CSRC investigates six companies for fraud

China's top securities regulator launched investigations into six companies alleged to have committed fraud in their initial public offerings, the regulator said on Friday.

It was the first batch of cases involving IPO fraud since the regulator tightened its scrutiny on new share sales in June.

Major wrongdoings found by the regulator during the investigation included false and insufficient statements in their IPO prospectuses, such as cooking up revenues and profits, failure to disclose major debt, tax payments and guarantees, and inflating overseas subsidiaries' assets to write off huge losses of the parent company.

Other irregularities included failure to disclose information about internal management and corporate governance, changing corporate names and making false statements about business transformation to mislead investors and encourage speculative trading.

Shanghai-listed P2P Financial Information Service Co Ltd is among the six companies being investigated for IPO fraud by the regulator.

"The false statements and the failure to disclose key information by the companies often lead to clues of serious illegal market activities and crimes, such as illegal connected transactions, cash embezzlement and tunneling of benefits," said Zhang Xiaojun, spokesman of the China Securities Regulatory Commission at a news conference in Beijing.

Zhang said that the regulator will continue the crackdown on IPO and financial fraud as well as violations of disclosure rules to ensure a fair, transparent and effective market.

Industrial Securities Co Ltd, the underwriter of Dandong Xintai's IPO, was ordered to pay 550 million yuan ($82.2 million) to compensate investors' losses, in addition to a 57.3 million yuan fine.

On Friday, the benchmark Shanghai Composite Index rose 0.21 percent to close at 3,090.04 points. The Shenzhen Component Index fell 0.33 percent to close at 10,748.9.