Six Companies in One Night! Three Key Signals Behind the Intense Wave of Regulatory Fines

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21st Century Business Herald Reporter Cui Wenjing

Strict regulation of listed companies continues to advance in all aspects. On the night of March 20 alone, six listed companies were investigated and fined.

These include newly investigated *ST Aowei, as well as companies that received prior administrative penalty notices such as ST Dongshi, Hongtao 3 (Shenzhen Hongtao Group Co., Ltd.), and those with final administrative penalty decisions like ST Mingcheng, *ST Mubang, and R Changkang 1 (Yangtze Runfa Health Industry Co., Ltd.).

Just from their stock abbreviations, it’s clear these companies are already entangled in issues. The lighter ones are marked with ST (special treatment or other risk warnings), the more serious ones are on the brink of delisting with *ST, and some have already delisted but still face strict penalties.

From the penalties imposed on these six companies, three major signals are worth noting.

Signal 1: Zero tolerance for financial fraud—investigations are strict, even if companies correct their false reports voluntarily, penalties still follow. For example, ST Dongshi was investigated and fined mainly due to false disclosures in its 2022 annual report. Although ST Dongshi voluntarily issued a correction announcement on April 30, 2024, it was still fined a total of 4.4 million yuan.

Signal 2: Delisting does not exempt from penalties—whether a company is delisted or in the process of delisting, investigations and penalties continue. *ST Aowei was delisted by the Shenzhen Stock Exchange on the same day it was investigated; Hongtao 3 and R Changkang 1 were delisted as early as August 15, 2024.

Signal 3: Violations involving misappropriated funds must be repaid—delisting does not exempt repayment, and penalties apply even after repayment. *ST Mubang is a case in point. In 2024, it was found to have misappropriated 1.204 billion yuan of non-operating funds from related parties. The funds were fully repaid by November 2025, but the administrative penalty decision issued recently still listed this as a reason for punishment.

It’s important to note that while the China Securities Regulatory Commission (CSRC) is cracking down comprehensively on various issues in listed companies, financial fraud remains a top priority. CSRC Chairman Wu Qing emphasized at the 2026 Two Sessions economic theme press conference that efforts will be increased to investigate financial fraud, strengthen joint efforts with third parties involved in fraud, strictly enforce delisting requirements for fraudulent companies, and resolutely eliminate “bad apples” and break the “ecosystem” of financial fraud. This indicates that more companies involved in financial misconduct and violations will be uncovered and severely punished. As problems are gradually cleared, the overall quality of listed companies will further improve.

Six companies investigated overnight—what common issues do they share?

On March 20, the capital market once again saw a series of regulatory fines.

*ST Aowei, ST Dongshi, ST Mingcheng, *ST Mubang, along with delisted R Changkang 1 and Hongtao 3, disclosed regulatory updates on the same day, involving investigations, prior notices of administrative penalties, and formal penalty decisions.

The concentration of six companies being targeted in one night is no coincidence. It reflects two core issues currently under regulatory focus: financial fraud and misappropriation of funds.

Financial fraud is among the most severe and widespread problems, causing many companies to stumble.

*ST Mubang’s fraud is particularly shocking. Its subsidiary fabricated sales of silicon materials and single-crystal furnaces, resulting in a false increase of 159 million yuan in profit in the 2023 annual report—accounting for 536.60% of the disclosed profit for that period. This means *ST Mubang’s actual performance was a loss, but it falsified its reports to turn losses into profits.

ST Dongshi, in 2022, failed to account for land lease transactions of its subsidiaries, leading to inflated profits of 9.4029 million yuan and 18.931 million yuan in its semi-annual and annual reports, respectively. Notably, although it voluntarily issued a correction announcement in April 2024, this did not exempt it from penalties.

The delisted Hongtao 3 also had false performance forecasts. It predicted a net loss of 350 million to 650 million yuan for 2023, but the actual loss was 1.404 billion yuan, a serious discrepancy.

ST Mingcheng’s financial fraud was more covert and ongoing. Its 2021 annual report artificially inflated income by 98.42 million yuan through its La Liga football rights business, while underestimating inventory and goodwill impairments by 98 million yuan and 213 million yuan respectively, resulting in a total false profit of 409 million yuan, severely distorting its operating results.

Another common issue is related-party non-operating fund misappropriation and illegal guarantees, which can drain a listed company’s assets and harm minority shareholders.

The delisted R Changkang 1 is a typical case. Since 2021, it and its subsidiaries transferred funds through intermediary bank accounts and bill circulation, continuously funneling money to the controlling shareholder Runfa Group. In 2022, the misappropriation amounted to 79.01% of its disclosed net assets for that period. To conceal this, R Changkang 1 even manipulated its financial statements by underreporting liabilities, leading to understatements of liabilities in 2021, 2022, and the first half of 2023 by 1.188 billion yuan, 1.188 billion yuan, and 1.353 billion yuan respectively.

*ST Aowei is also deeply involved in fund misappropriation. As of December 2025, about 189 million yuan of funds remained unpaid; it also had issues with illegal guarantees for the controlling shareholder.

ST Dongshi faces dual problems, having been investigated twice in 2023 and 2025. In 2021, it purchased new energy vehicles from related parties for 429 million yuan; in 2023, it paid 128 million yuan in non-operating funds to related parties for capital and interest, constituting non-operating fund misappropriation.

The delisted Hongtao 3 also failed to disclose the judicial freezing of its controlling shareholder’s shares in a timely manner, and its chairman knew about it but did not organize disclosure, constituting a major omission in information disclosure.

Behind the dense fines, three major regulatory signals emerge

Beyond common issues, companies also show different violations, reflecting deeper regulatory trends.

From *ST Aowei’s investigation and delisting on the same day, to ST Dongshi’s second investigation, and even delisted companies still being fined, three clear signals are evident.

Signal 1: Strict investigation of financial fraud—voluntary correction does not exempt from responsibility.

ST Dongshi exemplifies this. Its core reason for penalties was the false disclosures in its 2022 semi-annual and annual reports, which inflated profits by 9.4029 million yuan and 18.931 million yuan, accounting for 30.97% and 82.33% of the disclosed profits. Despite voluntarily issuing correction notices in April 2024, this did not change the fact of illegal disclosure, and the company and responsible individuals were fined a total of 4.4 million yuan.

Similarly, ST Mingcheng issued correction notices for prior accounting errors in June 2022, but its illegal activities—such as inflating income and underestimating impairments—still led to fines totaling nearly 15 million yuan.

This shows that regulators are now focusing on whether fraud occurred, not just whether it was concealed.

Signal 2: Delisting does not exempt from penalties—investigations continue regardless of delisting status.

*ST Aowei received a notice of investigation on the same day it was delisted for having a market value below 5 billion yuan for 20 consecutive trading days, making it a typical “investigation equals delisting” case.

Even companies that have already delisted are still under scrutiny—Hongtao 3 and R Changkang 1 were delisted on August 15, 2024, but investigations and penalties continued. R Changkang 1 and its controlling shareholders were fined a total of 25.5 million yuan, with individual fines reaching 27.8 million yuan, and the former chairman and vice chairman were banned from securities markets for life. Hongtao 3 was fined 13.4 million yuan for failing to disclose share freezing and false performance forecasts.

From “investigated on the day of delisting” to “delisted for years but still fined,” regulators are making it clear: delisting does not mean immunity from penalties.

Signal 3: Misappropriated funds must be repaid—penalties apply even after repayment.

*ST Mubang’s case is the most illustrative. In 2024, it had non-operating fund dealings with its controlling shareholder and related parties totaling 1.204 billion yuan, accounting for 128.98% of its audited net assets. Although the funds were fully repaid by November 2025, the administrative penalty issued in March 2026 still listed “failure to disclose related-party transactions” as a core violation. *ST Mubang and six responsible persons were fined a total of 22.5 million yuan, with the controlling shareholder fined 8 million yuan and banned from securities trading for six years.

This clearly shows that regulators’ attitude has shifted from “recover the funds” to “violate and penalize, even after repayment,” aiming to fundamentally curb major shareholders’ encroachment on listed company assets.

From these three signals, it’s evident that current regulation has formed a “comprehensive coverage, zero tolerance, strong deterrence” three-dimensional enforcement pattern. The intense crackdown on information disclosure violations indicates a normalized high-pressure environment. Whether it’s financial fraud or fund misappropriation, whether companies are delisted or voluntarily corrected, as long as the red line is crossed, they will face consequences. This not only sends a clear message to the market but also strongly protects investors’ legitimate rights and interests.