Xiao Jianhua

Brokerage house linked to missing tycoon Xiao Jianhuau under probe

New Times Securities under investigation by the China Securities Regulatory Commission

PUBLISHED : Friday, 17 February, 2017, 8:01pm
UPDATED : Friday, 17 February, 2017, 8:01pm

New Times Securities, a brokerage house controlled by China’s missing tycoon Xiao Jianhua, the

CEO and founder of the investment firm Tomorrow Group, is under investigation by the China Securities Regulatory Commission, according to a company filing by a client of the Beijing firm.

Nantong Metalforming Equipment, a forging equipment manufacturer listed in Shenzhen, said in an announcement on the Shenzhen stock exchange on Thursday it had decided to fire New Times Securities as its financial advisor on a current deal, because the brokerage firm was “under investigation by the China Securities Regulatory Commission for possible violations of laws and regulations”.

The announcement said Nantong was informed of the probe on December 22, 2016.

The investigation is related to the initial public offering of Huaiji Dengyun Auto-Parts Holding, which was sponsored by New Times Securities, according to the broker’s disclosure in a report to Nantong Metalforming on December 29.

New Times is operating as normal, said the filing.

Nantong Metalforming said it will recruit another advisor before resubmitting its proposal on the deal in question, which involves the acquisition of two mainland advertisement companies, worth a total of 2.17 billion yuan.

New Times Securities ranked 64th among China’s 125 brokers in 2015, with total assets of 21.24 billion yuan, according to the Securities Association of China.

The unlisted broker was in 2015 controlled by Xiao Weihua who directly and indirectly hold a 60 per cent stake in the operation, according to the company’s bond issuance prospectus published then.

Xiao Weihua was board chairman and general manager of Tomorrow Group, a holding company with business interests in various sectors, including IT, commodities and financial services, from January 2010 to February 2015 and remained as its executive director and general manager.

He is the cousin of Xiao Jianhua, according to the mainland newspaper Time Weekly, citing family members living in the village where Xiao was born.

Xiao Jianhua disappeared on January 27 from a Hong Kong hotel to “assist with investigations” on the mainland.

Huaiji Dengyun, the Guangdong-based auto parts manufacturer, was listed in Shenzhen on February 19, 2014. It has been under investigation by the regulator since October 20, 2015, according to its filing at Shenzhen exchange, due to possible fraud in the IPO or violation of rules regarding information disclosure.

If convicted of wrongdoing, the company could face being delisting, following in the footsteps of Dandong Xintai Electric Co, which was the first firm delisted from the mainland exchange for fraud last year.

Dengyun posted a 45 per cent year on year drop in net profit to 18.62 million yuan in 2014 after listing, despite sound-looking financial records in its IPO prospectus.

One year later, its auditor ShineWing said Dengyun showed significant deficiencies in its internal controls, but New Times Securities has insisted there was no deficiency.

In November last year, New Times Securities was also warned by National Equities Exchange and Quotations, the so-called New Third Board, to regulate its own business, after the broker led to a sharp price movement of NEEQ-listed Luoyang Shangliu Park Co in the market making process.