Legal Analysis Of The Delisting Disputes Of Wanfu Biotechnology

Wanfu biotechnology (Hunan) Agricultural Development Co., Ltd.(hereinafter referredto as "Wanfu biotechnology"), was issued investigation and punishment by the Commissionfor fraud. This is the second listed qualitative and punishment of fraud case after "Green-Landfraudulent listing case", Wanfu biotechnology is also known as "China’s first GEM fraudstock." May10,2013, the Commission informed of the investigation of "Wanfubiotechnology case", as well as the penalty decision to the responsible person for the case.This article is to analyze the contentious issues leaded by this delisting case from theperspective of law, and this paper describes the controversial view, based on which putforward proposed countermeasures in order to provide some ideas to improve our "SecuritiesAct" in the delisting system. Apart from the introduction and conclusion, the dissertation isdivided into four parts:Part I:"Wanfu biotechnology fraudulent listing case" profiles. Overview the main courseof Wanfu biotechnology fraudulent listing, as well as administrative punishment decisionmade by the Commission in this case.Part II:"Wanfu biotechnology fraudulent listing case" delisting caused controversy.Including two views of not supporting delisting and supporting Wanfu biotechnologydelisting. For the former one there are mainly three: Firstly, Wanfu biotechnology delistingwould cause stock losses of those small investors, triggering panic in the market, notconducived to stable the stock market; Secondly, the listed companies and the localgovernment are inextricably linked as local government support local businesses listed forconsideration of local economic performance, local governments will not easily allow localcompanies delisting, the interests of local government become one of delisting resistance;Thirdly, the implementation of the approval system of the IPO system in China, SecuritiesRegulatory Commission approved the initial public offering, which is essentially a substantivereview, would provides indirectly guarantee for the listing of the Company, so do those whomake fraudulent listing and delisting conflict issue approval system, which has become one ofdelisting obstacles. Supports for Wanfu biotechnology delisting also has three aspects: Firstly,illegal acts of fraud listed seriously damage to the healthy development of the securitiesmarket, for the long-term development of the stock market, fraud for listing should beseverely punished, and ordered its delisting; Secondly, as for the limited financial resources, the stock market should be reasonably allocated to those who have good and efficientcorporate operating results, financial fraud and fraud by those listed companies crowding theoriginal limited financial resources, is not conducive to market funds to invest in operationsguide excellent corporate performance, make damage to a reasonable allocation of financialresources in the stock market functions; Thirdly, the stock market ought to protect smallinvestors, which make fraudulent delisting of listed securities market in favor of purification,to reduce the risk of huge investment products, can protect the legitimate rights and interestsof investors.Part III: From "Wanfu biotechnology case" review of the delisting system. Firstly, for theprovisions of "Securities Act", the Wanfu biotechnology has been given a warning andimposed a fine of300,000yuan, the cost of illegal fraudulent listing is too low, resulting in afinancial fraud and fraud by those who listed "fought", which had a negative impact on thesustainable development of the stock market and further amendments to Chinese "SecuritiesLaw". Secondly, according to the relevant provisions of the "GEM stocks Listing Rules",theShenzhen Stock Exchange has twice publicly condemned Wanfu biotechnology, Wanfubiotechnology seems to have been on the verge of delisting. However, whether the standardshould be publicly condemned to further refine and enhance the standard of objectivitycondemnation, is a problem worthy of in-depth analysis. This paper argues that, like Wanfubiotechnology this financial fraud and fraud by listed companies should be classified as "othercircumstances prescribed" to create a serious fraud that directly terminate the listing of thehidden clauses. Finally, compared to Hong Kong,"HONTEX Case", Wanfu biotechnologyand HONTEX did the same on fraud, but they are subject to different punishment, whichexplains to prevent similar acts of fraud listed, Chinese relevant legal system needs to befurther revised and improved.Part IV: Improvement of delisting system recommendations. Mainly includes threeaspects: Firstly, to promote market-oriented, stock issue IPO registration system reformgradually to make the IPO more market-oriented, thereby reducing the cost of listedcompanies, also reduce the resistance of delisting, so that normalize the listing Companydelisting. Secondly, to further amend the "Securities Law" and refine the Shanghai andShenzhen Stock Exchange Listing Rules, let compulsory direct delisting increase the cost ofillegal fraud for listing so that it costs outweigh the benefits, in order to prevent fraudulentlisting behavior. Thirdly, to make fraudulent listing companies directly delist, the most important is the protection of small investors’ interests in the system, the establishment of aclass action regime, the Commission supporting prosecution system, as well as smallinvestors’ Protection Association, would better protect the legitimate rights and interests ofinvestors, maintain the healthy development of the securities market.