Inflated financial report profits! ST Dongshi and its executives have been fined, and a rights protection campaign is underway.

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（Source: Caixin News）

Dongfang Fashion did not account for its subsidiary Chongqing Dongfang Fashion Driving Training Co., Ltd.'s land lease business in 2022, resulting in underreported management expenses and financial expenses, which led to false disclosures in the company’s 2022 semi-annual and annual reports.

Recently, Dongfang Fashion Driving School Co., Ltd. (ST Dongshi (Rights Protection) (603377.SH)) issued an announcement revealing that the company, along with Yan Wenhui and Wang Hongyu, received the “Administrative Penalty Notice of Prior Notification” (No. 3, 2026) from the Beijing Regulatory Bureau of the China Securities Regulatory Commission on March 20, 2026.

The notice shows that, upon investigation, the facts of Dongfang Fashion’s suspected violations are as follows:

In 2022, Dongfang Fashion failed to account for its subsidiary Chongqing Dongfang Fashion Driving Training Co., Ltd.'s land lease business, underreporting management and financial expenses, which caused the 2022 semi-annual and annual reports to contain false statements, artificially inflating profits by 9,402,916.83 yuan and 18,931,027.65 yuan respectively, accounting for 30.97% and 82.33% of the total disclosed profits for that period. On April 30, 2024, Dongfang Fashion issued an “Announcement on Correction of Previous Accounting Errors and Retroactive Adjustments,” proactively correcting and retroactively adjusting the 2022 financial statements.

The Beijing Securities Regulatory Bureau believes that Dongfang Fashion’s above actions涉嫌违反《中华人民共和国证券法》（hereinafter referred to as the “Securities Law”) Article 78, Paragraph 2, and constitute a violation of information disclosure as described in Article 197, Paragraph 2 of the Securities Law.

Xu Xiong, then Chairman of Dongfang Fashion and Chairman of Chongqing Dongfang Fashion, failed to diligently perform his duties and did not provide written confirmation and assurance of the truthfulness, accuracy, and completeness of the relevant documents for the 2022 semi-annual and annual reports. According to Article 82, Paragraph 3 of the Securities Law, he is directly responsible for the company’s information disclosure violations.

Yan Wenhui, then General Manager of Dongfang Fashion, also failed to diligently perform his duties and did not provide written confirmation and assurance of the truthfulness, accuracy, and completeness of the relevant documents for the 2022 semi-annual and annual reports. He is also directly responsible under Article 82, Paragraph 3 of the Securities Law.

Wang Hongyu, then Deputy General Manager, Chief Financial Officer, and Secretary of the Board of Dongfang Fashion, failed to diligently perform his duties and did not provide written confirmation and assurance of the relevant documents’ accuracy and completeness for the 2022 reports. He is also directly responsible under Article 82, Paragraph 3 of the Securities Law.

Based on the facts, nature, circumstances, and social harm of the violations, and according to Article 197, Paragraph 2 of the Securities Law, the Beijing Securities Regulatory Bureau intends to decide: 1. Order Dongfang Fashion Driving School Co., Ltd. to correct the violations, issue a warning, and impose a fine of 1.8 million yuan; 2. Issue a warning and a fine of 1 million yuan to Xu Xiong; 3. Issue a warning and a fine of 800,000 yuan to Yan Wenhui; 4. Issue a warning and a fine of 800,000 yuan to Wang Hongyu.

The rights protection claim collection officially begins:

According to the Securities Law and the “Provisions of the Supreme People’s Court on Several Issues Concerning the Trial of Civil Compensation Cases Arising from False Statements in the Securities Market,” listed companies that cause investor rights to be damaged due to false statements should bear civil compensation responsibilities.

Platform rights protection lawyers believe that the rights protection collection period for ST Dongshi (603377.SH) is:

Investors who buy stocks between August 13, 2022, and before the close of April 30, 2024, and still hold them at the close on April 30, 2024, are eligible to register for rights protection and claims.

Required fees: Full-risk legal representation, no fees charged to investors before compensation.

Required materials: During registration, only basic information needs to be provided. After approval, you will receive a text message guiding you to connect with a lawyer. Please prepare materials according to the lawyer’s instructions and mail them to the law firm address.

Materials include account statements, account proof, power of attorney, etc. These can be prepared in half a day, and subsequent matters will be handled by the lawyer, so you do not need to appear in person.

Rights protection claim registration portal: Click to register

For related questions, see the rights protection guide: Click to view

Investors can search “Rights Protection Platform” in the Tonghuashun APP to find the registration portal and participate in claims.

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