*ST Changyao Multiple Executives Fined 31 Million Yuan Over Information Disclosure Violations

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Blue Whale News, March 18 — Recently, the Shandong Securities Regulatory Bureau issued an Administrative Regulatory Measures Decision Letter, penalizing the responsible persons for information disclosure violations related to *ST Changyao (rights protection) (formerly known as Kangyue Technology Co., Ltd.).

The decision letter shows that *ST Changyao committed the following violations:

In November 2020, *ST Changyao acquired a 52.75% stake in Hubei Changjiang Xing Medical Co., Ltd. through cash payment. In December of the same year, Changjiang Xing was included in the consolidated financial statements of *ST Changyao. The original actual controller, Luo Ming, and others, made performance commitments regarding net profit and other indicators for Changjiang Xing from 2020 to 2022. After the acquisition, Luo Ming continued to serve as Chairman and General Manager of Changjiang Xing, fully responsible for its operations and management.

From 2021 to 2023, the subsidiaries of Changjiang Xing, Hubei Changjiang Yuan Pharmaceutical Co., Ltd. and Hubei Xinfeng Pharmaceutical Co., Ltd., fabricated inbound and outbound warehouse receipts, etc., and recognized revenue without actual sales transactions, resulting in *ST Changyao’s annual reports for 2021-2023 artificially inflating operating income by 215.32 million yuan, 283.74 million yuan, and 233.63 million yuan respectively, accounting for 9.12%, 17.57%, and 19.51% of the disclosed operating income for those periods; inflating total profits by 56.40 million yuan, 63.38 million yuan, and 43.70 million yuan respectively, accounting for 35.62%, 88.23%, and 6.42% of the disclosed total profits for those periods. Additionally, due to the failure to reasonably recognize losses on the 2022 transaction project at Changjiang Weichuang Chinese Medicine City Trading Center, *ST Changyao’s 2022 annual report falsely increased profits by 4.55 million yuan, accounting for 6.34% of the disclosed total profits for that period. In summary, the 2021-2023 annual reports of *ST Changyao contained false records.

These actions violated the provisions of the Securities Law. Luo Ming has served as Chairman of Changjiang Xing since June 2015, served as General Manager of Changjiang Xing from January 2020 to August 2022, served as General Manager of *ST Changyao from April 2022 to January 2024, and as Director of *ST Changyao from July 2022 to January 2024; Yang Zhenghui was primarily responsible for sales and procurement at Changjiang Yuan and Xinfeng Pharmaceutical during the case period; Guo Xiaowei served as Chairman of *ST Changyao from August 2016 to July 2022; Li Jinfeng served as Chairman of *ST Changyao from September 2022 to March 2024; Luo Fei served as Executive Director and General Manager of Xinfeng Pharmaceutical from August 2022 to July 2024, and as General Manager of Changjiang Xing from August 2022 to present, as Executive Director of Changjiang Yuan from February 2023 to present, and as Director of Changjiang Xing from September 2023 to present; Zheng Shufeng was Financial Director of *ST Changyao from April 2020 to July 2022; Han Qingkai has served as Director of *ST Changyao since July 2022 and temporarily performed the duties of Chairman from March 2024 to July 2024; Yang Yinghuan has been Financial Director since August 2023 and has been delegated by *ST Changyao to serve as Director of Changjiang Xing since September 2023; Hu Zhengying served as Financial Director from July 2022 to August 2023 and was delegated by *ST Changyao to serve as Director of Changjiang Xing from April 2021 to September 2023; Ning Luhong has been Director, Deputy General Manager, and Secretary of the Board of *ST Changyao from July 2022 to May 2024; Li Xuan served as Chairman of *ST Changyao from July to September 2022; Zhang Tao was an Independent Director and Chair of the Audit Committee from November 2017 to July 2022; Yang Yuexiao served as Secretary of the Board of *ST Changyao from August 2016 to July 2022, Vice General Manager from August 2016 to present, and was delegated by *ST Changyao to serve as Director of Changjiang Xing since April 2021; Deng Yuanjun served as Independent Director and Chair of the Audit Committee from July 2022 to October 2024. The above personnel bear primary responsibility for the aforementioned violations.

In response, the Shandong Securities Regulatory Bureau decided to issue a warning to Luo Ming, impose a fine of 5 million yuan, and ban him from securities market activities for life; issue warnings and fines to Yang Zhenghui (warning, 3 million yuan, 10-year market ban), Guo Xiaowei (warning, 3 million yuan), Li Jinfeng (warning, 3 million yuan), Luo Fei (warning, 2 million yuan), Zheng Shufeng (warning, 2 million yuan), Han Qingkai (warning, 2.5 million yuan), Yang Yinghuan (warning, 2 million yuan), Hu Zhengying (warning, 2 million yuan), Ning Luhong (warning, 1.5 million yuan), Li Xuan (warning, 1.5 million yuan), Zhang Tao (warning, 1 million yuan), Yang Yuexiao (warning, 1.5 million yuan), and Deng Yuanjun (warning, 1 million yuan).

(Source: Blue Whale Finance)