conditions of the transaction. It does not mean that it must be unconditionally under any circumstances.” Actively communicate "completed the established transaction. Thirdly, the “Notice” took the situation after the announcement to determine that the information stated by Long Wei Media on January 12, 2017 was untrue and could not be established according to law. Long Wei’s announcement was true at the time and did not make incomplete or inaccurate statements. Fourth, after the failure of the approval of the financing plan of China CITIC Bank, Longwei Media has communicated with other financial institutions several times to continue to seek financing. Fifthly, under the circumstances that the “Share Transfer Agreement” involved in the case has changed, whether or not Longwei Media has communicated with other financial institutions will not affect investors' judgments. Even if information disclosure is flawed, it does not constitute an information disclosure violation.

The Securities Regulatory Commission responded: Regarding the fifth illegal fact. I would think that first, the related personnel of the Wanjia Group and the financial institutions cannot simply equate to Longwei Media’s “immediate communication with other banks”. Wanjia Group and Longwei Media are two independent entities. The multi-financing of Wanjia Group cannot be equated to Long Wei Media actively seeking financing. Evidence shows that the person responsible for the contact with the financial institution in this acquisition is Wang Jiazhong, a member of the Wanjia Group. Huang Youlong said in the query transcript: “China CITIC Bank is looking for Kong Deyong here. We haven’t found any banks here, including Shenzhen’s banks. From the beginning to the end, the banks were all connected with Kong Deyong. I have no contact with Zhao Zheng. ... Before Zhao Zheng went to Hangzhou and Kong Deyong to talk about the plane (before the share transfer was changed to 5%), Zhao Zheng and I said not to do it... As for the later cancellation of the acquisition, I feel that this thing can't be done, and I won't do it... Kong Deyong allowed us to retain 5% of the shares. I really didn't want to, but out of credit, I finally agreed... We never thought of buying with our own funds.” In addition, Huang Youlong and Zhao Zheng clearly stated in their inquiry transcript that after the failure of CITIC Bank's financing, they did not contact any financial institution again. To sum up, I will conclude that there are false records in the announcement that "there are many communications with other banks immediately."

Secondly, for the “information provided by the parties”, the actual follow-up attitude of Longwei Media is reflected in the announcement and it is considered that there is a misleading statement in the announcement.” The “Notice” believes that the expression “will actively communicate with the Wanjia Group to enable the transaction to be completed successfully” in the reply announcement of January 12, 2017 has caused investors to strongly anticipate the completion of the acquisition of Long Wei Media, and Subsequent to the performance of Long Wei Media, on February 8, 2017, Zhao Zheng was directly assigned by Huang Youlong to negotiate with Kong Deyong to terminate the acquisition, Huang Youlong reluctantly accepted the plan to purchase 5.0396%, and finally completely terminated the acquisition, etc. It is entirely clear that Long Wei Media has “ Actively "willing to facilitate the successful completion of this transaction. Therefore, I will find misleading statements in the announcement that “will actively communicate with the Wanjia Group in order to complete the transaction successfully”.

Defense (6): The relevant disclosure documents were drafted and reviewed by the financial advisor Hengtai Changcai, reviewed and directed by the Shanghai Stock Exchange and fulfilled the relevant requirements of the Shanghai Stock Exchange.

Securities Regulatory Commission: (6) Regarding the appointment of Hengtai Changcai as a financial advisor and review by the Shanghai Stock Exchange. I would think that Longwei Media and Wanjia Culture are information disclosure obligors. They should ensure that the disclosed information is true, accurate, complete, and timely. The verification of intermediary agencies and the review of self-discipline organizations cannot exempt principals of information disclosure obligations. .

Defense (VII): Regarding market influence, Longwei Media believes that the share price of Wanjia Culture during the acquisition period is affected by the multiple effects of the acquisition itself and other matters of the company and is a normal reaction of the securities market. The two response announcements in question did not seriously affect the share price of Wanjia Culture and did not affect the stock market and investors’ judgment.

The Securities Regulatory Commission: (7) The facts and evidence in the case are sufficient to determine that the circumstances of the case are serious. In light of the illegal facts and evidence in this case, the illegal activities involved in the case caused a significant fluctuation in the share price of the Wanjia culture. In the third part of this decision, the serious impact of the transfer of the controlling stakes has been elaborated. The parties mentioned that "the impact of the stock price is multi-faceted and has nothing to do with the letter of response to the case." Without objective facts and evidence, it cannot be established according to law.

Defence (VIII): Regarding the application of laws, Longwei Media believes that the “Notice” is punished by the Long Wei Media in accordance with the provisions of Article 119 of the Securities Law, and the legal error is applicable. The first is the disclosure of information covered by the "Notice", because the information involved does not have "significantness" and should be regulated by the stock exchange on a daily basis. It does not constitute an offence. The second is that Longwei Media, as the purchaser, should not be punished by Article 193 of the Securities Act. The purchaser does not belong to the category of “other obligors for information disclosure”.

Securities Regulatory Commission: (8) Regarding the application of law. Article 193 of the Securities Law provides information disclosure obligations of issuers, listed companies and other information disclosure obligors. The information disclosed by the information disclosure obligation subject shall not only be limited to statutory information, but also be active, accurate, complete and timely. According to the Measures for the Administration of the Acquisition of Listed Companies, Longwei Media, as the purchaser, is an obligor of information disclosure and belongs to the category of “other obligors for information disclosure” in the “Securities Law”, and Article 193 of the Securities Law is applicable according to law.

In addition to proposing the same defense as Long Wei Media, Huang Youlong also proposed:

First, the original intention and purpose of participating in the acquisition is to promote the long-term and coordinated development of arts and cultural industries, rather than seeking short-term benefits. Second, the behavior of participating in transactions is good faith, honesty, and legality. The ultimate failure is the result of many factors. Third, the "notice" confuses different subjects, behaviors and their legal responsibilities, and applies legal errors. Fourth, the duty of prudence has been fulfilled, there is no fault, and there is no motive, purpose, and necessity for misrepresentation. Fifth, the disclosure of information by Longwei Media does not constitute a "serious situation" and should not be banned from the market.

In addition to making the same statement of defense as Long Wei Media, Zhao Wei also proposed:

First, the failure to participate in Longwei Media's replies on the Shanghai Stock Exchange is not the direct responsibility of Long Wei Media for replies to the Shanghai Stock Exchange. Second, I am not a “supervisor” of a listed company. Although I am a shareholder, executive director, manager, and legal representative of Longwei Media, I am not responsible for the statutory guarantees of information disclosed by Longwei Media, and the supervisory authority should be held responsible. The burden of proof. Third, the “notice” criticizes the “celebrity effect” as a factor that “seriously misleads the market and investors, causing the stock price of Wanjia culture to fluctuate greatly, and seriously disrupts the normal market order”. Fourth, there is no violation of laws, administrative regulations or the relevant provisions of the China Securities Regulatory Commission and the circumstances are serious and should not be taken into the market ban measures.

Securities Regulatory Commission: (IX) Legal responsibility for Huang Youlong and Zhao Wei. I would think that, first, the facts and evidence in the case are sufficient to show that Huang Youlong organized, planned, and assigned relevant personnel to implement the transfer of the controlling share rights. He actually negotiated with Kong Deyong on the transfer of a controlling share, and decided to purchase a controlling stake in Wanjia Culture. Assign personnel to carry out financing arrangements and information disclosure, to know and decide on the progress of the acquisition, and to understand the contents of the two reply announcements.

Second, Zhao Wei, as the controlling shareholder, actual controller and legal representative of Long Wei Media, signed the "Share Transfer Agreement" and "Loan Agreement" to provide personal assets and personal credit inquiry for the announcement and bank financing plan. Zhao Zheng said in the query transcript, "She (Zhao Wei) knows the progress of the acquisition... twice. We sent it to Huang Youlong before the announcement. He agreed that Zhao Wei also knows." Therefore, I will determine that Zhao Wei is directly responsible for the violations of the laws and regulations of Longwei Media.

In summary, the above-mentioned personnel should bear responsibility for the violation of information disclosure by Longwei Media.

                (Original title: SFC document disclosure Zhao Wei's inquiries transcript: never thought of using its own funds to acquire)

                (Editor: DF120)

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